Obama's Evolving Sequester Strategy

    President Obama's sequester strategy has progressed through several phases:

        1. Stand fast with his base in refusing any change to entitlement programs and demanding further tax increases on the rich by elimination of loopholes. That has worked several times; why not again? Plan A failed when the Republicans were surprisingly willing to accept arbitrary cuts to the military, allowing sequestration to go into effect.

        2. Build up the story that this Republican idea came about because Boehner and his Tea Party allies will not accept a "balanced approach." Plan B failed when Bob Woodward loudly proclaimed that the sequester was a White House idea, and John Boehner repeatedly made the point that Obama had received his $650 billion in (10 year) tax increases in January. It also ignored the fact that the House has passed two bills to provide a more flexible way of applying the cuts - bills that the Senate ignored and the White House threatened to veto.

        3. Scare the public - and the Republican House members - with a litany of all the bad stuff that will happen. Plan C failed when planes didn't fall from the sky. Obama's message has changed to the gradualism of the pain, and the administration is doing what it can to make it real by doing things such as releasing thousands of illegal immigrants, furloughing meat inspectors, cancelling White House tours,  and holding back on military deployments. But the reality is that we can absorb cuts of 2.4% on a $3.6 trillion budget without calamity, no matter how hard Janet Napolitano and Ray Lahood try.

       4. Scare the public and the markets with fear that the Republicans will shut down the government by not passing another "Continuing Resolution" to authorize keeping on when the current resolution expires on March 27. Plan D failed when the House passed a bill on Wednesday to authorize spending through September at sequestration levels, with language that allowed some judgement as to how the military cuts would be implemented. The Senate will apparently pass it, and Obama will reluctantly sign it. (These Continuing Resolutions are necessary because for years the Senate and Obama have not done legally required budgets.) And the markets? Record highs.

    What has the Commander in Chief been thinking? That he could engineer a Democratic capture of the House in 2014 by blaming the Republicans for gridlock and a loss of government services?  He seems, however, to have had a different result.  A public which once believed Obama's claim that he could extend free healthcare to 30 million people without costing anyone "one thin dime" (a $6.2 trillion error, according to the GAO), is catching on to the flim flam. With the Washington Post giving Obama Pinnochios for claims about who proposed the sequester, layoffs of  teachers, and paycuts for Capitol Hill janitors some press integrity has returned, and the President's approval ratings have dropped well below 50% with about equal numbers holding Obama and the Republicans to be at fault.  

    While it feels good to have some financial discipline return, the reality is that year over year spending has flattened out but we remain at the heightened levels which began with the stimulus plan in 2009, and the heavy lifting of entitlement reform, tax reform (lower rates; fewer deductions; corporate and individual), and healthcare cost containment remains ahead. If Obama continues to pursue campaigning over governing - and he likes to do what he is good at while ignoring what he's not -  progress on the big stuff will remain elusive until 2016.    

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This week's video is an effort by Joe Scarborough to rehabilitate himself after his 2012 sell-out to Mika, by going after Paul Krugman.

bill bowen - 3/8/13

Comments

[DickG]

REP. BUDGET NEGOTIATING TECHNIQUE 'SEQUESTERED': 3.4% spending growth,10yr balancing period,revoking 'O' Care,reinstating 1996 Welfare Reform Act,reinstating required Budget Act(CR Agreement), Fed. lands to open for gas prod., Keystone and Medicare revision in 2023. All 'end game' positions, I would hope; but how are you going to get there from 'here'.
The Republicans, in order to look reasonable, submit this proposal that will be promptly 'neutered'. Four years ago,as soon as this president failed to meet Feb. deadlines on Budget submission,should have had his Budget Director called before Congress. Following The President's illegal repeal of '96 welfare reform; he again should have been sensored and appropriate administrator called before Congress.

Now they are demanding little from a President who's lawlessness has been institutionalized. Short of indicting this President or threatening their 'Continuing Resolution' on the debt ceiling, it's going to end up a minor 'blip'on the austerity 'front'.

[Bill McCormick]

OOOPS--the friendlies have come out swinging! GE CEO the President's buddy and head of his job creation advisory board has come out swinging against all of the new business regulations coming from the Administration.

