Tuesday, December 7, 2010


"Henry in the House"

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Posted: December 7th, 2010 -- 04:06 AM ET

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Ed Henry
CNN Senior White House Correspondent



The bipartisan tax deal is "the right thing to do" for jobs, the middle class,
business and the U.S. economy, President Obama said.

Editor's note: Ed Henry has covered the White House for CNN since March 2006. In "Henry in the House," he offers an insider's view of the Obama White House.

Washington (CNN) -- The metaphorical ink is still barely dry on the long, flowery press release President Obama sent out last Friday reacting to the drastic budget cuts proposed by the National Commission on Fiscal Responsibility and Reform that he appointed.

"Jobs and growth are our most urgent need," the President said Friday. "But if we want an America that can compete for the jobs of tomorrow, we simply cannot allow our nation to be dragged down by our debt. We must correct our fiscal course."

What a difference three days make. On Monday Obama signed off on a tax deal that independent budget analysts I've spoken to -- including Stan Collender of Qorvis Communications -- believe will add as much as $900 billion to the national debt. That expense would be higher than the $814 billion Obama stimulus package from 2009 and could basically cost as much as a second stimulus package.

"Yes, absolutely," Collender said when I asked whether this will be a second stimulus package by another name. "Whether it will have as much of an impact [as the first stimulus] is another question," because of the fact that the tax deal largely keeps existing policy in place, rather than creating many new tax cuts to spark the economy.

But Collender's point was that even if this second package is not very stimulative (the Bush era tax cuts will stay in place rather than create new spending), it will cost taxpayers about the same or maybe more than the first stimulus due to the inclusion of items such as the social security tax holiday and estate tax exemption.

It's no wonder then that even while the president acknowledged there will need to be "hard choices" about government spending in the days ahead when he addressed reporters on Monday, he essentially said that difficult conversation will wait for another day down the road because the bipartisan tax deal was too good to resist.

"It's the right thing to do for jobs," Obama said. "It's the right thing to do for the middle class. It is the right thing to do for business. And it's the right thing to do for our economy. It offers us an opportunity that we need to seize."

So much for seizing that other opportunity to balance the budget and avoid a Greek-style debt crisis, which Obama -- as well as Republican leaders such as Sen. Mitch McConnell of Kentucky -- seemed so committed to just last week after debt commission co-chairmen Erskine Bowles and Alan Simpson put their proposal on the table.

"Although I may not agree with all of the commission's recommendations, there will be no comfortable solutions to digging America out of a $14 trillion debt and I appreciate the bold attempt to provide a pathway back to a sustainable economic future for our country," McConnell said last week. "Historically, divided government has provided great opportunity to tackle the country's biggest problems on a truly bipartisan basis and it is my hope that this effort will serve as a catalyst for achieving the spending and entitlement reform that our country so desperately needs."

But in their first taste of the new divided government -- Obama still in the White House with a shrunken Democratic majority in the Senate and a Republican-led House that will take power in January -- the American people saw the two major parties coming together on a budget-busting package.

"This puts a nail in the Simpson-Bowles coffin," Collender told me.

Collender, who blogs on budget issues at the aptly named www.capitalgainsandgames.com, said Obama and congressional leaders are both signaling that the deficit-slashing will simply have to wait until after they have spent more federal money to try and pull the economy out of its funk.

After all of the Republican outrage about Washington spending run amok in the midterm election, Collender noted that McConnell and Speaker-to-be John Boehner (R-Ohio) are going to have a hard time explaining to the Tea Party how they can justify all of this new -- well -- Washington spending.

"How do Republicans campaign for six months on deficits being the devil and then turn around and vote for the option that increases the deficit the most?" asked Collender. "And how do they do it with a straight face?"

In fairness to Republicans, they also campaigned on stopping a large tax increase on January 1 by forcing Obama to stick with the Bush tax rates -- a battle the GOP won yesterday. McConnell stressed that view in his reaction to the bipartisan tax deal.

"I appreciate the determined efforts of the president and vice president in working with Republicans on a bipartisan plan to prevent a tax hike on any American and in creating incentives for economic growth," said McConnell. "Their efforts reflect a growing bipartisan belief that a new direction is needed if we are to revive the economy and help put millions of Americans back to work."

Another member of the Senate Republican leadership, GOP Conference Chairman Lamar Alexander of Tennessee, also suggested that rescuing the economy takes precedence over deficit reduction. If you think about it, that is what Obama was claiming about the first stimulus back in early 2009 -- the benefits outweigh the impact on the deficit -- and the President's contention was largely dismissed by Republicans at the time.

"We have close to 10 percent unemployment, and this agreement is the single best action Congress can take to make it easier and cheaper to create private-sector jobs," Alexander said of the tax deal. "The only question is, 'Is this the right thing to do for our country?' and the answer is yes."

As for Obama's commitment to reining in debt, Collender says "at least he didn't campaign on reducing the deficit" the way Republicans did this year in the midterm election.

But that's not completely true. In fact, dating back to the 2008 campaign Obama has promised to cut the deficit in half within his first five years in office. How's that going so far?

Well, beyond the first stimulus ($814 billion, according to the Congressional Budget Office last August) and the health care reform bill ($940 billion over 10 years, predicted the CBO), the White House is being careful to not put a precise price tag on it just yet as they await an official estimate from the Joint Committee on Taxation.

"We don't have that for you," an administration official said Monday night on a conference call with reporters.

On Tuesday morning, when I asked another administration official for an estimate, I was told: "We aren't giving a cost estimate yet because we haven't gotten" one from the taxation panel on Capitol Hill.

In the meantime, all of us -- including the White House -- will have to chew over what the President himself said just last Friday, when the debt commission completed its work and passed the baton to Obama and Congressional leaders in both parties.

"I don't doubt our ability to meet this challenge, but our success depends on our willingness to engage in the kind of honest conversation and cooperation that hasn't always happened in Washington," said Obama. "We cannot afford to fall back on old ideologies, and we will all have to budge on long-held positions. So I ask members of both parties to maintain an open mind and a commitment to progress as we work to lift this burden from the shoulders of future generations."

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