Bev Perdue Proposes GOP's Smaller Government Agenda: Her 2012 Campaign Strategy

Bev Perdue: Merge N.C. State Departments, Freeze Hiring


Gov. Beverly Perdue said Thursday she wants to consolidate several state agencies, eliminate support functions and freeze hiring to streamline state government and save money.

"I believe North Carolina has to be leaner and more nimble and more responsive to the citizens of this state," Perdue told area business leaders during a meeting at Pinehurst Resort. "It's not rocket science. It's just simple, fundamental, good business sense."

The state faces a $3.7 billion budget shortfall, starting July 1, according to the most recent estimation by fiscal experts at the legislature. That's nearly 20 percent of the $19 billion budget under which the state is currently operating.

Most of the gap is caused by the loss of federal stimulus dollars and the expiration of temporary taxes, along with high-priority spending items that lawmakers usually approve, such as funding increased school enrollment, state pension funds and the employee health insurance plan.

The shortfall could change if the economy improves or worsens.

The new Republican majority in the General Assembly has ruled out new taxes to close the budget gap, so more attention has been paid to possible consolidation or reorganization of state government as a budget solution.

Perdue said she wants to merge state agencies and privatize some of the duties now handled by state workers.

Under her plan, the departments of Juvenile Justice, Correction and Crime Control and Public Safety would merge into one Department of Public Safety; the Department of Commerce would absorb the Employment Security Commission; and the Department of Administration would be renamed the Department of Management and Administration and become the chief operations unit for state government, absorbing information technology, the Office of State Personnel and the controller’s office.

Purchasing functions can be consolidated and coordinated bidding and bulk purchasing would be farmed out to a private company, Perdue said. Also, up to 100 computer service units statewide could be closed, and a private company could help the state consolidate IT services in a central location, she said.

The governor declined to say Thursday how much money the moves could save or how many state jobs would be eliminated by farming out functions like human resources, purchasing and IT. The details would be included in her 2011-12 budget proposal, she said.

"I know I'm not giving all the details. The devil's in the details, and those details will be excruciatingly painful," she said. "There will be layoffs. I'm not proud of saying it. I'm very worried about it."

She also called for an immediate hiring freeze in all cabinet agencies and asked other members of the Council of State to do likewise in their departments.

Finally, Perdue said she would present to lawmakers a list of 150 state boards and commissions that could be eliminated. Lawmakers should review each and retain only those that are justifiably needed, she said, noting that more than half of the existing state boards and commissions receive state funding.

"If we're going to reinvent this thing called state government, we simply can't do things the old way," she said. "It's really time to stop talking the talk and do something to fundamentally change the structure of this great state."

The last state government reorganization occurred in 1996. The last significant attempt to consolidate government departments failed in 1995 when Republicans balked at Gov. Jim Hunt's proposal to eliminate the Department of Crime Control and Public Safety.

Leading Republican lawmakers, including incoming House Speaker Thom Tillis, said they met with Perdue Thursday morning to discuss her plan, and they support the idea of streamlining state government.


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Why Obama's Debt Panel Proposal Failed: Jobs More Important

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The Message From Washington: Recovery Fix Is More Urgent Than Deficit Fix


Friday, the 18 members of the National Commission on Fiscal Responsibility and Reform failed to pass an austerity plan to slash the U.S. budget deficit by 2015. Although eleven members voted in favor, the final tally was three short of the necessary number to send the plan to Congress for a vote.

Meanwhile, the Labor Department reported that unemployment in November had jumped to 9.8%, causing members of Congress and the Obama administration to suggest what needs to be done quickly to fix the jobs situation.

From Democrats: Extend unemployment insurance for those who have lost their jobs and continue tax cuts for 98% of Americans.



From Republicans: Extend tax cuts for everybody.

The takeaway? Fixing the sluggish recovery is more important right now than fixing the country’s deficit problem.

The cumulative U.S. budget deficit over the next 10 years is projected to be about $6 billion, and the total of U.S. debt is expected to equal more than two-thirds of total U.S. economic output in 2020.

That’s assuming that policymakers allow the Bush-era tax cuts and other expiring tax measures to end as scheduled (which almost certainly won’t happen). Despite the immediate focus on the recovery, don’t be surprised if some of the ideas for austerity find their way back into the president’s FY2012 budget request in February.

As Sen. Kent Conrad, D-N.D., said during the Fiscal Commission’s final meeting Friday: “This is not the end of the story.”

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Debt Plan Failed To Pass Despite Majority Support: Jobs More Important


A majority of the White House debt-reduction panel, representing a cross-section of the political spectrum, backed a sweeping yet controversial overhaul of U.S. tax and spending policies Friday, a sign that both parties are ready to put sacrosanct programs on the table to address the budget deficit.

Eleven members, ranging from liberal Democratic Sen. Richard Durbin of Illinois to conservative Republican Sen. Mike Crapo of Idaho, supported a proposal advanced by Democrat Erskine Bowles and Republican Alan Simpson, co-chairmen of the National Commission on Fiscal Responsibility and Reform.

The support surprised many but still fell short of the 14 votes needed to bring the package to the House and Senate floor for a vote. White House and Republican leaders suggested key parts of the package could be folded into the budget next year.

The proposals include eliminating popular tax breaks, cutting defense spending and raising the retirement age for Social Security. Multiple members of the panel said such steps were necessary to prevent the U.S. from entering a Europe-style fiscal crisis in the next decade.

President Barack Obama welcomed the report, without endorsing any of its specifics. "To sustain growth in the medium and long term we need to face some difficult choices to curb runaway debt," Mr. Obama said in a statement. "It will require cutting the spending we don't need in order to invest in what's necessary to grow our economy and our middle class. It will require all of us, Democrats and Republicans, to find common ground."

Government officials are trying to establish credibility on long-term deficit reduction while at the same time giving the struggling economy a shot in the arm, which would likely increase the deficit in the short term.

To White House policy makers and their allies, there is no contradiction between demands for immediate stimulus and efforts to cut the deficit over the coming decade.

In fact, the Labor Department's report Friday of far lower job creation than expected in November could help the process. Lawmakers and officials believe it will hasten a deal on a short-term extension of tax cuts, based on the idea that taxes shouldn't rise during an economic downturn, and moving the deficit conversation to the long term.

The White House and congressional negotiators were in talks on a costly package that is expected to temporarily extend all of President George W. Bush's tax cuts, as well as unemployment benefits and a raft of tax breaks for lower-income Americans that were part of last year's economic-stimulus law.

"There is no reason why policy makers can't do the sensible thing of stimulating the economy today through policies such as [emergency unemployment compensation] extension and some type of payroll-tax holiday and simultaneously improve our long-term fiscal sustainability," said Alan Krueger, a Princeton University economist who recently resigned as assistant Treasury secretary for economic policy.

Mr. Obama said the commission's report "includes a number of specific proposals that I—along with my economic team—will study closely in the coming weeks as we develop our budget and our priorities for the coming year."

White House budget director Jacob Lew invited the commission to meet with him and Treasury Secretary Timothy Geithner.

Administration officials have pointed to the commission's proposed cuts to defense spending, its attack on "tax expenditures"—cherished tax breaks such as mortgage-interest deductions—and its call for an overhaul of Social Security as potential areas to pursue.

The jobs report—just 39,000 new payroll jobs and a 9.8% unemployment rate for November—was "shockingly bad," said Douglas Holtz-Eakin, a former Republican director of the Congressional Budget Office. But the 11 votes for the commission report, including five senators from across the political spectrum, was "shockingly good," he said.

A resolution of the tax issue and the surge in support for drastic steps to reduce the deficit could bring economic benefits, Mr. Holtz-Eakin said. "We've got a business sector staring at Washington, totally paralyzed by what they see coming out," he said.

After the commission's final meeting, an additional 13 senators—12 Democrats, and independent Joseph Lieberman of Connecticut—wrote to the president urging action on the commission's plan "now."

"I would simply say to the president, to the Senate, to the House, and to the people of our nation, that we should not let this proposal fall idly by the wayside," Republican Sen. Mike Crapo, a conservative closely aligned with the GOP leadership, said as he cast his vote for the plan.


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Democrats Livid At Obama For Tax Cuts Deal Talks

Democrats Angry Over Obama Tax Deal Talks


For almost a decade in Democratic politics, there was little disagreement: If you were running for office, you wanted do away with the Bush tax cuts for high-end earners.

Now, in the eyes of liberal and moderate Democrats alike, President Barack Obama has blinked — even before the new House Republican majority takes office.

Between Obama’s weekly address Saturday and comments Wednesday by his senior adviser David Axelrod, the White House has made clear that it intends to compromise — ceding to Republican demands to extend the high-end tax cuts temporarily in exchange for renewing the middle-class tax cuts due to expire at year’s end.

“The president should have stood firm on the expiration of the tax cuts on upper-income earners,” said Jim Kessler, vice president for policy at Third Way, a centrist think tank. “First, I don’t think it is good for our economy right now. There are better uses for the money in the short term. ... Second, we can’t afford it. It just means tax increases for future generations. And third, I think the president had the upper hand.”

On this point, Kessler found a rare point of agreement with Adam Green, co-founder of the Progressive Change Campaign Committee, which has been a frequent critic of Third Way's centrist politics.

“The winning blueprint of the White House these two years is to pick smart fights where the American people are overwhelmingly on their side and force Republicans to fight hard,” Green said. “The tax-cut fight would be a perfect place to start.”

“There is zero tolerance among progressives for Democrats caving on an issue where 98 percent of the American people would be on their side,” Green added.

On Capitol Hill, House Majority Leader Steny Hoyer (D-Md.) also is opposed to a compromise that extends the tax cuts for high-earners. “Mr. Hoyer wants to see the middle class tax cuts extended, but not at the expense of adding $700 billion to the deficit to give tax cuts to the wealthy," said his spokeswoman, Katie Grant, referring to the 10-year cost of the high-end tax cuts.

There may still be a debate, if Obama pushes for a permanent, rather just a temporary, extension of the middle-class tax cuts — a fight that congressional Democrats still hopes he wages. Obama does not support a permanent extension of the tax cuts for the wealthy.

But Obama hasn't made clear whether a permanent extension of the middle-class cuts will be his starting offer to Republicans. The White House did not respond to requests Thursday for clarification.

Republicans have said they won’t agree to “decoupling” the tax rates for the middle class from those for the wealthy, and have threatened to filibuster any bill that would so. An impasse means the tax cuts would expire Dec. 31, hitting paychecks with a tax hike the next day.



But that debate -- over temporary vs. permanent tax rates – is hardly what many Democrats had in mind, and seems less likely to have a visceral punch, especially when the White House has shown it’s willing to live with a temporary across-the-board extension for some time.

Even that deal, however, would run counter to one of Obama’s longest-standing and most often-repeated promises from the 2008 campaign – that he would end the tax cuts for wealthier individuals.

It’s hard to overstate just how much some Democrats, still reeling from the midterms, were relishing the prospect of the Bush tax cuts fight.

Polls show a majority of voters support raising taxes on the rich. Democrats could accuse Republicans of being hypocritical defenders of the elite. And the debate would be a well-timed rallying cry for Obama as he sought to reassert himself as champion of working Americans after the Democrats’ drubbing at the polls.

Now it doesn’t look like it’s going to play out that way.

Axelrod said the White House has to deal with “the world of what it takes to get this done” – a signal to Democrats that they don’t have the votes to kill the high-end tax cuts in the face of a new Republican House majority and resistance from Democratic moderates in the Senate.

“We have to deal with the world as we find it,” Axelrod told the Huffington Post.

