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Obama's Tough Road Ahead

Yesterday Peter Orszag, President Obama’s budget director, acknowledged that earlier federal revenue estimates were too optimistic, and that new ones, forthcoming from the Congressional Budget Office (CBO), would show an even worse budget outlook than the White House expected last month. This about-to-explode political bomb couldn’t come at a worse time for the president -- and once it goes off, Obama might even have to battle with sections of his own party.

It’s here that we opinion writers usually point out that Orszag is trying to lower expectations about the nation's fiscal health. And he is surely doing that. But only, perhaps, so that they reflect dire reality. It’s pretty clear that tax revenues from the end of 2008 were abysmal, as a raft of other indicators from that period have been revised down, too. Meanwhile, the national debt topped $11 trillion on Monday, and that, as Obama’s critics will remind you, is before most of the stimulus spending gets paid out.

So the Treasury is in bad shape. Worse shape than officials claimed to think just a few weeks ago. And so, critically, is the political atmosphere -- more challenging for Obama now than at any time since his swearing in.

Members of Congress will soon finish sucking all the political utility they can out of the AIG bonus flap. The CBO’s new numbers will give Obama’s GOP critics an upsetting story to be outraged about just as the AIG issue retreats from public consciousness. But wait. There’s more. Next week, the Democrats in the House will present their budget outline, which likely will -- to varying degrees -- reflect Obama’s ambitious plans, including his push for health care reform and a cap on carbon emissions.

Perfect. Just after the administration scrambles to explain why it didn’t keep AIG’s derivatives traders from collecting their taxpayer-financed bonuses, and just as huge new deficit projections begin to flash ominously across Americans’ television screens, Obama’s party begins work on how it might spend lots more on a grab bag of expensive Democratic social projects. Eye-popping deficit numbers all but beg Americans to wonder how the country will afford it all. And that’s just what we know about. Jobless claims data are out tomorrow, numbers on mass layoffs the next day, and a new GDP estimate a week later, any of which could kneecap the Dow.

The merits of Obama’s proposals -- and there are many -- will matter less than the terrible atmospherics, and that will translate into policy changes in Congress. Indeed, Sen. Kent Conrad (D-N.D.), chairman of the Finance Committee, said yesterday that “adjustments” will have to be made to Democrats’ spending plans in light of the new CBO estimates. One thing that might go in the Senate -- and provoke a nasty fight with the House -- is the Carbon cap. No wonder, then, that the White House is thinking about using a special procedural shortcut to pass its budget, which would allow Democratic leaders to ram it through with simple majority votes, against the wishes of the party’s conservative wing. That, by the way, doesn’t look good, either.

Unless he works some political magic, Obama is going to have a rough couple of weeks. More and more, it seems that the relevant question is not whether the president will fall far short of the lofty goals he set for himself. It’s whether he badly splits the Democratic majority in the process.

By Stephen Stromberg  | March 18, 2009; 11:31 AM ET
Categories:  Stromberg  | Tags:  Stephen Stromberg  
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Next: Ron Silver R.I.P.

Comments

The public is firmly behind Obama, and he knows how to work it. Look for him to win BIG at the last moment, just like he always does - and that's good for all of us at the moment. It’s too bad we didn’t have Obama n better times, but who else would you want at a time like this? It's been about 60 days, folks - who else would have this much on his agenda and go at it shoulder-first?

Posted by: mobedda | March 18, 2009 1:21 PM | Report abuse

How long are the liberals going to pretend that none of this costs anything? When the fed pumps money into the economy, it does so by creating electronically in others' bank accounts dollars that did not exist one second before. Bernake made this clear on 60 Minutes...when the Fed first gave AIG $300 Billion, it was simply by adding $300 billion to AIG's federal reserve accounts. But those dollars aren't free forever...and the Fed is now spending another $1 Trillion to buy US Treasuries and other mortgage backed assets...and that money comes from the same place the $300B did...thin air. But there are downstream inflationary costs associated with those dollars. The Obama budget...made up of much the same stuff as those Fed dollars...plus a pinch of fairy dust, assume GDP growth of 25% over the next 4 years....split as 70% real growth and 30% inflation. But those inflation estimates are disingenous at best. While the liberals are hoping that Obama can use smoke and mirrors to prop up the economy just long enough to enact his sweeping agenda, moderates (read "real god-d*** people) in the Democratic party are trying to apply the breaks. The Obama administration is threatening to use Reconciliation...a partisan policy trick to keep moderates and opposing party debate wholly out of the process (bipartisan transparency? when you remove the ability to debate how on earth can you suggest you are being transparent?!!?)

My mom grew up in Scranton, PA and I still have a lot of family there...family that voted for Obama because they thought he'd help get their jobs back....now they are more than sorry...not only won't they get their jobs back (dirty energy manufacturing is a no no if you aren't in a union) they are slowly realizing how much all of this is going to really cost.

Posted by: theworkingclassalwaysgetsscrewedbygoodintentions | March 19, 2009 11:22 AM | Report abuse

Obama has scared me from the beginning.
His ability to enrapture the gullible is almost in a class by itself.
Hopefully, those who willingly donned rose-colored blinders (MSM included) will now start seeing the impossibility of Obama's promises to bring Utopia to all.

