The Note: Economies of Sale — Obama Agenda Threatened by Economy

By RICK KLEIN Look what’s back. It took a trip abroad, a few Republicans to make some other news, and maybe even one of those once-a-decade funerals that double as international events, but the economy is the big issue again. It’s never really gone away — though $787 billion in stimulus cash was supposed to have turned things around by now. But it hasn’t, and here we are. Give us a jobs report, a sliding Dow, a vice-presidential admission, and a presidential certainty that everything was handled right, and we’ve got a fresh dose of the issue that’s always been here — and that’s closer than ever to belonging to the Democrats alone. (If the domestic divisions weren’t enough, let’s go international: The economy will be a main focus at Wednesday’s G-8 sessions, in Italy, where President Obama spends his day after wrapping up the Russia portion of his trip.)
(And while he’s been away — maybe a bit too much playing by his top aides? So far, President Obama has had to tidy up some mixed messaging coming from his vice president and his chief of staff; it’s only Wednesday.) On the economy — this time, it’s not as easy to blame the predecessors. This time, the pressure to change course comes from the left and the right. This time, there’s an ambitious domestic agenda that’s at risk of getting sidetracked. Now, it’s the president himself on the line. “There are political warning lights flashing,” Dan Balz writes in The Washington Post.  “It seems hard to square an assessment that the administration underestimated the severity of the recession and the assertion that the White House wouldn't have done anything differently had it known how bad things really were,” Balz writes. “Concerns about whether the stimulus package is working, or will, are the last thing Obama needs at this moment.” (This may be why Vice President Joe Biden is headed to Ohio Thursday to tout the stimulus: “In the past two months, Obama's overall approval rating in the state dropped from 62 percent to 49 percent. His economic approval rating also fell, from 57 percent to 46 percent. Most significant was the sharp decline among independents. Obama's economic approval rating among these critically important voters plummeted from 51 percent to 33 percent. His overall approval dropped from 59 percent to 38 percent.”) Nate Silver, at FiveThirtyEight.com: “Obama's approval ratings have declined nationwide by perhaps 3-5 points since early May. I have little doubt that this has mostly to do with the flagging economy. Each day, a few more voters are going to blame Obama for the economic troubles that we're in.”  What of the rest of the agenda? “The jobs report last week opened a long gash beneath the waterline of President Obama's legislative agenda. Few realize it, but a scramble for lifeboats is about to begin,” Michael Gerson writes in his column. “By the time the health-care debate begins in earnest, these [fiscal] challenges at the federal level will be unavoidable. . . . Or maybe the captain could wake the passengers, end their dreams and announce the obvious: Because the economy has not improved, ambitious health reform must wait.”  Is the president convinced enough has been done? “Yes,” White House Press Secretary Robert Gibbs told reporters aboard Air Force Once, en route to Italy. “But, again, we're going to — we continue to watch what's going on. The reason I say we don't rule it out or rule it in is — I mean, I think the bottom line for the president is, if there are steps that he thinks and his team thinks need to be taken to improve our economy, we won't hesitate to do that.” A little more open: “We need to be open to whether or not we need additional action” to stimulate the economy, House Majority Leader Steny Hoyer, D-Md., told reporters, per Bloomberg’s James Rowley and Brian Faler.  “Democrats are all over the map on the stimulus and the possibility of a sequel, and it’s not hard to see why: When it comes to a second stimulus, they may be damned if they do and damned if they don’t,” Politico’s Victoria McGrane reports.  The thing about the urgency around quick action: “The Obama administration made its work harder by fostering unrealistic expectations. It projected in February a far rosier economic outlook than private analysts did,” McClatchy’s Kevin G. Hall and David Lightman report. “Obama's stimulus was designed to create 3.5 million jobs. That would replace only about half the jobs lost since the recession began.”  Need more proof that the economy is back as the issue? “U.S. stocks fell to their lowest level in 10 weeks on Tuesday as talk of a second government stimulus plan heightened fears that the economy is not yet on the path to recovery and that the corporate earnings season starting this week will be weak,” Reuters’ Edward Krudy reports.  (And what happens if unemployment reaches 14 percent –as predicted by Louis Woodhill, at RealClearMarkets?)  About those jobs: “Leading economists agree that the most powerful effects of the stimulus package have yet to be felt. But even if the measure lives up to Obama's expectations, it would barely offset the 433,000 jobs the nation lost last month alone, and the resulting employment would represent a drop in the bucket compared with the 6.5 million jobs lost since the recession began in December 2007,” Lori Montgomery writes in The Washington Post.  