http://www.businessweek.com/news/2013-10-17/obama-s-fiscal-fight-win-won-t-secure-success-for-agenda

Bloomberg News

Obama’s Fiscal Fight Win Won’t Secure Success for Agenda

October 17, 2013

Obama Win in Fiscal Fight Won’t Secure Agenda in Second Term

President Barack Obama leaves after speaking about the government shutdown and debt ceiling standoff in the Brady Press Briefing Room of the White House in Washington, DC, on October 16, 2013. Photographer: Saul Loeb/AFP via Getty Images

President Barack Obama’s victory in the fiscal standoff with Republicans won’t guarantee success in future talks over his second-term spending priorities and immigration proposals.

At the end of a weeks-long stalemate, Obama managed to stave off a direct assault on his health-care law by House Republicans and force them to allow an increase in the U.S. debt ceiling without conditions.

“It’s clearly a win for the president,” said Patrick Griffin, a congressional lobbyist in the administration of President Bill Clinton, who faced two government shutdowns and a combative Republican Congress. “Whether it’s a battle win or a war win for the president, we don’t know.”

Speaking from the White House this morning as federal workers returned to their jobs, Obama said, “how business is done in this town has to change.” He asked congressional lawmakers to return to negotiations with him to pass immigration and farm bills and craft a budget plan by year’s end.

“I understand we will not suddenly agree on everything now that the cloud of crisis has passed,” he said. Republicans who dislike him should “go out there and win an election” rather than undermine democratic governance. “Don’t break it,” he said.

Central Conflict

The last-minute agreement didn’t eliminate the core conflict in Congress over fiscal policy, and the temporary funding extension for the government expires on Jan. 15. The debt ceiling increase expires Feb. 7.

Republicans say that in the next round of budget talks they will still refuse to raise taxes, while Democrats say they won’t cut entitlements such as Social Security and Medicare without more tax revenue.

House Republicans vowed to keep chipping away at the Patient Protection and Affordable Care Act, the president’s signature achievement of his first term.

“We haven’t really resolved any of the big issues,” said Dan Meyer, who was chief of staff to Newt Gingrich when the former House speaker was confronting Clinton over the budget. “He didn’t get more revenue. He didn’t get the sequester caps lifted. All those decisions were punted.”

Former Vice President Al Gore, who served during Clinton’s administration, said Obama was correct in refusing to negotiate with Republicans over raising the debt ceiling.

“The outcome certainly validates the president’s decision,” Gore said in an interview on Bloomberg Television

Economic Impact

The partial government shutdown that resulted from the deadlock has taken at least $24 billion out of the U.S. economy so far, reducing fourth-quarter growth by at least 0.6 percentage points, according Standard & Poor’s.

Investors were unfazed, though. Daily swings in the Standard & Poor’s 500 Index (SPX) averaged less than 1 percent since the shutdown began on Oct. 1. After a deal was announced by Senate leaders, the benchmark climbed 1.4 percent to 1,721.54 yesterday in New York, rising to within 0.3 percent of its last closing record. Stocks rose today, briefly sending the S&P 500 past its record close. The S&P 500 gained 0.2 percent to 1,724.87 at 11:40 a.m. in New York.

The political costs are less clear.

A Pew Research Center poll showed that the longer the shutdown went on, the more Americans blamed Republicans. Seventy-two percent of Americans surveyed Oct. 9-13 disapproved of the job Republican leaders in Congress were doing, while 51 percent disapproved of Obama’s performance.

Midterm Elections

Lawmakers have more than a year before they face voters again in midterm elections.

“I lived through it last time,” Meyer said of the shutdowns in 1995 and 1996, after which Republicans maintained their congressional majorities. “There’s little historical evidence that standing a year before an election has much of an impact.”

Understanding the Debt Ceiling

Obama still is without a Republican negotiating partner who can reliably make a deal and deliver opposition party support.

House Speaker John Boehner of Ohio has been reluctant to hold votes on measures opposed by Republicans in the Tea Party caucus. While Senator Republican Leader Mitch McConnell of Kentucky stepped in to steer the bipartisan resolution to avoid a debt default, he may be less inclined to take such a political risk on other policy issues that could hurt his prospects in a primary election next year.

‘No Winners’

While Obama pressed this morning for Congress to take up his agenda and criticized Republicans who he blamed for creating “manufactured crises,” he refused to claim victory.

“Let’s be clear, there are no winners here,” he said.

David Plouffe, a former senior adviser to Obama, said the president is likely to emerge with a stronger hand in any case. The Tea Party faction in the House overplayed its hand, he said, and that probably enhances the position of the Senate, where Democrats have a majority, and of House Republicans who are willing to compromise with the administration.

The outcome of this standoff makes future confrontations over the debt limit less likely, Plouffe said.

“Hopefully, we have broken forever using the debt ceiling as a political weapon,” Plouffe said. “I’m not naïve but I think it’s unlikely the Republicans in Congress want to go through this anytime again soon.”

Next Round

The biggest victory for the president was in cutting off the Republican attempt to scuttle the health-care law, Plouffe said. By the time the next round of fiscal negotiations occurs in January, coverage will have begun for Americans who signed up through the health-insurance exchanges. That means Republicans who attack the law in the next budget fight would have to try to take away existing coverage from constituents.

Whether Obama gets from Congress a new immigration law or changes he’s seeking in taxes and entitlement programs depends on how Republicans read the outcome of this fight, Plouffe said.

He recalled that following their political loss in the 1996 shutdown, House Republicans under Gingrich reached deals with Clinton on welfare reform and the minimum wage.

“There was a strategic necessity for them post-shutdown to show they could govern,” Plouffe said. Immigration law “would be the natural place” for Republicans to act, he said.

“I don’t think we know the answer yet,” he said. “They may say, ‘We don’t feel the need to do what Gingrich did.’”

Brand Damage

Judd Gregg, chief executive officer of the Securities Industry and Financial Markets Association and a former Republican senator from New Hampshire, said both sides suffered by going through the shutdown.

“Clearly, there’s significant damage to the Republican brand relative to our willingness to be a party of constructive governance committed to fiscal responsibility and reducing the deficit and the debt,” Gregg said. “The president’s done himself considerable harm by not negotiating on this.”

“I think that everybody has a fair amount of egg on their face,” he said.

To contact the reporters on this story: Margaret Talev in Washington at mtalev@bloomberg.net; Mike Dorning in Washington at mdorning@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net


Best LBO Ever
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus