National Review

Corporate profits are at all-time highs and bond rates in the Treasury market are virtually at record lows. That’s a good combination for stocks, and it helped trigger a 255 point rally in Wednesday’s trading. What’s more, a surprisingly positive read on the ISM August manufacturing report delivered a strong blow to the double-dip recession pessimism that has plagued investors for many months.

Without question, the jobs picture is going to remain cloudy. There’s just too much uncertainty over the economy and the tax-and-regulatory threats coming out of Washington. Businesses can’t be sure about the costs of hiring. Meanwhile, over in housing — our other weakest sector — an inventory glut threatens further price declines.

But make no mistake about this: Businesses, at least the publically owned ones, are in very good shape. U.S. firms scored a record $1.2 trillion in profits during the second quarter and are sitting on roughly $2 trillion in cash. Our private-sector companies are resilient, and they have recovered significantly from the economic plunge.

And while their hiring is still behind schedule, they have begun the process of investing in equipment, software, and other capital goods. Business investment in the June quarter rose 16 percent above year-ago levels. This is all to the good. Healthy businesses are crucial to the stock market as well as the overall economic outlook.

In fact, since 2001, business profits have doubled, even while the stock market dial has hardly moved. If Washington can just keep its paws off of business and let market processes work, firms will continue to prosper domestically and internationally and will eventually pick up their hiring.

I hate to sound too much like Calvin Coolidge, who after Reagan is my favorite 20th century president, but the business of America is business.

Yes, when second-quarter GDP came out last week, the revised 1.6 percent growth number was universally derided as a step on the road to a new recession. But not so fast.

In a blog titled “What Everyone Missed in the Revised GDP Data,” brilliant Washington economist Alan Reynolds noted that real gross domestic purchases, which are purchases by U.S. residents of goods and services wherever produced, actually increased 4.9 percent annually — a full percentage-point stronger than the first-quarter results. Reynolds blamed a government accounting miscue over falling import prices for a misread on the trade deficit that subtracted about 4 percentage points from GDP.

So import prices actually increased in the second quarter, which lends credence to the idea that the economy is doing better than folks think. And by the way, the bulk of those imports are being used for capital-goods investment, which is a good thing, not a bad one.

Smoothing out the quarterly ups and downs, the real economy is growing about 3 percent year-on-year, with the domestic economy rising by 3.7 percent. This is a tribute to the resilient and durable free-market system in America.

It’s a pity that Team Obama and the Democratic Congress had to waste nearly $1 trillion on ineffectual spending stimulus, temporary tax rebates, cash for clunkers, and temporary homeowner tax credits — all of which have probably slowed recovery and prevented equilibrium in key sectors. And that’s not to speak of our huge and burdensome future debt.

Which brings me to the regime change coming in the midterm elections. That’s another bullish factor. As we speed toward November, the Republican party looks set to publish an agenda of limited spending, regulatory restraint, and low taxes, while momentum is gathering to at least temporarily extend the Bush tax cuts of 2003.

And lo and behold, President Obama and his economic team apparently are talking about additional tax cuts of one kind or another. I’m not holding my breath. They are likely to go for temporary and targeted tax relief, the most ineffectual kind there is. They should go Reagan, by reducing marginal tax rates across-the-board for personal, business, and investor incomes. That’s what they ought to do — strengthen incentives to reignite risk-taking. But the Republican tide is rolling in so strong right now, we just might see Democrats turn to lower taxes.

All this is good for stocks. Using conservative earnings estimates, the S&P 500 looks to be valued at a historically low 11.5 times earnings. That comes to an 8.7 percent yield on shares, compared with only a 2.5 percent rate on 10-year Treasuries.

In other words, profits up, rates down, tax cuts may be coming. In the new political environment, year-end tax-selling by investors may no longer be necessary in 2010 to beat the Obama IRS in 2011.

Let’s have a little optimism for change.







]]> http://www.klineforcongress.com/news/509/ USA Today

Listening to the Democrats this summer, you're unlikely to hear about an impending tax increase. In an effort to sanitize their historically irresponsible decision to raise tax rates in the midst of a struggling economy, President Obama and the congressional majority say they are merely "allowing the Bush tax cuts" to expire.

Skillful messaging perhaps, but cold comfort to the millions of Americans and small businesses who aren't concerned with what their effective tax rate was in 2001. For them, on Jan. 1, one of two things will happen: Taxes will go up, or taxes will stay the same. Coming to grips with this reality will be crucial to jumpstarting the economic recovery. Decisions on whether to buy an appliance, invest in a company, or expand a business are made by taking into account after-tax returns in the future — not in the past.

Democrats want Americans to believe that by letting tax rates rise they have discovered religion as deficit cutters. But after a two-year assault on the federal trough in which Congress passed the notoriously wasteful stimulus and added a new health care entitlement, few Americans are even bothering to listen. In reality, the harm this tax increase will inflict on jobs and gross domestic product will strongly outweigh any presumed boost in tax revenues.

American businesses are sitting on top of a record $2 trillion in cash — money that could be spent hiring more workers, funding new projects or paying out dividends to investors. But right now these dollars remain stuck on the sidelines.

Already grappling with weak demand for goods and services, businesses of all sizes have five main costs and expenses that impact their bottom lines. Thanks to the agenda in Washington, all are going up, turning the White House's much-touted "Recovery Summer" into the "Summer of Uncertainty." Here's a look:

•Taxes will jump next year on everything from ordinary income, capital gains, dividends and estates. And with our national debt soaring, the prospect of even more tax increases in the future seems more likely.

•Health-care costs are growing as a result of Obamacare's mandates and inflationary impact on premiums.

•Energy costs remain in limbo as leading Democrats, led by Sen. John Kerry, float the idea of passing cap-and-trade during the lame-duck session of Congress.

•Credit is becoming more expensive and is increasingly out of reach for most small businesses, partly because the 2,300-plus page financial regulatory bill encourages banks to horde their capital rather than lend it.

•Labor costs also threaten to climb higher as labor unions dig in their heels and gear up for another push to pass card check.

During last night's Oval Office address, President Obama vowed that America would "nurture the ideas that spring from our entrepreneurs." But if government doesn't stop penalizing hard work and discouraging risk taking, there won't be any entrepreneurs left.

In this environment, it's understandable why businesses — which have pared their expenses by laying off over 2 million workers since Congress passed the stimulus in February 2009 — would be reluctant to start hiring again. Hence the disappointing 71,000 jobs created by the private sector last month — a figure too small to keep up with the growth of the workforce, let alone take a bite out of the 9.5% unemployment rate.

No matter how much money President Obama borrows and spends, our economy simply will not recover until small, medium and large businesses have the confidence to put Americans back to work.

Republicans categorically oppose hiking taxes in times of economic crisis. For the past 19 months, we have offered better alternatives to the stimulus, cap-and-trade and the health care overhaul that keep the growth of government in check. We have taken a scalpel to the budget and offered up hundreds of billions of dollars of spending cuts. I don't believe any American thinks that this $3 trillion is being well spent.

Next year, President Obama is going to preside over one of the largest tax increases on families and small businesses in American history. How his administration has convinced itself that this is a good idea right now is beyond comprehension.

Mr. President, the federal budget is teeming with waste. If you want to rein in the deficit, Republicans welcome you to sit down with us and go line by line through the budget to cut needless spending. But don't impose sweeping tax hikes that will only make a bad economic picture much worse.

Rep. Eric Cantor, R-Va., is the Minority Whip in the House of Representatives.
]]> http://www.klineforcongress.com/news/508/ National Journal

Labor Day is almost here and Democrats are still waiting for the cavalry to arrive. An exhaustive scan of the horizon reveals no rescuers and none of the things Democrats badly need to save them from tough midterm election losses on Nov. 2.

There are few signs of any meaningful recovery, and indeed there is more talk of a double-dip recession, plunging the country back into economic trouble between now and the end of the year. Unemployment seems stuck at 9.5 percent, reinforcing the view that last year would have been better spent focusing on the economy than on health care reform.

Democrats also needed a public re-evaluation of the new health care reform law. They needed the public to decide that it wasn't so bad, that it was a good idea after all. That hasn't happened, as pointed out by the Kaiser Family Foundation's health care monthly tracking poll released this week. Favorable attitudes toward the new law dropped from 50 percent last month to 43 percent this month, and unfavorable views climbed from 35 percent to 45 percent. Twenty-nine percent of Americans believe that they and their families will be better off under the new law, while 30 percent say they will be worse off and 36 percent say it will not make much difference.

Some Democratic pollsters say they are seeing districts where Dem incumbents are running only even with relatively unknown challengers.

An interpretation of what has happened that could be considered extremely charitable to Democrats is that while the nation's economy deteriorated rapidly, President Obama and the Democratic Congress checked the box on the economy with an unpopular stimulus bill and then became obsessed with passing a health care reform package. At best, Americans are ambivalent about that package, and quite a few believe it is horrifically flawed. Unemployment has been above 9 percent for 15 consecutive months, and that number is significantly higher among African Americans, Hispanics and young people, the groups that boosted Democratic fortunes in 2008.

Simply put, Democrats find themselves heading into a midterm election that looks as grisly as any the party has faced in decades. It isn't hard to find Democratic pollsters who privately concede that the numbers they are looking at now are worse than what they saw in 1994.

The race-by-race outlook confirms the dire forecasts. Cook Political Report House Editor David Wasserman points out that at this point, 32 Democratic incumbents are running even or behind their Republican challengers in one or more public or private polls. At this point in 2006, when Republicans lost control of Congress, only 11 GOP incumbents were running even or behind.

Privately, some Democratic pollsters say that they are routinely seeing districts where Democratic incumbents are running only even with relatively unknown GOP challengers. In other districts where the Republican challengers are reasonably well known, the incumbents are often running 5-10 points behind, a rather extraordinary development at this point.

In the Senate, while the odds still favor Democrats holding on to a narrow majority, it is not only mathematically possible for the GOP to capture a majority this year, but it has become plausible. The odds of Democrats capturing even one currently Republican-held seat appear to be getting longer. Meanwhile, Republicans are running ahead or roughly even in 11 Democratic-held seats, one more than necessary for control of the Senate to flip. It's still a tall order but not crazy to say that Republicans will win the Senate.

Congress does not come back to town for two more weeks, but it is a pretty safe assumption that the mood among Democrats will be surly and the fingers will begin pointing. A party has not lost a House majority in such a short period of time in over a half-century. This is not going to go down well.
]]> http://www.klineforcongress.com/news/507/ Wall Street Journal

The Obama administration is considering a range of new measures to boost economic growth, including tax cuts and a new nationwide infrastructure program, according to people familiar with the discussions.
Experience WSJ professional

The president's economic team has met frequently in recent days to list ways to bolster the struggling recovery, according to government officials.

On the list of possible actions: additional tax cuts for small businesses beyond those included in a $30 billion small-business lending bill before the Senate. It's not clear what those tax breaks would target or how much they might cost in lost revenue to the government.

Also in the mix: a possible payroll tax cut for businesses and individuals, as well as other business tax breaks, according to people familiar with the discussions. Currently, income taxes are scheduled to rise with the expiration of Bush-era tax cuts at the end of this year.

Efforts to boost growth have taken on urgency as the economy has shown signs of flagging and is among voters' chief concerns ahead of November's midterm elections.

The White House is struggling with whether to propose ideas that would appeal to Republicans, and thus get support on Capitol Hill—such as tax cuts—or whether to promote ideas that officials believe could have more economic impact but might hit political resistance, such as more aid for states and more infrastructure funding.

Aides to the Democratic leadership in the House and Senate see little prospect of anything significant happening soon. With the party's majority in Congress under threat in November's elections, Democratic lawmakers are primarily busy campaigning.

One of the few exceptions: Democrats have lined up enough support to pass the small-business bill the Senate has been considering, said Jim Manley, a spokesman for Senate Majority Leader Harry Reid (D., Nev.).

In a Rose Garden address Monday, President Barack Obama said he was aiming to identify "additional measures that could make a difference in both promoting growth and hiring in the short term."

Among the ideas he cited were extending tax cuts for the middle class and renewing a mix of tax credits for businesses, such as the research tax credit.

The administration hasn't settled on whether to take bigger—and more expensive—steps, such as a payroll tax cut or additional tax cuts for small businesses. Complicating the talks are concerns about the cumulative federal deficit, which could rise by $11 trillion over the next decade.

"Everyone is mindful of the deficit problem, and everyone is mindful of the slack economy. The question is how you thread the needle, and so I think the programs will be narrow and focused," said Sen. Charles Schumer (D., N.Y.).

Some Republicans say an array of tax cuts is the best strategy to stimulate the economy. They include on their list reductions in the individual payroll tax used to fund entitlement programs such as Social Security and Medicare, as well as cuts in corporate income taxes.

All the talk about taxes—whether to raise them to address the deficit or cut them to stimulate the economy—may be having its own effect on growth. Allan Meltzer, an economics professor at Carnegie Mellon University, said the economy wouldn't fully revive until Washington resolved uncertainty surrounding business costs, including taxes.

"Companies are cutting their expenditures and not hiring because they're very uncertain" about these costs, he said.

Mr. Manley said Democrats wanted to hold a vote this fall to extend the tax cuts passed during the Bush administration for families earning less than $250,000 a year.

But a fight is looming, and that might mean more delays. Senate Republicans are likely to resist any legislation that doesn't also extend the Bush tax cuts for families and small businesses with earnings over $250,000.
]]> http://www.klineforcongress.com/news/506/ Politico

Democrats thought things couldn't get much worse on the electoral front — and then they went home to campaign.

A new Gallup poll released Monday shows Republicans with a record 10-point edge over Democrats on the "generic ballot" test — the question of whether voters prefer a Democratic or Republican congressional candidate. It’s the largest GOP polling edge at this stage in the 68 years of the generic ballot poll.

While party optimists say Democrats may cling to a small majority after the November election, an increasing number of Democratic strategists now say privately that they fear the House is already lost.

The Gallup poll, coming at the end of a brutal August for Democrats and President Barack Obama, reinforces the rapidly forming prevailing view that the horizon is as bleak for Democrats as it ever has been.

Indeed, the Republicans' 51 percent to 41 percent for Democrats on the generic ballot poll represents the largest Republican edge heading into a midterm election since the poll was first conducted in the 1942 election cycle, giving them greater reason for optimism than in the weeks leading up to their 1952 and 1994 House takeovers. It also represents a stunning reversal from the 6-point lead Democrats posted in the poll mid-July.

Worse for Democrats, the news comes after they've spent most of the last month on the campaign trail, touting their accomplishments for local communities and trying to remind voters of what life was like when George W. Bush was president.

The message that things are better than they could be hasn’t exactly been a winner with voters.

"You have millions of Americans worried about the economy, jobs, deficits, their children's future, and we're out there talking about what — Bush, Iraq?" said Chris Kofinis, a longtime Democratic strategist. "Our message needs to be more positive, more hopeful, more focused, and we need [to] talk to the economic reality of everyday Americans and their families. There is time to pivot, but we're just not there yet."

The generic ballot poll is not necessarily an indicator of how House races will go district by district, but more an indicator of the national mood of the electorate. Yet, the ominous poll numbers suggest that the strategy of Democratic leaders to stay below the radar during the August recess has been a failure. That strategy has been driven by a desire to limit the connection between vulnerable House Democrats and their party leaders in the nation’s capital, said a House Democratic leadership aide.

Although top Democrats have visited the districts of some of their vulnerable members during the past month, they typically have limited both national and local press coverage of those contacts. Day by day, more rank-and-file Democrats are taking potshots at their congressional leaders in an effort to distance themselves from them on policy — and sometimes personally.

Rep. Bobby Bright of Alabama even mused that House Speaker Nancy Pelosi might lose her job by death rather than party defeat.

"Never cross a bridge until you come to it," Bright said when asked whether he would vote for Pelosi for speaker if he's reelected. "She may get beat, she may step away, she may get sick and die." The local paper reported the comments as lighthearted.


By contrast, Republican leaders have openly visited battleground districts across the nation and have encouraged press coverage. They've even sent around photographs of Republican lawmakers at the kinds of "town hall" meetings that became horror houses for Democrats last August.

Operating from what seems like a defensive crouch, Democratic congressional strategists have complained that they have been hurt by a litany of political miscalculations and negative events outside their control.

They contend that White House officials have been “distracted” by foreign policy crises in Iraq and Afghanistan, plus social issues, such as the proposed New York mosque, that have kept them from focusing on the No. 1 issue of the economy. They also cite the bad timing of the BP oil spill in the Gulf of Mexico, which erupted in April, as Democrats were hoping to sell the benefits of their recently enacted health reform package.

Now, Obama can offer less help on the campaign trail: His Gallup numbers are upside down, with 43 percent approving of his performance and 49 percent disapproving.

While he uses the Oval Office Tuesday night to talk about American progress in Iraq — where many Democrats, including the president, opposed the "surge" strategy that helped stabilize the region — his party's congressional incumbents are getting hammered on the state of the economy. District by district, and at the national level, Republicans are making the argument that Democrats have done nothing to reverse an unemployment level that is hovering just below 10 percent despite — or because of — their efforts to pump hundreds of billions of dollars into the system.

Republicans say the equation is pretty simple: Bad polling is a function of unpopular policy.

"The Democrats’ budget-busting, job-killing agenda has not only hurt middle-class Americans, but it has been a disaster politically as well," said Ken Spain, spokesman for the National Republican Congressional Committee. "President Obama and Speaker Pelosi promised this would be a ‘recovery summer,’ but since that announcement, the economy has only slowed and the unemployment rate remains unacceptably high. This is an administration and a Congress that is grossly out of touch with the voters and the poll numbers are a reflection of that.”

Pelosi spokesman Brendan Daly notes that Gallup and other polling organizations have bounced around a bit in their generic polling and that Pelosi remains confident.

"The speaker's been very clear that we're going to retain the majority," Daly said.

Indeed, Democrats held a lead in the Gallup polling earlier this summer. But the three largest weekly leads for Republicans in the history of the midterm poll have come in this election cycle.

Add in an "enthusiasm gap," showing that Republican voters are twice as likely — 50 percent to 25 percent — to tell a pollster that they are "very" enthusiastic about voting this year, and a general reliability of GOP voters to show up for midterm elections, and the typically staid Gallup organization is adding its name to the list of analysts who foresee a major electoral shake-up.

"Republicans' presumed turnout advantage, combined with their current 10-point registered-voter lead, suggests the potential for a major 'wave' election in which the Republicans gain a large number of seats from the Democrats and in the process take back control of the House," Gallup writes. "One cautionary note: Democrats moved ahead in Gallup's generic ballot for several weeks earlier this summer, showing that change is possible between now and Election Day."

The latest Gallup numbers also call into question whether individual Democratic candidates will be able to withstand the national wave that appears to be building against their party and could overwhelm some who had thought they were secure.

Rep. Kevin McCarthy (R-Calif.) told campaign audiences that he typically takes the Gallup results and gives the front-running party an additional four points for intensity, with “likely voters.” Based on past experience with the Gallup survey, he added, “the actual vote in November doesn’t deviate by more than a point or two.”

One former Democratic aide who holds out hope that Democrats will recover by doing more to show voters that they side with them — rather than just saying it — said the best-case scenario is a "two- to three-seat, cling-onto-it" majority.

