Still talking, at any rate

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Barack Obama refocuses on jobs and the deficit but promises to press on with health-care reform
Jan 28th 2010 | WASHINGTON, DC | From The Economist print edition

Bloomberg
BEING a president and not a journalist, Barack Obama buried the lead. But for all his talk about creating jobs and taming the deficit, the big news in his state-of-the-union speech on Capitol Hill this week was that despite the Democrats’ recent stunning loss of Ted Kennedy’s Massachusetts seat—and with it their supermajority in the Senate—the president intends to press ahead with health-insurance reform. The only thing he could not say was how he intends to do it.

Less than a fortnight ago Mr Obama had reason to believe that he would be addressing Congress in far happier circumstances. The House and Senate had each passed their own versions of a health bill and seemed on course to meld them into a single piece of legislation for Mr Obama to sign—perhaps tucking it away in time for a triumphant first state-of-the-union speech. The upset in Massachusetts demolished that calculation. It has made it impossible for the Democrats to take a new bill through the Senate without some Republican support; and it has terrified many Democrats who were already fearing for their own seats in November’s mid-term elections. Many implored the president to heed the voters of the Bay State, accept that he had overreached and either trim down his health plan or abandon it altogether.

On the evening of January 27th, however, a beaming and to all appearances relaxed president strode into the Senate like a lion into a den of Daniels, spoke at length about jobs, the deficit and the broken politics of Washington, and then accepted briskly that he shared some of the blame for failing to explain health reform clearly enough. He said he would listen to anyone from either party who had a better approach, but claimed that his plan offered a “vast improvement” over the status quo. He would not back down, and nor, he said, should Congress: “Do not walk away from reform. Not now. Not when we are so close. Let us find a way to come together and finish the job. Let’s get it done. Let’s get it done.”

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One way or another
As to how to get it done, the president was silent—no doubt because he and his divided party are still in the throes of a bitter behind-the-scenes quarrel over tactics. It is still possible that if all else fails the House Democrats will reluctantly adopt the Senate bill, removing the need for the Senate to vote on it again, and then introduce amendments under a budget reconciliation procedure that does not require a supermajority. All Mr Obama had to say in his speech was that even in an election year it remained necessary to govern: “We still have the largest majority for decades, and the people expect us to solve problems, not run for the hills.”

Despite his show of breezy confidence, Mr Obama plainly knows that on its first anniversary his presidency is in deep trouble. Only 48.7% of voters approve of his job performance and 46.3% disapprove, according to the polling average compiled by Real Clear Politics, a website. Gallup reported last week that after the vote in Massachusetts a majority of Americans (55%) wanted Congress to slow health-care reform efforts and consider alternatives that can win more Republican support. Plenty of senior Democrats concur. Senator Evan Bayh of Indiana told the Wall Street Journal this week that the party had drifted too far to the left, and had not tried hard enough to seek consensus with moderates and independents. It might take a “political catastrophe of biblical proportions”, he quipped, before some of his colleagues got it.

That may be why Mr Obama buried his lead. While persevering with health reform he is also trying to refocus his administration on the issues that voters now say matter more to them, especially jobs and the deficit (see chart). That entails defending his record on the economy. Without the controversial Recovery Act, he claimed, about 2m Americans now at work would have been unemployed. The House has approved a $150 billion jobs bill, focused on infrastructure spending and aid to the states. As the first order of business this year, Mr Obama said in his speech, the Senate should do the same. The administration plans to create or save tens of thousands of jobs by using stimulus money to develop a high-speed rail network for 13 major corridors, including lines from Orlando to Tampa in Florida and Sacramento to San Diego in California.

So far, however, job creation has been painfully slow. Unemployment has grown to 10%, despite forecasts that it would peak at 8% in late 2009. Mr Obama’s problem is that his two aims—stimulating the economy in order to create jobs, and reducing the deficit—pull policy in opposite directions. Because the recession has been deeper than expected, forecast revenues have fallen by $250 billion since last January. On the day before the speech the Congressional Budget Office (CBO) said that at an estimated $1.3 trillion and 9.2% of GDP, the 2010 federal deficit will be the second-largest in America’s post-war history—second only to last year’s.

Future deficits are forecast to shrink as the economy recovers (see chart), but to climb again from 2015. And even under the CBO’s rosy “baseline” forecast (which assumes, among other improbables, that Congress will control spending and let the Bush-era tax cuts expire), the deficit will rise to about $700 billion by 2020. A more realistic scenario (which assumes that politicians will show less discipline) expects the deficit to move towards $1.3 trillion by that year. Even the baseline forecast has annual interest payments on the debt more than doubling, from 1.4% of GDP this year to 3.2%, or $723 billion, by 2020.