The White House pushed back on characterizations that Axelrod’s comments represented a strategy shift. A spokeswoman said Axelrod was echoing what the president already stated in his weekly address.

And in an email to POLITICO, Axelrod added: "There is not one bit of news here. I didn't go beyond what we said before."

To progressives, and even some moderate Democrats in Congress, a temporary extension across-the-board would be a defeat. Renewing all of the tax cuts in tandem – without trying to separate the middle-class breaks – means that Congress would debate the issue again, likely in 2012, thrusting it into the presidential race when the stakes are higher.

“That would represent a complete cave,” said a senior Senate Democratic aide, who spoke on the condition of anonymity to speak candidly about party strategy. “It has been a cardinal truism among Democrats for 10 years that this policy was folly. That is a narrative we told for years and all of sudden we’re going to go back on that and punt on this? That would be dispiriting.”

Drew Westen, a psychologist and political consultant who has worked with Democrats on messaging, said a move to accept even a temporary extension on the high-end earners was "politically inexplicable and inexcusably bad public policy."

"It also eliminates any possibility that Democrats could draw a distinction between themselves as the party of the middle class and the GOP as the party that takes care of the rich and charges the bill to the children and grandchildren of working and middle class Americans," Westen wrote on POLITICO's Arena. "But the president and his senior advisers have proven incapable of understanding what Americans are feeling, unwilling to articulate any vision for moving forward, and uninterested in any principled position on virtually any issue for the last two years, so why start now."

By contrast, Republicans are united around one simple goal: No new taxes.

When Congress opens its lame duck session next week to debate taxes, no one may have more at stake than Obama, navigating his first major legislative showdown since Republicans won the House and picked up six seats in the Senate.

But just when Obama needs unity the most, Democrats are darting in every different direction, eager for the White House to offer definitive guidance, anxious over the party’s defeat in the elections and nervous about the persistently weak economy.

The president’s willingness to compromise is a tacit acknowledgment that the party can’t deal with the tax cuts on their own terms, and underscored how Democrats in Congress and the White House are far from united on the best path forward.

Some Democrats want to renew the tax cuts temporarily for all Americans, rich or not. Others prefer pushing a permanent break for the middle class, while phasing out those for the wealthy after two years – or sooner. Yet others say the income threshold should rise from $250,000 to $500,000. Or maybe even $1 million.

Even Treasury Secretary Timothy Geithner has argued that the tax cuts on the rich must expire.

''The world is likely to view any temporary extension of the income tax cuts for the top 2 percent as a prelude to a long-term or permanent extension, and that would hurt economic recovery as well by undermining confidence that we're prepared to make a commitment today to bring down our future deficits," Geithner said in August.

With the president overseas for the last week, Democrats want a clear sense of what Obama really wants them to fight for, according to senior Hill aides.

“People are waiting for the president to return,” a second senior Democratic aide said. “They’re looking for leadership. If they jump into that fight, they want to know he is there. They want to know what his roadmap is and how they can work to achieve their goal. This is direct involvement, publicly engaging folks through the media and in private meetings.”

There have been no negotiations in Congress this week. House and Senate Democratic leaders plan to take the temperature of their members in the early part of next week before settling on a strategy, aides said.

“I’ve been a little surprised by how this has played out,” Kessler said. “I thought this was an area where Democrats could have come out of the election with a pretty strong position.”


Sources: CNN, Politico

Obama's Deficit Panel Weighs Tax Cuts & Social Security

Panel Weighs Deep Cuts In Tax Breaks & Spending


A draft proposal to be released Wednesday by the chairmen of President Obama’s bi-partisan commission on reducing the federal debt calls for deep cuts in domestic and military spending starting in 2012, and an overhaul of the tax code to raise revenue. Those changes and others would erase nearly $4 trillion from projected deficits through 2020, the proposal says.

The plan would reduce Social Security benefits to most future retirees — low-income people would get a higher benefit — and it would subject higher levels of income to payroll taxes to ensure Social Security’s solvency for at least the next 75 years.

But the plan would not count any savings from Social Security toward meeting the overall deficit-reduction goal set by Mr. Obama, reflecting the chairmen’s sensitivity to liberal critics who have complained that Social Security should be fixed only for its own sake, not to balance the nation’s books.

The proposed simplification of the tax code would repeal or modify a number of popular tax breaks — including the deductibility of mortgage interest payments — so that income tax rates could be reduced across the board. Under the plan, individual income tax rates would decline to as low as 8 percent on the lowest income bracket (now 10 percent) and to 23 percent on the highest bracket (now 35 percent). The corporate tax rate, now 35 percent, would also be reduced, to as low as 26 percent.

Even after reducing the rates, the overhaul of the tax code would still yield additional revenue to reduce annual deficits — a projected $80 billion in 2015.

But how low the rates are set would depend on how many tax breaks are reduced or eliminated. Some of them, including the mortgage interest deduction and the exemption from taxes for employees’ health benefits, are political sacred cows.

The commission’s chairmen — Erskine Bowles, the president of the University of North Carolina system and a former White House chief of staff under President Bill Clinton, and Alan K. Simpson, a former Republican Senate leader from Wyoming — presented their draft to the nine other Democrats and seven other Republicans on the commission at a closed-door meeting on Wednesday morning.

The group, appointed last winter, had made no decisions in advance of last week’s midterm elections, to avoid politicizing the painful options for reining in projected yearly deficits that are building up the federal debt to a potentially dangerous level. Even so, the election results — by emboldening victorious anti-tax conservatives and defeating many fiscally conservative Congressional Democrats — are widely seen as having reduced the already slim chance that a supermajority of the commission could agree to a package of proposals by Dec. 1.

Under Mr. Obama’s executive order last February creating the panel of 12 members of Congress and six private citizens, 14 of the 18 commissioners must agree in order to send any package to Congress for a vote in December. The Senate majority leader, Harry Reid of Nevada, and Representative Nancy Pelosi, who will remain the House speaker until January, have promised in writing that the Senate would vote first and, if it approves a plan, the House would vote as well.

Should the package of proposals fall short of the necessary 14 votes in the deficit commission, as many people expect, proponents of deficit reduction, including some administration officials, hope that at least some of its recommendations could be the basis of efforts to pare deficits once the economy fully recovers.

In any case, the proposals will pose a test or an opportunity for Mr. Obama as he adjusts to the election drubbing that cost his party control of the House and reduced its Senate majority — depending on whether he tacks to the political center and embraces them in his own budget early next year, or shifts more to the left and leaves them on the shelf.

The chairmen’s proposals, and other deficit reports coming out soon from other groups, will present a challenge also to Congressional Republicans by challenging their contention that the budget can be balanced by spending cuts alone — a claim that even many conservative economists and budget analysts reject, given the scale of projected debt as the Baby Boom generation retires and claims federal benefits.

Next Wednesday, another bipartisan group of budget experts — led by Alice Rivlin, a former budget director both to Congress and Mr. Clinton, and Pete V. Domenici, a former Republican senator from New Mexico who for years was chairman of the Senate Budget Committee — plans to recommend a package of spending cuts and revenue increases that is similar but goes beyond what is now before the fiscal commission. They are sponsored by the Bipartisan Policy Center, a research organization formed by four former Senate majority leaders.

The Bowles-Simpson plan has a ratio of roughly $2 in spending reductions for every $1 in revenue increases, with an additional $673 billion in savings from reduced interest payments on the resulting lower federal debt.

“The Problem is Real — the Solution is Painful,” the chairmen wrote in their slide presentation to colleagues.

Mr. Obama directed the commission to propose ways to bring the budget into balance by the 2015 fiscal year, excluding interest on the federal debt accumulated so far. That interest is projected to be equal to about 3 percent of the nation’s gross domestic product that year — roughly the maximum level that many economists consider sustainable in a growing economy.

The commission chairmen’s plan aims to bring federal spending and revenue roughly in line by the fiscal year 2020. Spending would then be equivalent to 22 percent of the nation’s economic output — slightly higher than in earlier years, reflecting the growing costs of retirement and health benefits for an aging population — and revenues would be about 21 percent.

By comparison, in the fiscal year 2010, which ended Sept. 30, spending was 23.8 percent of gross domestic product while revenues were just 14.6 percent — reflecting the one-time costs of stimulus spending and the reduction in tax receipts because of high unemployment and slack business activity. That left a deficit for the year of 9.1 percent of gross domestic product and expanded the public debt to an amount equal to 62 percent of G.D.P.




Deficit Panel Leaders' Plan Curbs Social Security


The leaders of President Barack Obama's bipartisan deficit commission launched a daring assault on mushrooming federal deficits on Wednesday, proposing reducing annual cost-of-living increases for Social Security, gradually raising the retirement age to 69 and taking aim at popular tax breaks such as the mortgage interest deduction.

As part of a proposal to wrestle $1-trillion-plus deficits under control, their plan would also curb the growth of Medicare. It came a week after voters put Republicans back in charge of the House and told Washington that the government is too big.

However, the plan by Chairman Erskine Bowles and former Sen. Alan Simpson, the co-chairman, doesn't look like it can win the support from 14 commission members that is needed to force a debate in Congress. Bowles is a Democrat and was former President Bill Clinton's White House chief of staff. Simpson is a Wyoming Republican.

The two were among the first to acknowledge their plan's unpopularity — and to suggest it would be a nonstarter in Congress.

"We'll both be in a witness protection program when this is all over, so look us up," Simpson told reporters. Bowles said: "We're not asking anybody to vote for this plan. This is a starting point."

They weighed in as the Treasury Department reported that the federal government began the new budget year with a deficit in October that totaled $140.4 billion — down 20 percent from a year ago but still the third highest October shortfall on record. Even with the improvement, last month's red ink set the stage for what is expected to be a third consecutive year of $1 trillion-plus deficits.

The Social Security proposal would change the inflation measurement used to calculate cost-of-living adjustments for program benefits, reducing annual increases. It will almost certainly draw opposition from advocates for seniors, who are already upset that there will be no increase for 2011, the second straight year without a raise.

The plan would also raise the regular Social Security retirement age to 68 in about 2050 and to 69 in 2075. The full retirement age for those retiring now is 66. For those born in 1960 or after, the full retirement age is now 67.

Better-off beneficiaries would receive smaller Social Security payments than those in lower earning brackets under the proposal.

The commission is supposed to report a deficit-cutting plan on Dec. 1, but panel members are unsure at best whether they'll be able to agree on anything approaching Obama's goal of cutting the deficit to about 3 percent of the size of the gross domestic product.

Building the needed support of 14 of its 18 members will be difficult. Cuts to Social Security and Medicare are making some liberals on the panel recoil. And conservative Republicans are having difficulty with the options suggested for raising taxes. The plan also calls for cuts in farm subsidies, foreign aid and the Pentagon's budget.

"This is not a proposal I could support," said panel member Rep. Jan Schakowsky, D-Ill. "On Medicare and Social Security in particular, there are proposals that I could not support."

The plan released by Bowles is only a proposal put forth by him and Simpson. Members of the commission will resume debate on it later Wednesday and next week in a long-shot bid to reach a compromise.

The release of the proposal comes just a week after midterm elections that gave Republicans the House majority and increased their numbers in the Senate. During the campaign, neither political party talked of spending cuts of the magnitude proposed by Bowles, with Republicans simply proposing $100 million in cuts to domestic programs passed each year by Congress.

"It's a very provocative proposal," said a Republican panel member, Rep. Jeb Hensarling of Texas. "Some of it I like. Some of it disturbs me. And some of it I've got to study."

