November 9, 2012

The 'fiscal cliff': Righting the economy a balancing act

The president, silent since his re-election, is expected to outline his approach in remarks on Friday.

By ANDREW TAYLOR The Associated Press

Orrin Hatch, Karl Rove
click image to enlarge

Karl Rove, former senior advisor and deputy chief of staff to former President George W. Bush, talks to Sen. Orrin Hatch, R-Utah, on the floor of the Republican National Convention in Tampa, Fla. in August. Some in the Republican party wonder if Rove has lost his touch as a political strategist.

The Associated Press

RESULTS UNDERMINE ROVE'S POSITION AS TOP DOG

Eight years ago, Karl Rove was on the top of the political world. He had guided George W. Bush to a re-election victory while congressional Republicans picked up four Senate seats and solidified their House majority.

His dream of a permanent, or at least durable Republican majority in the country seemed at hand. He was the unquestioned top dog in the world of Republican strategists, and even Democrats who loathed him acknowledged that he was devastatingly effective.

Times change.

Eight years hence, Rove is at the center of a mini-controversy over his insistence that his employer -- Fox News Channel -- had mistakenly called Ohio for President Barack Obama and, in so doing, had handed the race to the incumbent.

But that odd moment aside, there is also a broader conversation happening within the Republican party about Rove and whether his time as the unquestioned smartest guy in the party has come to an end.

"He has lost his mojo," said one longtime and well connected Republican strategist granted anonymity to speak candidly about Rove.

While Rove passed on the chance to discuss his role in the 2012 election, others leapt to his defense.

"Karl played a giant role in the 2012 election and did so for the right reasons," said Terry Nelson, a Republican media consultant and former campaign manager for John McCain's presidential bid in 2008. "I hope he continues to be a leader in our party."

Much of the debate about Rove centers on his role as the most prominent face and lead fundraiser for American Crossroads/Crossroads GPS -- the dual-headed conservative group that raised and spent hundreds of millions of dollars on ads in the presidential and congressional races this cycle.

"Crossroads was a failure and Rove's core strategy of base-centric Republican politics is a failure," said a senior party consultant not favorably inclined to Rove. "There are not enough white men for the Rove view to work anymore. His time is past."

Rove's great genius in 2004 was to focus not on reaching out to swing voters as conventional political wisdom dictated but rather to concentrate on identifying, growing and turning out the Republican base. And that meant whites and white men in particular.

The problem for Rove and Republicans is that in 2012, the math simply didn't add up. Mitt Romney won white voters by 20 points but whites made up just 72 percent of the overall electorate, their lowest percentage ever.

-- The Washington Post

 

House Republicans' hard line against higher tax rates for upper-income earners leaves re-elected President Obama with a tough, core decision: Does he pick a fight and risk falling off a "fiscal cliff" or does he rush to compromise and risk alienating liberal Democrats?

Or is there another way that will allow both sides to claim victory?

Obama has been silent since his victory speech early Wednesday morning, but is set to weigh in Friday in remarks at the White House.

Capitol Hill Republicans, meanwhile, vow to stand resolutely against any effort by the president to fulfill a campaign promise to raise the top two income tax rates to Clinton-era levels. A battle would set the tone for the start of the president's second term.

"A 'balanced' approach isn't balanced if it means higher tax rates on the small businesses that are key to getting our economy moving again," House Speaker John Boehner, R-Ohio, said on Wednesday.

"Raising tax rates is unacceptable," he declared Thursday on ABC. "Frankly, it couldn't even pass the House. I'm not sure it could pass the Senate."

A lot is at stake. A new Congressional Budget Office report on Thursday predicted that the economy would fall into recession if there is a protracted impasse in Washington and the government falls off the fiscal cliff for the entire year. Though most Capitol-watchers think that long deadlock is unlikely, the analysts say such a scenario would cause a spike in the jobless rate to 9.1 percent by next fall.

The analysis says that the cliff -- a combination of automatic tax increases and spending cuts -- would cut the deficit by $503 billion through next September, but that the fiscal austerity also would cause the economy to shrink by 0.5 percent next year and cost millions of jobs.

The new study estimates that the nation's gross domestic product would grow by 2.2 percent next year if all Bush-era tax rates were extended and would expand by almost 3 percent if Obama's 2 percentage points payroll tax cut and current jobless benefits for the long-term unemployed were extended as well.

All sides say they want a deal -- and that now that the election is over everyone can show more flexibility than in the heat of the campaign.

Obama will address the issue Friday though he's not expected to immediately offer specifics. His long-held position -- repeatedly rejected by Republicans -- is that tax rates on family income over $250,000 should jump back up to Clinton-era levels.

Republicans say they're willing to consider new tax revenue but only through drafting a new tax code that lowers rates and eliminates some deductions and wasteful tax breaks. And they're insisting on cuts to Medicare, Medicaid and food stamps, known as entitlement programs in Washington-speak.

The White House's "opening position is, 'We're willing to do big entitlement cuts. In return we need you to go up on the rate,"' said Democratic lobbyist Steve Elmendorf. "Then they're going to get into a discussion. It'll be a process."

The current assumption is that any agreement would be a multi-step process that would begin this year with a down payment on the deficit and on action to stave off the tax increases and $109 billion in across-the-board cuts to the Pentagon budget and a variety of domestic programs next year.

The initial round is likely to set binding targets on revenue levels and spending cuts, but the details would probably be enacted next year.

"What we can do is avert the cliff in a manner that serves as a down payment on -- and a catalyst for -- major solutions, enacted in 2013, that begin to solve the problem," Boehner said.

(Continued on page 2)

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