Biden Digging for Tax Hike Deal

Dems Try to Retake High Ground on Economy

“The ‘Affordable Health Care Act’ was not as affordable as we expected.

The ‘Open Government Initiative’ was not as open as we expected.

The ‘stimulus’ was not as stimulating as we expected.”

-- Suggestions from the office of Speaker John Boehner for follow up “jokes” to the one President Obama made in North Carolina Monday that “‘shovel-ready’ was not as ‘shovel-ready’ as we expected.”

The lousy economy has helped push Democrats to the negotiating table in a bid to cut a deal to increase the federal government’s $14.3 trillion borrowing limit, but the blue team is still hoping to gain some leverage from the nation’s economic woes.

In order to keep their party’s rank and file on board, Democratic negotiators, led by Vice President Joe Biden, need to offer some kind of a tax increase as part of a package of cuts being negotiated with Republicans.

But if the deal includes a tax hike on incomes above $200,000, or anything else, Republicans won’t be able to deliver the seven Senate votes and 24 House votes needed to pass a plan that had unanimous Democratic support.

The gambit from the administration now is to offer an extension and expansion of President Obama’s payroll tax cut in a bid to spur hiring and to offer Republicans a trade off in favor of a tax hike on high-income earners.

An aide to one senior House Republican described the possibility of a tax rate increase in exchange for the extension of a temporary tax break on payrolls as “a non-starter,” but the administration is desperate to get a deal and look active on the economy.

The Republican complaint about the Obama payroll tax break is that it is too small to jolt the economy back on the wrong track. Obama has long favored the imperceptible tax break, like the one in his 2009 stimulus that put another $6 in the weekly paychecks of most workers. The theory is that the money is spent quickly helping the economy.

Republicans, meanwhile, favor low rates overall and lean toward shock and awe when it comes to tax cut stimuli. Recall that one Republican plan for the 2009 stimulus was to simply zero out the payroll tax for the remainder of that year, rather than a small adjustment.

Biden’s group meets again today. While there is new optimism about the size of the cuts that can be achieved, the looming question remains about taxes.

With Democrats taking a pounding over the condition of the economy and Republicans still denouncing Obama’s joke about the failures of his stimulus package, Democrats may eventually be convinced to drop calls for a tax hike.

But for now, the White House is still looking for a trade off. The president’s chances for getting his hike will be enhanced if Democrats can’t paint Republicans as protecting “millionaires and billionaires” while opposing a little more pocket change for the middle class.

The Democratic counterattack begins anew today.

Perry’s Cultural Conservatism Complicates Coalition Building

“When it comes to conservative social issues, it annoys me when fellow Republicans duck and cover from pressure on left on these issues of protecting the most vulnerable.”

-- Texas Gov. Rick Perry in Manhattan speaking to the New York Republican County Committee, a liberal/moderate GOP group.

Rick Perry’s greatest appeal as a potential 2012 contender is among religious conservatives and heartland Republicans. But if he’s going to make the grade, he will need to find some support among the establishment Republicans back East.

It may prove a struggle, as Perry showed Tuesday when he spoke to New York City Republicans – as a replacement for Donald Trump – in a speech about Texas’ phenomenal job growth in the past decade, the governor’s favorite topic. But even among perhaps the most liberal group of Republicans in the nation, Perry couldn’t resist making a jab about social issues.

The favorites of the Eastern establishment are far more moderate on these issues. New Jersey Gov. Chris Christie told CNN Tuesday night that he did not believe homosexuality was a sin, despite the teachings of his church and Mitch Daniels, has repeatedly called for a “truce” on social issues in order to address the nation’s fiscal concerns. Mitt Romney has changed his tack on abortion and has avoided questions about homosexuality, but cultural conservatives still eye him suspiciously.

Perry, on the other hand, is front and center with the kind of religious conservatism that makes folks on the coasts squeamish. It’s helped Perry win support from culturally conservative Latinos and old-school Texas Democrats, but it’s not in tune with the big-tent Republicanism being preached in Washington.

Perry is leading a massive prayer vigil in Houston in August, and is calling his fellow governors to come join him to pray for the healing of the nation. That ruffles feathers in the new-look GOP.

But if Perry runs, it can’t be in total opposition to the establishment. If he spooks all the moderates into Romney’s arms, Perry would surely lose. He could never out-conservative Michele Bachmann or Rick Santorum and so would have a divided right and a unified left. He needs some friends beyond his base.

Perry is meeting today with a likely candidate for that kind of support, former New York Mayor Rudy Giuliani. Giuliani, flirting with a run himself, is a principal at a big-time law firm that does lots on business with oil companies in Texas. He also got rolled by Romney in 2008 and the two have been political combatants ever since.

Perry’s primary appeal in the East is as a tort-reforming, tax cutting, business-boosting job creator, but the social issues and disdain for traditional power centers are his main appeal everywhere else.

The veterans of the Bush White House team eye Perry warily. He is a former Democrat and was a rival to Bush in Texas. If Perry is serious about a run he will have to make some outreach there, which would be a humbling experience for the famously proud Lone Star governor.

As Perry continues his national testing the waters tour, the questions he will have to answer are a lot about pride. The main one: Can Perry, who has always shunned the Eastern establishment, build a coalition that includes some of its members?