But member Sen. Judd Gregg, R-N.H., called the proposal "an aggressive and comprehensive plan for getting federal spending, deficits and the debt under control. ... This will not be the final proposal, but it is a significant step down the path of establishing fiscal responsibility."

Other proposals by Bowles and Simpson include:

—Increasing the gas tax by 15 cents a gallon to fund transportation programs.

—A three-year freeze in the pay of most federal employees and a 10 percent cut in the federal work force.

—Eliminating all congressional pet projects, known as earmarks.

Bowles and Simpson also are proposing a fundamental rewrite of the tax code, though they didn't offer a specific plan.

But the goal is to lower overall tax rates, simplify the code and broaden the taxpayer base. One option proposed is to completely eliminate so-called tax expenditures — including popular deductions like the mortgage interest tax break and a deduction taken by companies that provide health insurance to their employees.

They didn't specifically call for doing away with these popular tax breaks, instead listing that among a series of possible options.

While it may not survive, the Bowles-Simpson proposal illustrates the painful choices involved in tackling a deficit that presently requires the government to borrow 37 cents out of every dollar it spends.

Even with the dramatic proposals, the Bowles-Simpson plan would leave deficits of about $300 billion in 2015, the year by which Obama tasked the group with balancing the federal budget, except for interest payments on a national debt that now stands at $13.7 trillion. If the changes to Social Security are dropped, the deficit would be about $400 billion in 2015.

But the plan is an aggressive assault on the longer-term deficit crisis, which is fueled by spiraling costs for retirement programs.


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Obama's Reinvention Post "Shellacking": Cut Taxes, Ditch Axelrod & Jarrett

Obama's New Job: Reinvention


Weeks before the midterm elections, Barack Obama already knew his life as president would change forever. His Democrats were going to "take a shellacking," as he put it after the vote. They would likely lose their House majority – and boy, did they.

Obama 2.0, in the works for months, is now live, and the outlines are beginning to take shape. After pledging to find "common ground" with the newly empowered Republicans in Congress, the president is holding a White House summit with the leaders of both parties on Nov. 18.

He has signaled a willingness to compromise on extending Bush-era tax cuts for the wealthy. He has distanced himself from the now-toxic cap-and-trade energy bill and laid out areas for possible consensus action under the rubric of "energy independence." He is looking ahead to the recommendations of the bipartisan deficit commission, due Dec. 1, as a launch point for addressing America's worsening fiscal imbalance.

In short, Mr. Obama is making all the right noises. But over the next two years, can he rise to the occasion and master the new reality or will the Republicans get the better of him, as they seek to unseat him in 2012?

Is He Carter Or Clinton?

"Barack Obama is clearly a good person," says Cal Jillson, a political scientist at Southern Methodist University in Dallas. "The question is whether he can be an effective, efficient president. That jury is still out. It's the question, is he Carter or Clinton?"

Obama's two most recent Democratic predecessors, Jimmy Carter and Bill Clinton, show two paths. In the Carter version, a smart but self-righteous president never figures out a comfortable modus operandi with Congress – and it was a Democratic Congress back then – and is swept out after one term. Of course, Mr. Carter also presided over crippling events that weren't his fault, beginning with an economically damaging energy crisis and the drawn-out Iranian hostage crisis. But the voters had had enough.

In the Clinton version, a smart and personable but undisciplined president loses his congressional majorities after two years, and after some painful retooling, learns to meet the Republicans partway and wins reelection.

At this point, Obama may seem more like a Carter than a Clinton. It's hard to see him hanging out after hours with a Speaker John Boehner the way President Reagan would invite Democratic House Speaker Tip O'Neill, a fellow Irishman, over for drinks every so often, or secretly consulting with a Republican strategist the way Mr. Clinton did with Dick Morris to learn the art of "triangulation."

Some analysts are not convinced that Obama can reinvent himself after his electoral comeuppance.

Limits To Reinvention

"I think voters get a pretty strong set of feelings about a president by this time, and there are limits to how much you can reshape how the public sees you," says Julian Zelizer, a Princeton historian and author of a new book on Carter. "Obama's better opportunity is to focus his fire on the Republicans and present them as the party of extremism that can't govern and has no solutions."

So far, the Republicans' two leaders on Capitol Hill seem to be playing good cop, bad cop. The day after the election, Congressman Boehner echoed Obama as he spoke of working with the president on "the American people's priorities: creating jobs and cutting spending." The next day, Senate minority leader Mitch McConnell (R) of Kentucky doubled down on his insistence that the GOP's top political priority should be to deny Obama a second term.

"The fact is, if our primary legislative goals are to repeal and replace the health spending bill; to end the bailouts; cut spending; and shrink the size and scope of government, the only way to do all these things is to put someone in the White House who won't veto any of these things," Senator McConnell said Nov. 4 in an address at the Heritage Foundation in Washington.



To be sure, the White House itself has put out the message that the next two years will be marked by a combination of cooperation and conflict. Both work to Obama's advantage. The public wants to see the parties working together, but if liberal Democrats see Obama veering too far to the right, he could alienate his base and invite a primary challenge from the left. Already, the name of former Democratic National Committee chair Howard Dean has been floated as a possible contender (and immediately shot down by aides), as has the name of Sen. Russ Feingold (D) of Wisconsin, who lost reelection. A spokesman said Senator Feingold has "no interest" in running.

Challenging Obama Would Be Tricky

Given Obama's unique position in history as the first African-American president, it may be trickier for a fellow Democrat to challenge him the way Sen. Edward Kennedy challenged Carter in 1980, another factor that weakened Carter's reelection bid.

And there are many reasons for Obama to be hopeful about his future. His job approval rating is not too far below 50 percent, and the Republican Party is just as unpopular as the Democrats. A Pew Research Center/National Journal poll released Oct. 25 found majority approval of only two GOP agenda items: allowing more oil and gas drilling off US shores and allowing private accounts in Social Security. Repealing health-care reform came in at 49 percent.

Freezing all government spending except for national security won 43 percent support. Conducting major investigations of the Obama administration came in at 42 percent.

The Republicans may overreach, but Obama can't count on that. Instead, he is looking inward. Expect a staff shake-up in the White House. At his Nov. 3 press conference, Obama took responsibility for an economy that has "not made as much progress as we need to make." But he did not apologize for any of the big agenda items – foremost, the economic stimulus and health-care reform – that have caused him so much grief.
Mistakes acknowledged

In a recent New York Times interview, he admitted that he let himself look too much like "the same old tax-and-spend liberal Democrat." He admitted he learned too late that "there's no such thing as shovel-ready projects." And he suggested that he should have allowed the Republicans to "insist on the tax cuts in the stimulus," instead of proposing them himself.

But those are tactical matters, and he faces a big-picture challenge. Come January, to avoid gridlock, he must govern "less like the liberal antithesis of Ronald Reagan and more like the heir to Bill Clinton, whose agenda he has regarded hitherto as excessively compromised and incremental," writes former Clinton policy adviser William Galston.

"No later than his 2011 State of the Union address," adds Mr. Galston, head of governance studies at the Brookings Institution, "we will find out whether Obama possesses the one trait that every successful statesman needs: the ability to adjust to changing circumstances without selling his soul."








Dems Need To Stop Making Excuses, Start Listening


The Obama administration and its Democratic allies started making the excuses months ago, when they first started to see the electoral tsunami headed their way. It is typical of the arrogance of the central planner that our president seems to genuinely believe that the strong majority of Americans -- who have now clearly demonstrated their opposition to his policies -- are suffering from what Friedrich Engels called false consciousness. His condescending view is that Americans who disagree with him must not understand what’s best for them.

He needs to get over it, now, because if he fails to listen to the American people and chart a more fiscally responsible course, the country is headed for an economic disaster and he is headed for a political one.

At a recent Democratic fundraiser in Boston, Obama made the false consciousness argument this way:

“And so part of the reason that our politics seems so tough right now, and facts and science and argument does not seem to be winning the day all the time, is because we’re hard-wired not to always think clearly when we’re scared. And the country is scared, and they have good reason to be.”

Obama has blamed groups like mine for his party’s troubles. We are, apparently, the bourgeoisie misleading the working class in his false consciousness theory of the 2010 election. He attacked us by name at least 18 times this year, most recently in Rhode Island, where he said: “We are getting snowed under by unsupervised spending, undisclosed spending through these front groups that so many of you have read about: ‘Americans for Prosperity’ and ‘Moms for Motherhood’-- that last one I made up.”

But his joke about our name ignores that prosperity depends on economic freedom, as I previously explained here in Fox News Opinion.

The American people understand this, and they made it crystal clear in the election. They weren’t misled. They weren’t deceived. They weren’t “snowed under” by advertising. The idea that somehow the election was bought is insulting to voters and a sad excuse for continuing to ignore the strong majority of American who are demanding fiscal responsibility. An excuse to ignore our fiscal problems and condemn us to slow growth that will inhibit Americans achieving all of our hopes and dreams.

President Obama was still making excuses in his post-election press conference on Wednesday. He deflected questions about the implications of the election for his far-left policy agenda, and insisted that the election had nothing to do with precisely the central policy issues voters rejected: health care, stimulus spending, and cap-and-trade energy taxes.

Obama claimed, without evidence: “we’d be misreading the election if we thought that the American people want to see us for the next two years relitigate arguments that we had over the last two years.” Then he went on to argue for, astonishingly, even more stimulus spending.

Nobody is more in denial than Speaker-un-elect Nancy Pelosi, who recently claimed “Everything was going great and all of a sudden secret money from God knows where - because they won't disclose it -- is pouring in.”

Going great? In Pelosi’s delusion, the 2009 summer of discontent never happened. The American people, in her mind, weren’t outraged that she ignored them to jam Obamacare through using procedural trickery to sidestep the Massachusetts election. Pelosi is willfully blind to that fact the American people have been in open revolt against out-of-control spending for the better part of two years. She is even actively campaigning to retain her post as House Democratic Leader. Talk about a false consciousness.

In reality, all sides were well-funded in the major policy debates running up to this election and in the election itself. Supporters of big government lavishly funded their advocacy groups (as has become the norm) while, for the first time, supporters of limited government (including our 85,000 donors) stepped up and came close to matching them.

The Democratic committees outraised Republican committees about $560 million to $497 million, while Republican candidates narrowly outraised Democrats $503 million to $465 million. In House races, the New York Times reported that Democrats and left-leaning groups outspent Republicans and right-leaning groups on television advertising $142 million to $119 million.

This cycle included well-funded parties, candidates, and groups across the political spectrum that had every opportunity to get their messages out. Every voter had an ample opportunity to hear all of the arguments and make up his or her own mind. The result was clear. Now is the time to stop making excuses and start delivering fiscal responsibility.


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Sources: Christian Science Monitor, CNN, Fox News, Jewish Journal, MSNBC, Youtube, Google Maps

Ben Bernanke & Obama's $600B Bond Inflation "Stimulus" Monstrosity

The Fed’s Big Gamble: What Could Go Wrong

The Federal Reserve is about to take a huge risk in hopes of getting the economy steaming along again. Nobody is sure it will work, and it may actually do damage.

The Fed said Wednesday it is committing to buy $600 billion more in government bonds by the middle of next year in an attempt to breathe new life into a struggling U.S. economy.

Economists call it "quantitative easing." It gets the name "QE2" — like the ship — because this would be the second round. The Fed spent about $1.7 trillion from 2008 to earlier this year to take bonds off the hands of banks and stabilize them.

Here's how it's supposed to work this time: The Fed buys Treasury bonds from banks, providing them cash to lend to customers. Buying so many bonds also lowers interest rates because demand for Treasurys leads to higher prices and lower yields. Interest rates are linked to yields. Lower rates encourage people to borrow money for a mortgage or another loan.