A counterpoint, from Bob Shrum in The Week: “For the GOP, it's another case of buying short-term press at the expense of coherent strategy. The party again reinforced the sense that it has no answers of its own; Republicans came across as transparently eager for a continuing or deepening recession that they can blame on Obama,” Shrum writes. “The GOP will pay a heavy political price if the economy does turn around.”   Unless: “the GOP's spectral rhetoric could spook congressional Democrats into a self-destructive period of doubt and disarray,” Shrum continues. “The casualties would be health reform, the energy bill that still has to pass the Senate, and conceivably a second stimulus package — which Vice President Biden just refused to rule out because it may be needed. The other casualties would be the Democrats themselves; instead of changing the country, the outcome would be a change in the balance of political power.” Firing back: The DNC is releasing a new Web video taking on House Minority Leader John Boehner, R-Ohio, for his contention that the stimulus has brought no actual Ohio infrastructure projects. “His own state’s newspaper found that Boehner was flat wrong,” the narrator says.    (Look for more ads like it, as Democrats serve notice that the political fight over the stimulus flows both ways.) Biden is back on the road Wednesday to tout the stimulus. But another new Government Accountability Office report questions the impact: “The Obama administration hoped spending $787 billion in stimulus would jump-start the economy, build new schools and usher in an era of education reform. So far, government auditors say, many states are setting aside such grand plans and simply trying to stay afloat,” the AP’s Kimberly Hefling reports. “But investigators found repeated examples in which, either out of desperation or convenience, states favored short-term spending over long-term efforts such as education reform.”  “The report says that as of mid-June, states had received about $29 billion of the estimated $49 billion in stimulus funding they are scheduled to get before the federal budget year ends Sept. 30,” per USA Today’s Matt Kelley. “More than 90% of the money given to the states so far is for Medicaid and a fund meant to prop up states' budgets for schools and other basic services such as public safety.”  The House Committee on Oversight and Government Reform has a hearing Wednesday on the stimulus — where Republicans will press governors as well as representatives of the GAO and OMB. Biden hits the road, in Ohio and New York State, to make the case on the stimulus Thursday. But first, “Vice President Biden will be in Washington, DC. At 10:30 AM EDT, Vice President Biden, Health and Human Services Secretary Kathleen Sebelius, Chairman of the Senate Committee on Finance Max Baucus and representatives of the hospital industry will make a major health care announcement.” Just behind these announcements: “In each case, the Obama administration hailed the agreements as historic. But what has been little discussed is what the industry groups will be getting in return for their cooperation, whether or not the promised savings ever materialize,” David M. Herszenhorn and Sheryl Gay Stolberg report in The New York Times. “Some lawmakers said the deals, while seemingly helpful, could raise false expectations by obscuring how much the industry is demanding for its concessions.”  President Obama is in L'Aquila, Italy, with G-8 meetings marking the day. The economy follows him there, too: “Britain and the United States may see room for more stimulus. Germany is worried that it has done too much already,” per the AP’s Colleen Barry and Jane Wardell. “The leaders of the Group of Eight nations — united in their desire to work together to combat the worst economic crisis since the Depression, but still divided on how much longer they need to keep the stimulus going — will discuss on Wednesday ways to coordinate their exit strategies once their economies are stable enough.”  “As President Obama heads for his second economic summit in three months, lingering skepticism about U.S. leadership threatens to produce a policy stalemate that could undercut prospects for recovery at home and abroad,” the Los Angeles Times’ Don Lee reports. “Behind a veil of traditional diplomatic courtesy, leaders of the other wealthy economies are all but certain to resist any major new steps to stimulate global economic activity. That reality is reflected in Obama's announced intention to emphasize initiatives on food security instead of more crucial issues like stimulus spending or jobs.”  On health care — a split to get things going. This time it’s MoveOn.org taking on White House Chief of Staff Rahm Emanuel. ABC’s Jake Tapper: “Rahm Emanuel's remarks in [Tuesday's] Wall Street Journal — in which he argued that a government-run public health care plan isn't as important as the need for competition driving down insurance costs — has resulted in the liberal group MoveOn.org rallying its base to tell President Obama to resist Emanuel's views. . . . This afternoon, MoveOn sent out an email to its more than 3 million members saying that ‘Emanuel signaled support for a “trigger” provision — a proposal that would undermine the public option, and put off real reform for years.’ “  Not just off the Hill: “Congressional liberals on Tuesday stressed their willingness to vote down a health care overhaul that lacks a robust government insurance plan, after White House Chief of Staff Rahm Emanuel suggested such a plan could be delayed,” Roll Call’s Steven T. Dennis and Keith Koffler report. “Emanuel’s comments effectively poked a sharp stick into the thorniest philosophical divide among Democrats. House liberals have repeatedly threatened to vote down any bill that includes a trigger, while Blue Dog Democrats strongly support a trigger and may not support a bill without one.”  