In September 2006, just before Democrats won a 30-seat sweep to take control of the House, they led with 52 percent to 41 percent in the Gallup generic ballot test. Republicans need to net 39 seats to win control in the next Congress, and several major political prognosticators have said Republicans have a real shot at surpassing that number to win the House.
]]> http://www.klineforcongress.com/news/505/ Politico

A new poll shows that public support for health care reform dropped sharply in August – a dagger in Democrats’ hopes that their landmark legislation will help them in November’s midterm.

The Kaiser Health Tracking Poll has support for the bill dropping seven percentage points in August – down to 43 percent – while opposition rose 10 points to 45 percent. That’s the weakest showing since May – and a far cry from the bump proponents had hoped to see as some of the law’s more consumer-friendly provisions kick in.

Democrats said throughout the year-long debate on Capitol Hill that support for the overhaul would increase once the bill passed and Americans were able to take advantage of some of its benefits. But it appears voters’ opinions of the legislation were set more firmly than anyone thought during the bruising political fight.

“Public opinion on health reform has been stuck in a fairly narrow band and is not changing dramatically,” said Drew Altman, president and CEO of the Kaiser Family Foundation. “And with concerns about the economy and jobs dominating the public’s agenda and local issues always so important in midterm elections, it is not clear that health reform will play a significant role at the polls in November.”

Respondents listed health care as the third most important factor in deciding how they’ll vote this fall — behind the economy and “dissatisfaction with government.”

Forty-two percent of respondents said health care reform will play an “extremely important” role in their ballot-box decisions, on par with the 41 percent who said the same thing in June.

About a third of voters say support for the health reform law would make it more likely that they’d vote for a candidate. But a third say it would make it less likely and a third say it wouldn’t make much of a difference. Those figures haven’t changed much since the law passed.

A series of insurance industry reforms, which Democrats pointed to as some of the most consumer friendly provisions of the law, are due to go into effect next month. They include a ban on lifetime or annual caps on insurance coverage and free preventive care on new insurance plans.

While many of these provisions have proven popular in polls, the popularity of the overhaul on the whole hasn’t improved. Plus, opposition to other provisions – namely, the requirement that nearly all Americans buy insurance coverage – has increased. The so-called “individual mandate” is opposed by 70 percent of the Kaiser poll’s respondents.
]]> http://www.klineforcongress.com/news/504/ Washington Times editorial

In the closing days of spring, administration cheerleader-in-chief and Vice President Joseph R. Biden Jr. proudly predicted that as the months ahead heated up, so too would the economy. It was to be "recovery summer," according to Mr. Biden, who toured the country touting the alleged benefits of President Obama's "shovel-ready" economic policies.

"The fact is the Recovery Act is working," Mr. Biden declared in mid-June. But as summer fades and the economy sputters, the vice president now gamely contends that even though the economy did not respond as robustly as the administration would have preferred, "no doubt we're moving in the right direction."

But what direction is that? Indicators that should be down are up, and those that should be up are down. The administration claims to have "saved" 3 million jobs, but this argument is losing traction as new claims for unemployment benefits continue to rise. Almost one in five American adults is either unemployed, underemployed or has lost hope. Gross domestic product (GDP) growth has declined since the end of 2009, and Friday's downward revision of second-quarter growth shows an economy on life support. New-home sales have fallen to the lowest pace on record, and despite historically low mortgage rates, prospective homebuyers lack enough confidence in the future to make long-term commitments. Meanwhile, more people are losing their home,s and Mr. Obama's plan to mitigate foreclosure has bogged down in red tape and administrative waste.

Since the "recovery summer" campaign kickoff, the stock market has declined, Treasury bond yields have tanked, the trade deficit has increased, manufacturing is down, non-farm productivity is down, durable goods orders are performing below expectations, the dollar is weaker, and retail sales have flatlined.

The administration has been forced to make the argument that things may be bad but they would have been much worse had the stimulus not passed, citing a study released last week by the Congressional Budget Office that concludes that the stimulus temporarily raised GDP and employment. But according to a concurrent report by CBO's Macroeconomic Analysis Division, the data "are not as helpful in determining [the stimulus plan's] economic effects as might be supposed because isolating the effects would require knowing what path the economy would have taken in the absence of the law." Because what might have been cannot be known, the data "add only limited information" about the impact of the stimulus. In other words, maybe it helped, maybe it didn't.

The most observable impact of the orgy of federal spending in the past 18 months is the rapid increase in government debt. The budget deficit for the month of July 2010 was greater than the deficit for the entire year of 2007 - that is, under George W. Bush, the person Democrats reflexively blame for all the country's troubles. The government will spend more in stimulus money than it did on seven years of war in Iraq and run debt at levels not seen since World War II.