Libya Showdown Looming Larger

“Therefore, it would appear that in five days, the Administration will be in violation of the War Powers Resolution unless it asks for and receives authorization from Congress or withdraws all U.S. troops and resources from the mission.”

-- Letter from House Speaker John Boehner to President Obama Tuesday concerning the Libyan civil war.

House Speaker John Boehner has set a Sunday deadline for the White House to either obtain Congressional authorization for American involvement in the Libyan civil war or to withdraw U.S. forces.

We are heading into the final act of a constitutional showdown over the three-month U.S. commitment to a coalition of rebel tribes and Islamists seeking to topple their longtime foe, Col. Muammar Qaddafi.

Boehner bought time for the operation there by helping to diffuse a bipartisan move for an outright withdrawal, but since the administration has not responded, other than to recapitulate prior assertions that the level of involvement was too small to merit Congressional authorization, the showdown is here.

Sen. John McCain and others are pushing for the administration to lobby Congress harder for an authorization, but it would be hard for the White House after declaring the War Powers Resolution not applicable. By waiting so long and so fully flouting the law, it would be a fast pivot for the president to suddenly play supplicant to the Congress on the war.

Remember, Obama has two covert wars cooking: one in Pakistan and one in Yemen. If this whole War Powers thing gets away from him, he will have bigger troubles ahead.

Watch for Libya hawks like McCain, Sen. John Kerry and the biggest proponent of intervention, Secretary of State Hillary Clinton, to push hard this week for some kind of cover on the war – a generic resolution in support or something fungible.

The concern for the president about such a push would be that the measure would fail and he would find himself the recipient of a bipartisan repudiation. He may instead prefer to simply ignore the law and dare Congress to do something about it.

The White House could deliver a report to Congress on the conduct of the war as soon as today. It’s contents will tell us a great deal about whether the president means to bow to Congress or go it alone.

Pakistanis Cloud Hopes for Afghan Withdrawal

“Three”

-- Deputy C.I.A. Director Michael Morrell when asked by members of the Senate Intelligence Committee to rate Pakistan’s helpfulness on counterterrorism on a 10-point scale, according to the New York Times.

The New York Times reports that Pakistan has arrested the tipsters who helped the U.S. find and kill Usama bin Laden. This is what the diplomats call a “complicated” alliance.

To those outside of the State Department it looks like a total disaster that casts serious doubts on the alternative strategy for the U.S. war in the region, which is to cut the 100,000-man army in Afghanistan in favor of an escalated covert war to be fought on both sides of the Af-Pak border.

If the Pakistanis keep heading in this direction, the degree of difficulty of conducting such a campaign will go up dramatically.

Defense Secretary Robert Gates is giving his parting testimony to Congress today and Gen. David Petraeus is making the rounds of Congress as he seeks Senate confirmation to shift from the uniformed service to covert warfare as head of the C.I.A.

Both men can expect to be tested on the viability of the Obama strategy given the disobliging attitude of our allies in Islamabad.

Corn Vote Could Signal Thune’s Return to Presidential Field

“We have a lot of folks who made investments, you have people across the country whose livelihoods and jobs depend upon this. I think it makes sense, when we put policy in place and we say it is going to be in place for a certain period of time, that that be honored.”

-- Sen. John Thune, R-S.D., talking to reporters about his decision to split from most in his party to support extending ethanol tax breaks.

South Dakota Sen. John Thune was part of a group of Midwestern and Great Plains Republicans who joined Democratic leaders to kill an amendment that would have ended the tax break for ethanol six months early.

The amendment would have done away with a 45-cent-per-gallon tax benefit for gasoline producers who add ethanol to their fuel and a 54-cent-per-gallon tariff on imported ethanol fuel designed to drive up the cost of cheaper, sugar-cane ethanol from South America.

The existing tax break, passed in 2004, is set to expire at the end of the year. The amendment, offered by Oklahoma Republican Sen. Tom Coburn, would have put the money toward deficit reduction and was intended as a demonstration of GOP willingness to slaughter sacred cows.

Thune, normally a staunch fiscal conservative, helped lead the charge of agricultural-state Republicans who joined Democrats in killing the bill. The measure is good home-state politics for Thune, but he just got reelected without any significant opposition. If he was ever going to break with parochial interests now would be the time.

But the corn subsidy is good politics in Iowa too. The rumors are flying in Washington that Thune is taking a second look at a possible presidential run. With a crowded field and still no standard-bearer to unite conservatives against moderate frontrunner Mitt Romney, there’s reason for Thune to look again.

Thune is scheduled to be on “Special Report with Bret Baier” next week. Power Play will be sifting through the corn silks for signs that the man from Murdo may be getting back in the game.

And Now, A Word From Charles

“It's the way (President Obama) wants to govern left without appearing to govern left. As a result of midterm election he lost control of the House of Representatives, so it's administrative. That's the case with the EPA -- Environmental Protection Agency -- to regulate a way to get him restrictions on energy production he'd get in cap and trade. He lost on cap and trade. So it's a way to go under and around the legislative system, which I think is in and of itself a travesty.”

-- Charles Krauthammer on “Special Report with Bret Baier.”