Posted by: spamsux1 | March 19, 2009 12:17 PM | Report abuse

Working class et al....

Can always tell when people lean republican....they can't see 30 yers of debt piled upon debt, they think they left the country prosperous... when actually they've gutted it..

as for Obama having a rough two weeks and splitting the democrat party.

I should think everyone would be trying to help... they have not come up with anything that even looks like an alternative plan to cope with debt, energy, health care, education, or anything else.

I see where McCain and Leiberman the Jew who wants war with arabs non ending, have a plan for staying in Afghanistan forever.

If the new block of moderate democrats represent a threat to Obama, lets have it out, let us see what part of Obama's plan they don't buy into - they may leave when the Limbaugh Party of No leaves.

Posted by: dutchess2 | March 19, 2009 12:45 PM | Report abuse

Actually not all of the public is behind Obama. Mainstream Media wants us to hear all the good and they have convienced so many Americans that he is going to fix all. All I see is spending. He dropped the proposal on private healthcare for military vets because the media could not sugar coat that for him. If the Media would report unbiased news then maybe we could all draw conclusions on our own rather then act like the media's puppet. We are AMERICANS........do you research and think for yourself. Obama can't fix everything!! He is going to downsize our military just like Clinton. What do Americans think the term " defense cuts " means? Don't even get me started on Pelosi and her Illegal immigrant speech....Illegal immigrants have American jobs. Open your eyes America!!

Posted by: trueamerican4 | March 19, 2009 7:27 PM | Report abuse

Actually not all of the public is behind Obama. Mainstream Media wants us to hear all the good and they have convienced so many Americans that he is going to fix all. All I see is spending. He dropped the proposal on private healthcare for military vets because the media could not sugar coat that for him. If the Media would report unbiased news then maybe we could all draw conclusions on our own rather then act like the media's puppet. We are AMERICANS........do you research and think for yourself. Obama can't fix everything!! He is going to downsize our military just like Clinton. What do Americans think the term " defense cuts " means? Don't even get me started on Pelosi and her Illegal immigrant speech....Illegal immigrants have American jobs. Open your eyes America!!

Posted by: trueamerican4 | March 19, 2009 7:29 PM | Report abuse

Obama told us that he would have no lobbiest in his administration,all bills would be posted online for 5 days for the people to review, instead we get tax cheats and excuses. If Obama continues to take shortcuts and compromise his covenant with the people he will very shortly lose their goodwill. Obama needs to be true to the change he promised even if it is not politically expedient, the short term gain will be overwhelmed by the long term lose.

Posted by: saw1 | March 20, 2009 11:45 PM | Report abuse

theworkingclassalwaysgetsscrewedbygoodintentions

The war is still costing $10 billion a month, and you didn't mind that was borrowed money when Bush was hiding the costs from the budget.

The bonus mess showed Obama that we're still out here and we got his back.

After the mess republicans have made of things with their 30 years of pitting Americans against Americans, and tax cuts for the wealthy have left us broke and broken, I don't expect to hear a single word from them in opposition.

Who would ever believe they have a single idea how to get us out of the mess they made?

Posted by: dutchess2 | March 21, 2009 9:46 AM | Report abuse

I would hope that Obama will have to battle members of his own party. So far , the Blue Dog Democrats have rolled over and played dead.

Obama, who pretended to be a bipartisan, wants to eliminate the Republicans as a check and balance in the Senate. The Democratic supermajority, and Pelosi's draconian procedural rules, have effectively eliminated Republican input in the House.

No doubt, liberals are delighted by this, and are unconcerned that if Obama has his way, all US citizens represented by a Republican Senator and/or Congressman will also not have any effective voice when it comes to the economic future of our country, at least, not until the 2010 midterm elections, by which time it will be too late.

And Obama continues with his mantra of "hope, change and believe" telling us we can fix the economy, achieve energy independence, maintain national security, revamp our schools, assure access to college for all, halt global warming, provide universal health care for all with better quality and lower cost, and cut the deficit all simultaneously.

He continues to tell us that we can have it all, and it won't cost a dime more in taxes to anyone making less than $250,000/yr, cause crippling inflation, mortgage our childrens' and grandchildrens' future or bankrupt the country.

We are told to ignore those "gloomy" projections coming out of his own government's bipartisan GAO, which predict Obama's budget will result in deficit spending that even Obama's own budget director admits is "unsustainable". All we have to do is "hope" and "believe" and it will all come true.

Posted by: plb1 | March 23, 2009 3:02 PM | Report abuse

Forget explaining the 800 billion stimulus package.

With lower estimates on revenues perhaps there needs to be an explanation of the new plan to use over 750 billion to buy worthless assets.

800 billion for the economy of the entire country, and over 750 billion for 10 major banks.

I guess that the Treasury renaming of "toxic assets" to "Legacy assets" is a sign of the start of the new policy of full disclosure that has been promised by the administration.

Posted by: bsallamack | March 23, 2009 10:06 PM | Report abuse

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