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Right Turn
Posted at 03:42 PM ET, 06/01/2011

The poor economy complicates Obama’s debt ceiling position

On the same day that a raft of bad economic news came out President Obama was meeting with House Republicans. The Richmond Times-Dispatch reports:

House Majority Leader Eric Cantor, R-7th, today emerged from a meeting between House Republicans and President Barack Obama saying he asked for Obama’s cooperation in keeping tax increases out of the Biden commission talks. . . .

“I asked the president, hopefully, that he will work with us to do so and to keep out of the discussions surrounding the debt limit and in the Biden talks any notion that we’re going to increase taxes,” Cantor said.

“It’s counterintuitive to believe that you increase taxes on those individuals and entities that you are expecting to create jobs.”

. . . He referenced the labor report released today by ADP, a private payroll firm, that said private-sector employment increased by 38,000 from April to May on a seasonally adjusted basis. Cantor said it was “woefully short of the amount needed for us to see this economy get back on track and people get back to work.”

Cantor said Obama “admitted that we have to look at growing this economy, and the discussion focused on the philosophical difference on whether Washington should continue to pump money into the economy, or [whether] we should provide an incentive for entrepreneurs and small businesses to grow.”

He said he thinks the president was “well aware” and “admitted the fact that private sector job creation is not enough, and he did mention that a lot of the losses were in the public sector.”

The Post’s report made clear that the Republicans were putting the president on the spot:

Rep. Jeb Hensarling (R-Tex.) said lawmakers told Obama that jobs are the top economic priority and that “job creators” in their congressional districts have a “lack of confidence in the future.” He said employers attribute their lack of confidence to a heavy “regulatory burden” and a high “tax burden.” In addition, he said, the Republicans expressed their fears that “the debt burden is going to lead to high taxes,” hurting employment even more.

“Unfortunately, what we did not hear from the president is a specific plan of his to deal with the debt crisis that could actually be scored by the Congressional Budget Office,” Hensarling said.

In short, Obama is going to be hard-pressed to seriously maintain his position on tax hikes and to defend his own budget as pro-growth.

Like the White House, the Obama reelection campaign is going to face more of this sort of pointed questioning. Tony Fratto, who served in the Bush administration and is now a Republican consultant, told me, “For the second year in a row it looks like we’re seeing a summer slowdown, and that would make things very difficult for President Obama. Right now — two years after the official end of the recession — the overwhelming majority of Americans feel like the economy is in recession.” He acknowledges much can change in 17 months. Nevertheless, he cautions that “perceptions can easily become hardened over the next few months to the point that voters will no longer give the President the benefit of the doubt on the economy.”

The droopy economy makes Obama’s demands for tax hikes even more problematic. That is a current dilemma as he tries to reach a deal on the debt ceiling. More important from his standpoint, as Fratto explains, “Unless the economy stages a much stronger turnaround than anyone is now predicting, President Obama could be facing voters with a very weak economy. Look no further than what happened to President Carter and the first President Bush in weak economic conditions.”

UPDATE (3:55p.m.): A spokesman for Minority Leader Sen. Mitch McConnell (R-Ky.) emails me, “ A year after the White House trumpeted ‘Recovery Summer,’ and more than two years after telling Americans that a trillion dollars in new debt would keep the unemployment rate under 8 percent, Washington Democrats still don’t have a budget, a plan or even a schedule for dealing with the looming fiscal crisis or the ongoing jobs crisis. And their only ‘solutions’ so far seem to be to raise taxes on job creators, increase the price of gas, and cause even more jobs to move overseas. And now they’re holding up trade agreements that the President says will create jobs. Maybe this week’s headlines will get their attention.”

By  |  03:42 PM ET, 06/01/2011

Categories:  2012 campaign, Budget, Economy

 
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