This was no summer of love for the president. National economic woes, ill-timed and extravagant vacations, nearly continuous golf outings and persistent bad press from the Gulf oil leak took their toll. Mr. Obama's Gallup weekly approval rating when the White House rolled out "recovery summer" was 47 percent, with 45 percent disapproving. The latest figures in the same poll are 43 percent approval and 50 percent disapproval. Meanwhile, more Democrat-held seats in Congress are in play for the November midterm elections, and unfortunately for the president, the strongest signs of recovery are in the Republican Party.
]]> http://www.klineforcongress.com/news/503/ The Hill

The playing field of competitive House races has expanded substantially over the past two months, increasing the chances that Republicans will control the lower chamber next year.

The news is good for Republicans as many open seats are trending to the GOP while dozens of Democratic incumbents are scrambling to keep their jobs.

Democratic leaders are on the defensive, making the case they can still retain the majority in November while playing defense in districts they weren't expecting to be concerned about earlier in the cycle.

As the election environment has worsened for Democrats amid troubling new economic and polling data, Republicans have become increasingly bullish in their projections of major House gains.

National Republican Congressional Committee (NRCC) vice chair, Rep. Kevin McCarthy (Calif.), predicted Wednesday that as many as 80 seats are in play this fall.

Over the past two weeks, Republican campaigns have gleefully blasted out internal numbers claiming leads for their challengers in districts that were considered safe bets for Democrats to retain.

The mood in Democratic and Republican circles is strikingly different than more than three months ago when Mark Critz (D) easily won the special election to replace the late Rep. John Murtha (D-Pa.). That GOP loss stifled talk of Republicans winning control of the House in November. But the chatter is back, and it’s backed up by non-partisan analysts.

A review of election handicapper Charlie Cook's race ratings shows a demonstrable change from June to August. Over that two-month span, an additional 12 Democratic-held congressional seats have moved into "toss-up" territory from previous “likely Democrat” or “lean Democrat” categories.

Furthermore, Democrats now have to worry about the open seat to replace retiring Rep. Patrick Kennedy (D-R.I.). Other Democrats who have showed up on Cook’s competitive race chart since June include Reps. Sanford Bishop (Ga.) and Loretta Sanchez (Calif.).

"Will people be disappointed if we don't take the majority in the House?" said Republican pollster Glen Bolger. "Yeah. But it's still going to be close."

Bolger's firm, Public Opinion Strategies, is the source for many of those internals suggesting that Democrats are now staring down challenges even in districts where they have built-in advantages.

Bolger said the number of seats actually winnable for the GOP in November is close to 50. That's not a projection even the most optimistic of Republican strategists would have made at the beginning of the year.

"It’s become no different than what Republicans faced in '06 and '08," Bolger said. "We're seeing races where the Republican has next to no name ID and is either leading or tied. That means the incumbent loses."

On the flip side, only three Republican-held districts are considered toss-ups--Reps. Charles Djou (Hawaii) and Joseph Cao (La.), as well as the open seat race in Rep. Mark Kirk's (Ill.) district.

"It's been clear for a while now that no one can be complacent," said Democratic pollster Peter Brodnitz.

Reps. Allen Boyd (D-Fla.), John Boccieri (D-Ohio) and Earl Pomeroy (D-N.D.) were three of the new additions to Cook’s toss-up list. Boyd barely survived a primary challenge last Tuesday in a race that turned out to be much closer than most were predicting. And Boccieri and Pomeroy both won easily in 2008, but now find themselves looking over their shoulders ahead of November.

Another round of Democrats who made Cook's August list, but weren't on the list at all in June include Reps. Bob Etheridge (N.C.), Mike McIntyre (N.C) and Phil Hare (Ill.). All of those districts are now in Cook's "likely Democratic" column.

An email from earlier this week touting the prospects of the NRCC's "Young Gun" candidates, cited an internal poll from the campaign of Hare's Republican opponent, Bobby Schilling, that showed him down just two points to the incumbent. That's a district that Obama won with 57 percent of the vote in 2008.

One Democratic strategist who admitted he's increasingly pessimistic on the party's fall prospects said, "If someone like Hare is in trouble, that could obviously mean bad things for us."

Much like the surprising loss of Rep. Sue Kelly (R-N.Y.) in 2006, a district like Hare's could be the tipping point between solid Republican gains in 2010 and a crushing GOP wave that wipes out the Democratic majority.

"If you're a Democrat in a district [Sen. John] McCain [R-Ariz.] won, or a Democrat in a district [President] Obama didn't win by a large margin, you've got some problems," said Bolger.

Thirty two of the 37 congressional districts held by Democrats that are rated as toss-ups by Cook this November fit that description.

"I see the momentum building and building," McCarthy said Wednesday. The NRCC's vice chair of recruiting said Democrats are in "panic mode" over their prospects for the fall. Of Democratic incumbents, McCarthy said, "the members themselves see it. They feel it back home and they're lashing out."

The expanding playing field of competitive House races also brings tough choices over resource allocation into play for both party committees. If numbers continue to plummet for some Democratic incumbents in heavily Republican districts, the Democratic Congressional Campaign Committee (DCCC) will be forced to decide which districts it should pull resources and national party support from in order to protect incumbents that can more easily be saved.

