Obama badly needs a victory

Just as Obama's health care and energy reform bills take shape, voters and Congress are newly sensitized over costs, thanks to the way the new President mishandled his stimulus package.
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The president and his team

Just as Obama's health care and energy reform bills take shape, voters and Congress are newly sensitized over costs, thanks to the way the new President mishandled his stimulus package.

Obama, headed up or down? We will know more a week from now.

As has been well reported, President Obama's general approval ratings have remained strong. But confidence in his domestic policies has been steadily eroding, especially among moderate and independent voters who constitute a majority in the country. Support has eroded, in particular, because of backlash toward the public costs and federal role associated with the auto-industry bailout and toward rising federal budget deficits that threaten big inflation down the road.

Obama badly needs a near-term victory — most importantly with his health-care and energy proposals — lest his general approval ratings begin to sink.

On the other hand, there is some good economic news both for him and for the country. The Organization for Economic Cooperation and Development (OECD) reports that global recession has hit its bottom. There are some good signs here at home, too. Some banks have repaid their TARP money. Lower home prices have bought buyers back into the market. Most economists continue to predict recession's end by late this year or early in 2010.

But on Main Street, recovery seems distant. Unemployment rates are reaching toward 10 percent (far higher than Obama said they would go) and will not trend downward until months after the actual recession ends. Small business failures have increased. Financial markets seem unlikely to rally strongly until good news drives out the bad.

So, where does that leave Obama's plans for health care and energy legislation?

As readers know, I was stunned when, immediately after his inaugural, Obama put his weight behind an $800 billion economic-stimulus plan largely developed by House Democrats. He urged passage of the bill on an emergency basis — before most Members of Congress had received their final copies of it. Republicans and most moderate Democrats were frozen out of the drafting process. Worse, what was passed on a party-line basis had little to do with immediate economic stimulus, since much of the package consisted of Members' wish lists backlogged during the Bush years.

In hindsight, Obama might wish the stimulus package had not existed. It has not created the jobs or growth he promised. Its impact will not be felt in the economy until after recession has ended next year. Its big price tag, added to the financial- and auto-industry bailout price tags, has sensitized voters and the Congress to the inflationary threats of new health-care and energy spending.

Accordingly, the White House message on health care has shifted its emphasis from extension of coverage to containment of costs. Cost-containment also has become the principal selling point of energy proposals to be introduced in the House of Representatives this Friday. Problem is: All independent estimates of the health-care and energy initiatives show them sharply increasing federal red ink — unless accompanied by crushing tax increases.

A recent Congressional Budget Office report estimated that between $1 trillion and $1.6 trillion would be required over the next several years to finance a plan which, in the end, would still leave millions of citizens without health coverage. The working drafts of energy legislation also imply big energy-price and tax increases as the economy is shifted from oil, natural gas, and coal to alternative fuels.

Thus far Obama has continued to campaign on a general basis for health-care and energy reform and left the drafting of his actual proposals to Democratic committee chairs in the House and Senate. They, in turn, have been unable to agree on specific proposals and, in the key Senate Finance Committee, have been stalled on health-care action because of the cost implications of the plans presently under discussion.

Next week consensus will begin to form around the principal elements of the health-care and energy plans, which will then become characterized as the Obama Plans. Committee hearings will begin. Negotiations will take place between moderate and liberal Democrats, and with Republicans, in an attempt to keep the proposals' price tags affordable. Obama, finally, will have to make definitive decisions about the elements he will accept. It will be increasingly difficult for the President to keep talking in general terms about reform. He will need to defend specific provisions of the bills in play.

If the economy were growing, at full employment, and generating rising tax revenues, the task would be difficult. In the midst of recession, and with federal debt sharply increasing, it will be more than difficult.

Outlook: I make it 60-40 that health and energy legislation can be passed that will trigger incremental change in those sectors. That would enable Obama to declare "victory" — albeit quite limited victory. If he overreaches, however (as he clearly did with the stimulus package) and sticks with proposals that appear too costly and wrenching, he could lose any chance at anything. He could not come back in 2010 with more modest plans. His opportunity would have been lost.

Watch closely next week.


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About the Authors & Contributors

Ted Van Dyk

Ted Van Dyk

Ted Van Dyk has been active in national policy and politics since 1961, serving in the White House and State Department and as policy director of several Democratic presidential campaigns. He is author of Heroes, Hacks and Fools and numerous essays in national publications. You can reach him in care of editor@crosscut.com.