At the same time, lower interest rates make relatively safe investments like bonds and cash less appealing, so companies and investors take the cash and buy equipment or other investments, like stocks. The S&P 500 takes off and Americans celebrate with a shopping spree. Businesses see a rise in sales and begin hiring again, and a virtuous cycle of more spending and more hiring ensues.

But many analysts and even supporters of the plan see dangers. It could make the weak dollar even weaker and lead to trade disputes with other countries. It could lead bond traders to believe that higher inflation is on the way, and they could derail the Fed's efforts by pushing rates higher. Many investors argue that it may create bubbles as hedge funds and other speculators borrow cheaply and make even bigger bets on stocks, commodities and markets in developing countries like Brazil.

"It's a desperate act," says Jeremy Grantham, co-founder of the investment firm GMO. Grantham says it's a clear message from the Fed to the rest of the world: "The U.S. doesn't care if the dollar weakens."

Here is a look at the ways the Fed's strategy could backfire:

Dollar drop

As word trickled out over recent months that the Fed was planning a new round of bond purchases, the dollar sank. It hit a 15-year low to the Japanese yen Nov. 1. Why? In the simplest terms, a country that cuts interest rates makes its currency less attractive to the worlds' investors. The interest rate is also the investors' yield, the payout they receive. When that yield falls, the world's banks move their money into countries with higher rates. They may exchange U.S. dollars for Australian dollars then invest the money in higher-paying Australian bonds.

"The Fed aims to push up the prices of stocks, bonds, real estate, and you name it," says Bill O'Donnell, head of U.S. government bond strategy at the Royal Bank of Scotland. "Everything is going to go up but the dollar."

A drop in the dollar can help companies like Ford that sell their products abroad. When the dollar weakens against the euro, for example, one euro buys more dollars than before. Foreign customers notice the price of the Explorer they've been eyeing is lower in their currency, yet Ford still pockets the same number of dollars for every sale.

The downside is that a weakened dollar pinches people in the U.S. because anything produced in other countries becomes more expensive, like oranges from Spain or toys from China.

"Look around you," says Thomas Atteberry, a fund manager at First Pacific Advisors. "How many things can you find that were made in the U.S.A?"


Blowing bubbles

Buying bundles of Treasurys knocks down interest rates, making borrowing cheap. But it also motivates investors to move out of safe investments into riskier ones in search of better returns. The stock market, for instance, rises in value and everyone with some of their savings in stocks feels wealthier. Ideally, it produces what what economists call a "wealth effect": People who feel better off spend more.

The problem, according to some critics, is that cheap borrowing costs and buoyant markets make a fertile environment for bubbles, which eventually pop. "The effort to help the economy sets up another more dangerous bubble," says Grantham, who warned of Japan's surging real estate and stock markets in the 1980s, soaring Internet stocks in the 1990s and the housing market in the 2000s.

Stocks in developing countries are a likely candidate for the next bubble. Cash from Europe and the U.S. has plowed into emerging markets, such as Brazil and Chile, since the financial crisis, largely because these countries have less debt and faster economic growth than in the developed world.

Another concern: Hedge funds borrowing cheap money can magnify their bets, taking a loan at 2 percent to buy a security that's rising 10 percent. They sell the security, pay off the bank and pocket the rest. That's true whenever interest rates remain low. Falling rates allow speculators to borrow larger amounts. In the extreme, losses from hedge funds and other borrowers can put their banks at risk and leave governments to clean up the mess.

The game only works as long as the investment keeps climbing. When the bubble breaks, the fallout can devastate an economy.

"I think bubbles are the main villain in this piece," Grantham says.

Cheap debt provided the fuel for the housing bubble, allowing home buyers to take out larger loans on the belief that somebody else would buy the house at a higher price. Fed chief Ben Bernanke's answer, Grantham said, is to start the cycle over again by blowing a new bubble. "All they can do is replace one bubble with another one," he said.






QE2: Fed Pulls The Trigger


In its latest move to jump start the sluggish recovery, the Federal Reserve announced it will pump billions into the economy.

The central bank will buy $600 billion in long-term Treasuries over the next eight months, the Fed said Wednesday. The Fed also announced it will reinvest an additional $250 billion to $300 billion in Treasuries with the proceeds of its earlier investments.

The bond purchases aimed at stimulating the economy -- a policy known as quantitative easing -- will total up to $900 billion and be completed by the end of the third quarter of 2011.

Ever since the Fed first signaled back in August that it was considering a second round of monetary stimulus, dubbed QE2, investors have been preoccupied with speculating on how much the Fed would buy.

Now the verdict is in, and is roughly in line with forecasts. Mainstream estimates had predicted a total between $500 billion and $1 trillion.

"It was all largely as expected," said Calvin Sullivan, chief strategy officer at Morgan Keegan. "The markets are responding as one would expect."

Stocks seesawed between gains and losses, as investors digested the news. The real surprise was in the bond market, where yields on the longer term 10-year and 30-year rose, after traders realized the Fed's plan called for 91% of its purchases at shorter maturities than expected.
Read the Fed statement

The Fed also reiterated its bearish view on the stalling economy, saying "the pace of recovery in output and employment continues to be slow."

Amid sluggish consumer spending, businesses have been reluctant to hire and the economy has grown at a snail's pace. At the same time, inflation is dangerously low, causing some economists to warn that the United States may even be flirting with deflation -- a debilitating drop-off in prices and demand.

The Fed has already kept the federal funds rate, a benchmark for interest rates on a variety of consumer and business loans, at historic lows near zero since December 2008. The Fed said Wednesday that it would continue to hold the rate at "exceptionally low levels" for an "extended period."

The federal funds rate is the central bank's key tool to spur the economy and a low rate is thought to encourage spending by making it cheaper to borrow money.