"At the end of the day, we will look at races that we can win," DCCC Chairman Chris Van Hollen (Md.) said Friday, suggesting that the committee will take a hard look at which races truly deserve the lion's share of the party's attention in the run-up to November.

"The DCCC can't create a campaign from scratch," he said. "But we can be the booster rocket."

On the Republican side, NRCC operatives face similar questions. Even with internals suggesting Democrats like Armed Services Committee Chairman Ike Skelton (Mo.) and Hare can be beaten in November, tough decisions loom – especially because the DCCC enjoys a major cash advantage over the NRCC.

Democrats see a silver lining in the speculation that the GOP could reclaim the majority they lost four years ago.

"The bigger danger for Republicans is now that they're talking in terms of winning the House, voters will start thinking about what that means," said Brodnitz.

That's at least what the Democratic leadership is hoping. Van Hollen accused Republicans of prematurely celebrating victory Friday and reiterated his confidence that Democrats would retain the majority in the House this fall.

He said that "reports of the House Democrats' demise are greatly exaggerated."

The Maryland legislator argued that Republican confidence about how many seats they’ll gain this fall is based on false assumptions about the level of Democratic turnout.

"The energy level is rapidly rising on the Democratic side," Van Hollen said. "Most of the activity in these campaigns will take place in the next nine and a half weeks."

The DCCC is kicking off its get out the vote effort over the weekend, promising to knock on some 200,000 doors across the country Saturday.
]]> http://www.klineforcongress.com/news/502/ Los Angeles Times Staff Writer

The Commerce Department on Friday downgraded the nation's economic growth in the second quarter, providing the most important evidence yet that the recovery has stalled.

The anemic annualized growth rate of 1.6% was down from last month's estimate of 2.4%. The drop was slightly less than many economists had predicted, but the report still put an exclamation point on a week of bad economic news that has raised fears the nation could plunge into another recession.

Responding to those concerns, Federal Reserve Chairman Ben S. Bernanke said Friday that the central bank was prepared to step in if necessary to help provide additional stimulus to the economy and avoid the type of debilitating deflation that struck Japan in the 1990s.

He outlined three possible options, including expanding its purchases of long-term securities to pump more money into the economy and signaling that the central bank will keep its short-term interest rate near zero for longer than the vague "extended period" it has promised.

"The Federal Reserve is already supporting the economic recovery by maintaining an extraordinarily accommodative monetary policy, using multiple tools," Bernanke told a major economic gathering in Jackson Hole, Wyo., according to a copy of his remarks released by the Fed.

"Should further action prove necessary, policy options are available to provide additional stimulus. Any deployment of these options requires a careful comparison of benefit and cost."

In his highly anticipiated comments, Bernanke added that despite the "recent slowing" in economic growth, "it is reasonable to expect some pickup in growth in 2011 and in subsequent years." But the high unemployment – at 9.5% in July – is expected to "decline only slowly," he said.

"The prospect of high unemployment for a long period of time remains a central concern of policy," Bernanke said.

The Commerce Department's Bureau of Economic Analysis said the downward revision was based on more complete data and "primarily reflected a sharp acceleration in imports and a sharp deceleration in private inventory investment" by businesses. Those drops were partially offset by an increase in residential and nonresidential investment, as well as increases in federal, state and local government spending.

Federal stimulus and other spending was a big boost from April through June, with expenditures and investment up 9.1% in the second quarter, compared with an increase of 1.8% in the first quarter of the year, the report said. But the nonpartisan Congressional Budget Office reported this week that the effect of last year's $814-billion stimulus legislation would gradually diminish in the second half of the year.

The widening trade deficit was a major drag on the recovery in the second quarter. Real exports of goods and services increased 9.1% in the second quarter, compared with an 11.4% increase in the first quarter. Imports soared 32.4% in the second quarter after rising 11.2% in the first.

The government routinely revises its reports on domestic economic output, also known as Gross Domestic Product.

Friday's revision comes after an advance estimate of second-quarter GDP that was released July 30. The average revision is about 0.5%.

Economists had projected second-quarter GDP could fall to 1.3% or lower. Still, Friday's report was discouraging because growth below 2% reflects a very weak recovery. The economy had grown at a 3.7% rate in the first quarter and 5% in the final three months of last year.

The downward revision follows horrible housing reports that hit Tuesday.

Thursday brought some more potentially discouraging news on home foreclosures and unemployment. Investors demonstrated their concern, dropping the blue-chip Dow Jones industrial average 74 points to close below 10,000 Thursday for the first time since early July.

The downward revision of second-quarter economic activity came as other forecasts projected slow growth.

Last month, Federal Reserve Chairman Ben S. Bernanke declared that the economic outlook was "unusually uncertain." Concerned about the pace of recovery, the Fed this month decided to start buying U.S. Treasury bonds again to keep down longer-term interest rates.

The central bank this year had begun pulling back its extraordinary support for the financial system, but jumped back into the bond market this month because Fed policymakers said the recovery "appeared more modest in the near term than had been anticipated."