And, last week Warren Buffet talked avout the need for the President to get out of the public campaign mode and behind closed doors with one or two Republicans and get some legisaltion done to solve the budget problems. By the way, Warren pointed out that he would probably pay 23% taxes this year under the new tax plan. But, interestingly, 15% of that tax he pays, he says, is payroll tax. That means Warren is double paying payroll tax as a self employed individual. But, unless I am wrong that is only on the first $100,000 and totals about $10,000. Hardly a big tax for the 4th wealthiest man in the world! I think Warren said he gave $80B to charity last year. I think that will cut your tax rate some. And, I doubt his secretary matched it. I could not follow the logic of his conversation. Comparing the tax rates of the 4th wealthiest man in the world to that of his employees may be good for political campaigns but it is apples and oranges in reality.

BILL CLINTON is said to be responsible for Obama's new attitude toward the Republicans. I guess the deal is on to make Hillary our next President. Of course, Bill has been our proxy VP for the past 4 years so why would we doubt the strategy for 2016?

[DickG]

THANKS FOR A LITTLE 'INSIDE BASEBALL';but can I suggest both you're names to Oreilly ? Dennis Miller could use a rest; and we could all use actual facts from the private sector, for a change.

[Bill McCormick]

SOME HOPE that we may finally be seeing some jobs emerge as a result of end of the Fiscal cliff public scare show, the belief that Sequester may actually be a good idea, and a calmer approach to the continuing resolution. Once again this brief respite from public scare tactics (albeit as Bill points out in his piece this week Obama did attempt to scare the public with his campaign style trip to the support states)has created an uptick in consumer and business confidence. And of course the FED continuing to print money at unprecedented clips is fueling a DOW rally that looks like a pot of gold to all--just jump in. Sell your Apple and buy Google.

BUT, as a cautious headhunter type I can say with some credablility that this may not yet be as good as it seems. While we got blockbuster news in job creation this month up 236,000 jobs and unemployment down from 7.9% to 7.7% a careful look at the figures makes me cautious. First the January job numbers were adjusted DOWN to 119,000 from a reported 157,000. Second, the unemployment rate fell because 130,000 people found jobs but also because 117,000 quit looking. 12 Million Americans are still unemployed. Then, manufacturing jobs which all this money printing is supposed to be stimulating only contributed 14,000 to the base. Remember those are the high paying middle class creating jobs the President promised as he now enters his 5th year in office. What did grow in February? Construction 48,000 likely rose because of good weather or perhaps finally that $68B in SANDY money got into the NE and created some jobs. Not as likely to be from the much heralded housing surge. Retail up 24,000. This could be the hiring of more 29 hour a week people by stores to avoid healthcare implementation costs. After all retail is not exactly your high paying middle class job. 24,000 jobs added in healthcare and education--what? I thought we are laying off teachers? And, for goodness sake 20,000 added in the movie business. Liberals are making more movies? All I know is that in the world of Executive Search where we actually work on high paying middle class jobs interviews continue to decline and hires are uncommon. Except in the area where oil and gas prospers. And, as California enters the fracking markets and Obama prepares to approve the Keyston Pipeline there is hope. Hope that Liberals, so fierce in their defense of their ideals in election campaigns will once again realize that success for people depends on a realistic approach to problem solving long term and at a rate that the economy can absorb it. After all the "I" man has become the "we" man and actually talked WITH some Republicans this week instead of TO them.

WATCH YOUR WALLETS however as we have yet to see the impact of the payroll taxes and the healthcare implementation on jobs and investment. And, whenever an adversary begins to sound like he likes you negotiations are about to get tougher.

[DickG]

INTENTIONALLY MISINFORMING THE POPULATION TO CREATE FEAR & DISORDER This type of activity certainly qualifies as IMPEACHABLE MOTIVES (Article #2 Impeachment Grounds). Perhaps now that Sen Rand Paul and Ted Creuz have displayed the 'Blocking and Tackling' necessary with this fraud; we can move ahead with a House 'Indictment'Bill.