It's Obama Versus Bush as Growth Ebbs Before Election
Friday, August 20, 2010; 3:43 PM
Aug. 20 (Bloomberg) -- President Barack Obama and fellow Democrats have run out of time and tools to generate growth as a historic government intervention to rescue the economy runs up against the limits of the November election calendar.
So the contest with Republicans for control of the U.S. Congress has reverted to arguments that have traditionally defined the parties: the role of spending and taxes.
Democrats are reminding voters that their economic problems started under President George W. Bush, while Republicans are taking aim at the Obama administration's handling of record deficits and high unemployment. The Bush administration's tax cuts, due to expire Dec. 31, will be among the points of contention.
"The Republican Party is going to go to the mat to defend the centerpiece of President Bush's economic agenda, and we know where it got us," White House communication director Dan Pfeiffer said in an interview, placing the blame for the financial crisis on the Bush administration. The Obama administration wants tax cuts to remain for households earning less than $250,000. The Republicans want the cuts extended for every income level.
The showdown over taxes and policy comes as the economy shows fresh signs of slowing. The Standard & Poor's 500 Index fell 0.26 percent to 1,072.83 at 3:34 p.m. in New York, a second day of losses after reports yesterday showed manufacturing in the Philadelphia area unexpectedly contracted in August and claims for unemployment benefits last week jumped to the highest level since November.
The July unemployment rate in Nevada, where the Senate Majority Leader Harry Reid is struggling to win re-election against a Republican challenge, reached 14.3 percent, a record in Nevada and the highest of any state, the U.S. Labor Department reported today.
"It is just too late to influence how things stand on Election Day," said Nigel Gault, chief U.S. economist for IHS Global Insight, a macroeconomic research firm in Lexington, Massachusetts. Gault said it can take months for new government spending or tax cuts to affect the economy.
Republicans are concentrating on connecting voter unease to record federal budget deficits and unpopular bailouts of companies including Citigroup Inc. and General Motors Co. They drove home those points and their divisions with Democrats in a debate this month over how to fix budget gaps in their home states.
"We're broke," House Minority Leader John Boehner of Ohio told reporters before a House vote this month on a $26-billion aid package for state and local governments. "We do not have the money to bail out the states. It's time for them to get their arms around their own problems."
Former Representative Tom Reynolds of New York, who chaired House Republicans' national campaign committee in 2006, said the theme has begun to echo across campaign trails.
"From John Boehner to most of his candidates, they are talking about less spending and no taxes and let's get the economy moving again," Reynolds said.
Yesterday's economic data prompted economists at JPMorgan Chase & Co. in New York to lower their growth estimates. The economy will expand at a 1.5 percent annual rate this quarter and at a 2 percent pace in the last three months of the year, a percentage point less than they previously estimated.