Economy tilts debt-deal win to GOP

Neil Munro White House Correspondent
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President Barack Obama needs a successful end to the debt-ceiling debate more than Republican legislators need a win because of the sour economy, political analysts and advocates say.

“The aspirational goal that Obama set for himself — the grand bargain that would have come closest to fulfilling the upside potential [of a reinvigorated economy] — was never a serious possibility in the current climate,” said Bill Galston, President Bill Clinton’s chief domestic policy adviser.

“Without an economy-boosting grand bargain,” he said, “the president has to hope that the factors which have slowed economic growth during the first quarter turn out to be transient.”

“He has the most to lose in this debate,” because swing-voting independents already fault him for not improving the economy, said Luke Frans, executive director of Resurgent Republic, a GOP-affiliated polling group. Those voters, he said, are “skeptical, and on the brink of being negative.”

White House officials continue to press Republicans to sign on to a big deal that would impress swing voters by including some tax increases, budget cuts and modifications to entitlement programs and also by showcasing the president’s claim to be Washington’s grand compromise-maker.

The downward trajectory of Obama’s political position was made more clear this week when Obama rejected a proposal by Republican Majority Leader Rep. Eric Cantor. On July 13, the president said, “I’m going to the American people on this.” (Boehner says no need for Camp David summit)

But Gallup reported July 14 that only 14 percent of independent swing voters are satisfied with the country’s direction, and that registered voters would support a “Generic Republican” by 47 percent to Obama’s 39 percent. The underlying economic trends remain bad for the president. The formal measure of unemployment nudged up to 9.2 percent in June, and Wall Street’s forecasts for economic growth have sliped to below 3 percent.

The swing voters who backed Obama in 2008 “believe he’s made the problem worse … [and] don’t think he’s genuine in what he says,” said Frans, who recently completed four-focus groups that mostly consisted of Obama supporters, in Pennsylvania, Virginia, Florida, and Colorado.

The participants wanted “evidence that Washington is ready to stop its spending spree, and cutting $1 of spending for every $1 the debt ceiling is raised is viewed as failing to get ahead of the problem,” the Resurgent Republic report said. (S&P warns it may downgrade US credit rating)

“He needs to have an agreement that provokes high-fives and back-slapping in the [financial] markets, on Wall Street, and in the media … something that creates a positive buzz that the average voter who is confused would say that ‘he has to have done something,’’’ said Michael Franc, vice-president for policy outreach at the Heritage Foundation. In practice, that means, he said, “some revenues increase, broadly protection for entitlements … and showing leg on cutting defense.“

To escape this descent, Obama seeks “a change in trajectory, a change in the way Washington is going,” Resurgent’s Frans said. “Obama is so branded now as spending more money to restart the economy, record deficits and debt ceilings, I’m not sure what can it can do for him,” he added.

Republicans politicians recognize Obama’s downward trend, and don’t want to rescue him by striking a grand deal on Obama’s terms. “Republicans will not be reduced to being the tax collectors for the Obama economy,” Sen. Mitch McConnell said in a July 14 speech that rejected Obama’s grand-bargain deal.

“Washington is dysfunctional,” Republican strategist Karl Rove wrote in a July 14 Wall Street article. “Obama owns the dysfunction [because] the president has not only governed as a liberal — he’s governed as an incompetent liberal, thereby reminding voters that electing a Republican Congress and president next year is the only way to change direction.”

“Republicans don’t want to co-own the economy by being a partner to a grand deal that would take some of the sting out of what the president is feeling right now,” said an industry lobbyist.

But Republican legislators also face the voters in 2012, and so they need to show they’re working to change the trajectory of federal spending, said GOP-affiliated advocates. Legislators need to “make it crystal clear that they moved Heaven and Earth to get something satisfactory, but failed because of the stubbornness of Obama and the Democrats,” Franc said.

House legislators can demonstrate their determination by passing bills that force the president to reveal his detailed proposals, or that force the White House and the Senate Democrats to publicly defeat those House bills, Franc said.

An increasing number of Republican legislators, including McConnell, say they’re preempting a default and any public anger by passing a bill that would allow Obama to raise the debt ceiling. McConnell’s bill, for example, would allow “a clean increase in the debt ceiling with clean Republican hands,” said Galston.

“My assumption is that whatever they are saying in public, in private, many of the [Republicans] in both chambers agree with what Sen. McConnell has been saying bluntly in the last 36 hours, namely if the Republicans are seen as complicit as sending in the country into default, and bad things result from that, it may well lead to a defeat of like 1995.” Galston said.

“I think the White House is quite pleased with the deal that McConnell is offering,” he said. “The economy, if it improves, will swamp whatever unpleasant memories will be left” among Democrats, he said.

But if the economy does not improve, Republicans expect Obama’s polls to continue their slide downwards. “It will be difficult for him to claim victory, to say businesses have certainty [to spur investment], when around the corner are more regulations and [Obama’s] promises to increase taxes,” Frans said.