When already low rates failed to get consumers and businesses to spend, the Fed decided to resort to the more unconventional tool of quantitative easing, to lower interest rates even further.

But critics of QE2, including some Fed members, believe that too much monetary stimulus might lead to runaway inflation that could derail the economy, or future asset bubbles that could endanger economic stability over the long term.

The most outspoken voting member of the Fed, Kansas City Fed President Thomas Hoenig, was once again the lone dissent among policymakers, saying he believed the risks of additional securities purchases outweighed the benefits.

Other opponents have argued that it simply won't work. The Fed already made nearly $2 trillion in similar purchases during the Great Recession, and current low interest rates have not jolted spending, they say.

"I don't think this is going to make any difference at all," said Paul Ashworth, senior U.S. economist with Capitol Economics, who feels the plan is too small. "This is a slippery slope. Once you're on it, it's very hard to get off."

He predicts a repeat of what happened with the first round of quantitative easing two years ago. The Fed initially announced a $600 billion program in November 2008, but then four months later, increased that to $1.8 trillion, when it wasn't enough.


Sources: CNBC, CNN, MSNBC

Wall Street Jitters Remain After Turbulent Dow Collapse

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Visit msnbc.com for breaking news, world news, and news about the economy

World Stocks Slide On Dow collapse, Debt Crisis


A strong set of U.S. Jobs data Friday failed to shore up confidence in world markets following days of extreme volatility amid mounting fears that Europe's debt crisis could spread and derail the global economic recovery.

In Britain, where investors were grappling with uncertain general election results, the FTSE 100 index was down 108.48 points, or 2.1 percent, at 5,152.51, while the pound oscillated wildly.

Germany's DAX fell 105.24 points, or 1.8 percent, at 5,800.02 while the CAC-40 in France was 79.91 points, or 2.3 percent, lower at 3,476.20.

And on Wall Street, the Dow Jones industrial average was down 59.85 points, or 0.6 percent, at 10,460.47 soon after the open while the broader Standard & Poor's 500 index fell 11.04 points, or 1,117.11.

There had been hopes that Wall Street would open higher after strong U.S. jobs data helped push other concerns, primarily centered on Europe's debt crisis, aside for a while.

Figures from the U.S. Labor Department showed that employers expanded payrolls by 290,000. That's the most in four years and more than the 200,000 anticipated. However, the jobless rate rose to 9.9 percent from 9.7 percent, mainly because 805,000 jobseekers — perhaps feeling better about their prospects — resumed their searches for work.

Though the data showed the U.S. economy started the second quarter of the year robustly, economists warned that the debt crisis, among other issues, could change everything.

Sovereign Debt crisis

"There are still major risks to the global economy from the sovereign debt crisis in the eurozone and high unemployment acting as a drag on consumer spending in the U.S.," said Charles Davis, senior economist at the Centre for Economic and Business Research.

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Davis also said that there was a risk that the U.S. Federal Reserve may start to raise interest rates earlier than planned, possibly as soon as the third quarter of 2010, if the jobs outlook continues to improve — the threat higher borrowing costs causes jitters in the markets.

Friday's stock market declines come a day after dramatic events on Wall Street, when a trading error had pushed the Dow Jones industrial average down 1,000 points at one stage, though it did recover to end "only" 347.8 points lower.

The primary focus in the markets though remains on whether the trouble in the eurozone will spread from Greece.

Many economists say Greece may be insolvent in the end despite an EU-IMF bailout, and there are fears that other countries will face bond market skepticism — and higher borrowing costs that will worsen their finances in a vicious spiral. That could undermine markets and consumer confidence just as Europe crawls out of recession.

Finance ministers from the Group of Seven nations are holding a teleconference to discuss the situation, Japan's finance minister Naoto Kan said.

Stock markets weren't alone in seeing massive swings — in the currency markets, the dollar was down a massive 6 yen at 88.68 yen one stage, while the euro dropped to $1.2520, its lowest level in 14 months. The retreats were reversed though and the dollar was trading 0.8 percent higher on the day at 91.49 yen while the euro was up 0.2 percent at $1.2658.

"Contagion has smashed risk appetite and created panic while a 'fat finger' glitch has created mayhem in equities," said Neil Mackinnon, global macro strategist at VTB Capital.

"Caution remains the watchword especially in front of the G7 conference call where markets will be wary of support/intervention action," said Mackinnon.

As if all that wasn't enough, investors, particularly in London, had to grapple with the inconclusive outcome of the British general election.

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With the counting of the votes coming to an end, it's clear than no party has won enough seats to control Parliament. Without an overall winner, the parties are assessing the situation to see if any alliances can be concluded or whether the Conservative Party, which won the most seats and votes, will go it alone.

The uncertainty — markets don't like uncertainty — was most evident in the currency markets where the pound tumbled 1.8 percent to a year low of $1.4481 at one stage before recovering somewhat to be trading 0.5 percent lower on the day at $1.4678.

Across Asia, stocks were hit hard even though the government debt crisis is centered on Europe — all the main indexes ended lower with Taiwan, Indonesia, Thailand and New Zealand down sharply. China's Shanghai Composite Index closed 1.9 percent lower while Hong Kong's Hang Seng index ended around 1.1 percent down.

The most dramatic retreat was seen on Japan's benchmark Nikkei index, which closed 3.1 percent down at 10,364.59

"Financial markets have begun to over-run policymakers' ability to implement measures to stem the crisis," said Sean Darby, a strategist with Nomura in Hong Kong. "A strong dollar and the flight to quality mean that Asian equities have also been drawn into the contagion."

Oil markets were also oscillating wildly — benchmark crude for June delivery was down 28 cents to $77.83 a barrel in electronic trading on the New York Mercantile Exchange. That modest rise follows the $2.86 slide on Thursday.


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Sources: Fox News, Huffington Post, MSNBC, Google Maps