Against this background, Mr Obama’s plan to freeze “non-security” discretionary spending for three years from 2011 to 2013 is at best a signal of intent, saving only $250 billion over ten years as the cumulative deficit billows to $6 trillion over the same period. But even this small nod toward fiscal discipline has provoked howls of outrage from the liberal wing of his own party, aghast at the notion of protecting defence spending. And if the Democrats cannot agree among themselves on how to shrink the deficit, the hope of agreement across party lines looks scanter still.

One day before the state-of-the-union message, the Senate failed to approve a proposal to create a bipartisan commission to consider ways to increase taxes and reduce spending. The yeas outnumbered the nays by 53 to 46, but failed to reach the 60-vote supermajority. Republicans by and large recoiled at the taxes, Democrats at the cuts. Judd Gregg of New Hampshire, the Republican co-sponsor of the proposal, called this “yet another indication that Congress is more concerned with the next election than the next generation.” Mr Obama responded in his speech by announcing that he would create a commission by executive order. But with the two parties at loggerheads and his own divided, the value of the commission is questionable, since none of its recommendations will be able to bind Congress.

Running against Washington, again
Can Mr Obama’s speech galvanise and unite a party that remains stunned and demoralised by the upset in Massachusetts? Mr Obama’s speech included a sop to the liberal wing of the party, in the shape of a promise to end the ban on openly gay men and women serving in the armed forces. There is to be new help for working families, including measures to make it easier for families to pay for child care and college tuition, save for retirement and take care of elderly relations. Even so, Charlie Cook, a close follower of the electoral horse-race, takes a dim view of Democratic prospects in November. He predicts a net gain for the Republicans of five to seven seats in the Senate and between 25 and 35 in the House. More ominous still is that so many Democratic candidates have read the runes already and decided to quit the field.

The chicken run started before Massachusetts. In early January two Democratic senators—Byron Dorgan from North Dakota and Chris Dodd of Connecticut—said they would not seek re-election. This week Vice-President Joe Biden’s son, Beau, chose discretion over valour: he announced that he would be sticking to his job as Delaware’s attorney-general instead of making a run for the Senate seat his father vacated. That makes it all the likelier that the seat will fall to a 70-year-old Republican candidate, Mike Castle. Also this week Marion Berry, a “Blue Dog” conservative Democrat from Arkansas, said that he would not be defending his seat in the House.

The president’s own former seat in Illinois—a state that voted 62% for Mr Obama and 37% for John McCain in the 2008 presidential election—is now considered in play as well. Roland Burris, whom the disgraced Illinois governor, Rod Blagojevich, appointed to fill the seat Mr Obama vacated, is not running, and none of the Democrats vying to capture the nomination in next week’s primary can be confident of beating the Republicans in November. Senator Arlen Specter of Pennsylvania, who rebranded himself from Republican to Democrat last year, is also facing a serious primary challenge in May. Some polls show his Republican challenger, Pat Toomey, defeating him in the mid-terms.

That the president understands the trouble his party is in cannot be doubted. Even before voting ended in Massachusetts, he had brought David Plouffe, the successful manager of his 2008 campaign, back to co-ordinate strategy as November’s mid-term elections approach. But in the 2008 campaign Mr Obama was the outsider running against George Bush and the tawdry ways of Washington. This time it is he who is the incumbent and the Republican grassroots who have the fire in their bellies (see Lexington).

Hence another theme of Mr Obama’s speech. President he may be, but he continues to portray himself as a crusader against Washington. America’s government suffered not just from a deficit of dollars but from “a deficit of trust”, he said. “To close that credibility gap we must take action at both ends of Pennsylvania Avenue to end the outsize influence of lobbyists; to do our work openly; to give our people the government they deserve.” Having already excluded lobbyists from policy-making jobs or seats on federal boards and commissions, Mr Obama now wants to require them to disclose each contact they make on behalf of a client with the administration or with Congress.

For a president running a war or two, Mr Obama devoted relatively little of his speech to foreign policy. The fight against al-Qaeda would continue, but the war in Iraq was ending and all American combat troops would leave by August. The security gaps revealed by the foiled Christmas bomb plot were being closed. American diplomacy had brought deeper isolation and sanctions to bear on North Korea, and if Iran continued its nuclear defiance it would face “growing consequences” (though these were not specified). For most Americans, however, foreign entanglements have seemed less enthralling in the past fortnight as a presidency that had been running fairly smoothly smashed into the buffer of Massachusetts. It remains to be seen whether Mr Obama can recover in time for November.