GOP Looks to Escape Obama’s Stimulus Squeeze; Pile on Perry; Euro Trashed; Rough Weekend for Israelis
Obama’s Slow Walk on Stimulus Increases Pressure on Republicans
-- A House Republican aide describing President Obama’s quest for conflict with the GOP in Congress.
President Obama’s 2012 strategy runs through Congress. The president bets that he can be seen as a victim of Republican radicalism rather than the proprietor of a failed economic program.
He continues his bid today as he delivers his third stimulus package to Congress, a plan the White House estimates at $447 billion. About half of the plan is based on extending and expanding current temporary payroll tax incentives.
The rest of the price tag comes from actual spending:
-- $140 billion in infrastructure spending and direct aid to retain state and local government employees at stimulus levels
-- $62 billion in spending to extend unemployment insurance benefits and add new programs
The challenge for Republicans is in how break up the bill and enact the parts they like – extending current tax rates – without having to deal with issues they don’t like, like state subsidies and new welfare spending.
The answer, Republican aides say, is to start passing legislation quickly. Obama, who held back his plan for a month will wait nearly two more weeks before explaining his plan to pay for his new spending initiatives. The House GOP, on the other hand, can start passing consensus legislation immediately.
“We’ve been passing job-creating legislation for nine months,” said one senior House aide. “We can go ahead and pass some more while the president is still trying to explain how he will pay for another failed stimulus.”
The imperative for House Republicans is not to have an impasse on jobs when the clock runs out on the stopgap resolution funding the government Sept. 30. If Democrats can lament a stalled stimulus bill while the specter of a government shutdown looms, it will make the Republicans only look worse.
The president’s go-slow approach on jobs legislation no doubt was developed with Sept. 30 in mind.
Romney Gets Help in Perry Attacks
-- Former Minnesota Gov. Tim Pawlenty on “FOX & Friends” endorsing Mitt Romney for president.
When Michele Bachmann is out warning her fellow Republicans not to take bold stands on issues for fear of frightening moderate voters, you know that the Republican presidential race is getting wild.
Bachmann told an interviewer at Radio Iowa that it was wrong for Texas Gov. Rick Perry “to make senior citizens believe that they should be nervous about something they have come to count on” when he called Social Security a “Ponzi scheme” and “a monstrous lie.”
Bachmann, who more commonly chides fellow Republicans for being inadequately conservative or aggressive in confronting liberalism (recall her slam on Tim Pawlenty – “sounds like Barack Obama”), has joined with moderate Mitt Romney to deplore the harsh language Perry used to talk about the nation’s oldest and most cherished entitlement.
Romney has enlisted the help of Pawlenty, who ended his two-year campaign in August after a disappointing showing in the Ames Straw Poll, in his play against Perry. Pawlenty made his announcement of support for Romney on “FOX & Friends” today.
The Pawlenty endorsement will help Romney continue to consolidate establishment support against Perry, but it’s Bachmann who could do Romney the most good in the coming days.
Bachmann got short shrift at the MSNBC/Politico debate last week in part because she was not willing to join the Perry piñata party being thrown by the hosts. But with her window of opportunity rapidly closing, Bachmann seems determined to pull down Perry tonight. She will likely be joining Rep. Ron Paul, Romney, former Sen. Rick Santorum and Jon Huntsman in the attacks, so to get attention she will have to do something that stands out.
Perry will take heat for being too moderate on immigration and other conservative apostasies in tonight’s debate, sponsored by CNN and its partner, the Tea Party Express. But the central struggle will be over Social Security and whether Perry is just too radical on the subject to win a general election.
Perry has a good defense on the question on whether it’s a Ponzi scheme. Writing in USA Today, Perry lays out his case:
“By 2037, retirees will only get roughly 76 cents back for every dollar that is put into Social Security unless reforms are implemented. Imagine how long a traditional retirement or investment plan could survive if it projected investors would lose 24% of their money?”
What Perry doesn’t have is his own plan to fix it. He’s good about calling for a discussion, but presidents have to do more than start conversations. With the rest of the pack working to bring him down, Perry has to have a plausible plan. The bad news for him is that the current market volatility makes the Sununu plan of the Bush era a political dead letter.
If Perry backs down, he’ll lose the intangible that currently has him on top. If Perry offers a plan that sounds too radical, Romney will keep gnawing on the question of electability and saying that Perry is just too far right to defeat Obama.
Romney believes he can stop Perry in the Florida primary the same way John McCain stopped Romney in 2008 and is looking forward to having the help of the media, Pawlenty, Bachmann, Paul, Santorum and Huntsman in causing elderly voters to stampede away from Perry tonight.
They’d better hurry. The latest CNN poll out today and taken amid the Social Security scrum shows Perry consolidating his lead, still holding 30 percent of Republican support compared to 18 percent for Romney. The poll puts Paul in third place with 12 points and Bachmann headed for the low end of the third-tier with 4 percent.
Most worryingly for Romney, Perry did best with Republicans over 65. Forty percent of oldsters said they would be “enthusiastic” about a Perry nomination, compared to 26 percent for Romney.
Germans Pull Back from Bailouts. Will Obama Lean Forward?
“It feels like Germany is preparing itself for a debt default. Fatigue is setting in. Germany could be a first mover or other countries could be preparing too.”
-- Jacques Cailloux, chief European economist at Royal Bank of Scotland, talking to the Financial Times.
The Germans are dropping the curtain on their time as the leading actor in the now four-year old debt drama in the European Union. With political pressures growing on Chancellor Angela Merkel and a stern warning from the nation’s high court, the Germans seem to be preparing to pull the plug on Greece.
Industrious Germans have grown weary of the endless cash demands from their Mediterranean cousins in Greece and Spain. The bankrupt states waned benefits even more lavish than those German workers enjoy, but lack the industrial output to support them. So now, Germans are on the hook for not only their own welfare state but those of the Greeks and Spaniards.
After all this bailing, the debt contagion has kept spreading. Italy is circling the drain and now even France is looking weak. That leaves Germany as the only large, sound economy on the Continent. Faced with the next deadline for a cash infusion for the still failing Greeks, Berlin is balking. Even harsh austerity measures haven’t convinced investors that European debt is a good risk, in part for the fact that bond buyers believe that they will not be sustained and that default is inevitable.
Six months from now, either Germany will be the lone plow horse slowly dragging the rest of Europe behind it, or the euro will be dissolving and the EU headed for a crackup.
British phobias about debt contagion and bank failure have their banks gearing up for a hugely expensive round of financial regulations. The recommendations from the commission established last year to study the safety and solvency of British banks are out today. The proposal, expected to sweep through Parliament, would force big banks to separate their core businesses – consumer and commercial lending – from more profitable enterprises like investment banking, securities trading, etc.
The expectation there is that capital will dry up more given the new rules, particularly since banks will be subjected to additional regulatory costs of about $9.5 billion a year.
This all matters for Americans because a credit and currency collapse would bring plenty of fallout here. Europe’s slow-motion collapse has kept the dollar high and interest rates low as investors seek the relative sanity of American government finance. But when the government defaults begin over there, banks and lenders over here will start suffering big losses, far outweighing the flight of capital across the Atlantic.
The question for the U.S. government is: Will Uncle Sam step in again? The Obama administration has used diplomatic pressures and international banking groups to help bring about the current European bailout scheme. Obama’s pressure on Merkel was seen as key to getting Germany on the treadmill. Given the consequences to the U.S. economy if the default chain starts in Europe, will Obama take action again? The political climate at home would make it much harder.
Bad Weekend for Israel
"I think the United States has been warned time and time again — from its own people — that its partnership with Israel might not be in its best interest right now. But they continue to stand by Israel, and ignore the changes in the region that the Arab Spring is bringing."
-- Palestinian legislator Hanan Ashrawi speaking to McClatchy Newspapers
A mob tore down a security wall protecting the Israeli embassy in Cairo before surging in to trash the compound and ransack its offices. The staff was evacuated and there is no word on when normal relations with the country formerly most important to Israeli security will be restored.
Meanwhile, the Turks, who had already expelled the Israeli ambassador, have downgraded the international relationship between the two countries to the same status as Zimbabwe and other delegitimized regimes.
And those are Israel’s best friends in the Muslim world.
Israel is under tremendous pressure right now as the Palestinians begin to make their case at the U.N. for their holdings, an archipelago inside Israel, to be recognized as a sovereign nation. The series of revolutions that has convulsed the region, a movement once called the Arab Spring by admirers, has left Israel with few friends in the region. Add in the chilly relationship with the Obama administration, and it’s a diplomatic disaster for Israel.
On the military front, the Iranians are expanding their sphere of influence and nearing nuclear capacity quickly. In Syria next door, strongman Bashar al-Assad, an Iranian ally, continues his brutal crackdown on rebels in his country.
The process at the U.N. is expected to start in 10 days, and the U.S. is expected to veto the measure in the Security Council. But the vote could show Israel’s isolation and give President Obama more leverage in his bid to get Israelis to make more concessions.