Sen. Chuck Schumer, D-N.Y.: “I have never heard that they were for the trigger, OK? So that came as a surprise to me.”  With the president issuing a clarification stating his continued support for a public option, Slate’s John Dickerson calls it the “Obama/Emanuel two-step.” “It merely reflects the strategic ambiguity Obama has been trying to achieve throughout this process. Yes, he's for a public plan — but he's not specific, which means his support can mean all things to all people. This ambiguity gives the president room to make deals, and it doesn't impinge on Congress's prerogatives. But it also creates explosive moments of confusion.” From the sausage factory: “Senators are cooling to a proposal that would impose a first-ever tax on employer-provided health insurance and are giving renewed attention to taxes on the wealthy to pay for a sweeping health-care overhaul,” Greg Hitt and Janet Adamy write in The Wall Street Journal. “Senate negotiators are considering a wider range of ways to pay for expanding health coverage, including President Barack Obama's proposal to limit tax deductions for the wealthy and another proposal to impose an income surtax on the wealthy, people familiar with the matter said.”  “Senate Majority Leader Harry Reid (D-Nev.) on Tuesday ordered Finance Chairman Max Baucus (D-Mont.) to drop a proposal to tax health benefits and stop chasing Republican votes on a massive health care reform bill,” Roll Call’s David M. Drucker and Emily Pierce report.  Your daily dose of Gov. Sarah Palin, R-Alaska: Her attorney, Thomas V. Van Flein, writes an open letter on The Wall Street Journal’s law blog explaining her legal bills — and concluding thusly: “The Governor has created a new political reality and is changing the battlefield to pursue her goals of energy independence for America, rational tax policies, improved national security and more efficient and smaller government. I suspect you may see her in the future.”  Charlie Cook sees something resembling a plan: “Palin's decision to step down earlier seems totally reasonable, even if badly executed. The widespread negative reaction among the political press seems to be a combination of shock that a presidential contender was doing something outside the box (she actually gives up power — how extraordinary! — and puts all her chips on a presidential bid earlier than they are accustomed to), and a disdain that many in the press have for her and anything she does — as she reciprocally seems to have for them.”  Want her to campaign for you? That’s a solid maybe: “I don't know how this recent announcement — which I still don't fully understand, I only know what I've read in the media — how that fully plays out, and whether she's going to just prefer a private life or whether she still wants to stay actively involved,” said gubernatorial candidate Bob McDonnell, R-Va., on ABCNews.com’s “Top Line.” “I think she'd be a good spokesman.”  Republicans get their top recruit in New Hampshire: “Attorney General Kelly Ayotte yesterday announced she will resign as the state's chief law enforcement official effective July 17 to consider starting a political career,” per the Union Leader. “Ayotte, who has been viewed as a rising star in New Hampshire Republican politics since she became attorney general in 2004, has long been considered interested in a political career and has long been encouraged by Republicans to run for office.”  Democrats don’t get their top recruit in South Dakota: “U.S. Rep. Stephanie Herseth Sandlin will run for re-election to the House, her office announced in an email,” per the Argus Leader. “There had been speculation that Herseth Sandlin might run for governor of South Dakota. But her statement today indicates that she will be on the ballot for the U.S. House race in 2010.”  Getting flashbacks? “Former White House Deputy Chief of Staff Karl Rove was deposed Tuesday by attorneys for the House Judiciary Committee, according to Rep. John Conyers (D-Mich.), the panel’s chairman,” Politico’s John Bresnahan and Josh Gerstein report. “Rove’s deposition began at 10 a.m. and ended around 6:30 p.m, with several breaks, Conyers said.”  The Chicago Sun-Times’ Lynn Sweet writes up Kal Penn’s first day at work at the White House: “I brushed my teeth, I did floss, used mouthwash . . . took the bus to work, the same thing everybody does,” Penn — now again going by Kalpen Modi — said. 
The Kicker: “I don’t know if anybody else will meet their future wife or husband in class like I did, but I’m sure you’ll all going to have wonderful careers.” — President Obama, who actually met his wife in Chicago in 1989 — after Michelle Obama had graduated from Harvard Law. 
  “I think on a national level your department of law there in the White House would look at this, the things we have been charged with, and automatically throw them out, not make somebody hire their own personal attorney to get out there and fight.” — Gov. Sarah Palin, R-Alaska, hopeful that she could leave the “political blood sport” back in Alaska. 
Today on the “Top Line” political Webcast, at noon ET: Sen. Lamar Alexander, R-Tenn., and Ana Marie Cox of Air America. Follow The Note on Twitter: http://twitter.com/thenote For up-to-the-minute political updates check out The Note’s blog . . . all day every day:

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