Bernanke is set to address the economic situation later Friday morning in a speech at the Fed's annual Economic Policy Symposium in Jackson Hole, Wyo., a high-level gathering of central bankers, finance ministers, academics and industry executives from around the world. It will be his first public comments since the Fed announced its plan to resume purchases of Treasury bonds.

But with the Fed's benchmark short-term interest rate near zero, its policy options are limited. The Fed's most recent economic forecast, in late June, called for economic growth of 3% to 3.5% this year, slower than the 4% growth in the last half of 2009.

]]> http://www.klineforcongress.com/news/501/ U.S. News & World Report

There is an instinctive conclusion among the American public that President Obama's stimulus package has failed to create a sustained recovery. Unemployment has increased, not declined; consumers have retrenched; housing starts have crashed along with mortgage applications; and there is a fear that a double-dip recession may very well be in the pipeline. The public perception, reflected in Pew Research/National Journal polls, is that the measures to combat the Great Recession have mostly helped large banks and financial institutions, and that's a view common to Republicans (75 percent) and Democrats (73 percent). Only one third of either political leaning thinks government policies have done a great deal or a fair amount for the poor.
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There is another instinctive conclusion among the American people. It is that the national deficit, and the debts we have accumulated, are of critical political importance. On the national debt, the money the government has spent without the tax revenues to pay for it has produced mind-numbing numbers so large as to be disconnected from reality. Zeros from here to infinity. The sums are hard to describe; it is hard to describe an elephant, but you know one when you see one. The public knows that, shuffle the numbers as you may, the level of debt is unsustainable.

Who could be surprised since millions of voters have discovered that for themselves? As one realizes the morning after the night before, there is an unavoidable penalty for excess. It is unnerving to wake up and learn that you have a mortgage on your home that exceeds the value of the property. Or, and too often both, you have a credit card line that you cannot repay and the issuer has you on the rack for ever bigger compound interest on the debt. The lesson has been well and truly learned that debt catches up with you. Millions understand that they are just going to have to find a way to live within their means—and then still eke out some savings to pay down debt. And there are well over 14 million Americans without a paying job, so the level of discontent is very high. Just how are they going to regain control of their lives?

In a usnews.com post on July 26, Jodie Allen of the Pew Research Center reported that in recent weeks more academic and market economists have been urging the government to defer budget cuts and tax increases and instead provide additional stimulus to a still-fragile economy, some by continuing the Bush tax cuts. But among the public there has been a suggestive shift of opinion the other way, reflecting worries about debt. "Deficit and government spending" has jumped from 10th or 11th place as a priority for the federal government to one that is second only to job creation and economic growth. The drift of opinion is manifest in other recent polls. For instance, a CBS poll conducted July 9-12 assessed the most important problem facing the country as the economy and jobs (38 percent), with concern about the budget deficit and national debt way down at 5 percent. Yet CNN (July 16-21) has 47 percent preoccupied first with the economy, and 13 percent with the federal deficit. In a recent Time magazine poll, two thirds of the respondents say they oppose a second government stimulus program and more than half say the country would have been better off without the first one.

People see the stimulus, fashioned and passed by Congress in such a hurry, as a metaphor for wasted money. They are highly critical about the lack of discipline among our political leaders. The question that naturally arises is how to forestall a long-term economic decline.

The Fed has lowered rates dramatically to keep the economy ticking and maybe continue the painfully slow recovery, but at the receiving end there is no feeling of relief at all. People know that the stimulus is about to stop stimulating. They know that money is petering out. They know that states are preparing to cut $200 billion to balance their budgets. They realize that the Great Recession has wiped out huge amounts of wealth and that, unlike other recessions, this will not be followed by the kind of economic boom when people who had sat on their money during the lean years unleash pent-up demand for all sorts of goods and services.

There is no sign of that happening this time around. Households and businesses have kept their hands in their pockets. And so while many think that the only way to revive the economy and to inject more money into it is through governmental spending, the general feeling is that we can't afford that right now. The government will be writing more IOUs on top of those we already can't afford. Why plan a second stimulus if the first stimulus couldn't prevent high unemployment?

Of course, the question remains whether public sentiment coincides with sound economics. The challenge we face as a country is how to get growing vigorously again while achieving fiscal sustainability. We are learning from the Europeans what happens when the risks that came with excessive debt become realities. There seems to be an emerging consensus that if there is to be any additional stimulus, it must be explicitly linked to credible fiscal restraint down the road. This would include a commitment to binding legislation that would change the algebra so that both programs and budget procedures get us on a benign trajectory.

There are two warning signs of a budget crisis: rising debt and the loss of confidence that the government will deal with it. This administration is on the verge of fulfilling both conditions. In fairness, there is no majority coalition in Congress for deficit reduction today. It is also true that the growth of public debt has been driven by a dramatic diminution of tax receipts due to the recession, the extra spending to avoid sinking into a self-perpetuating depression, and all those billions we invested to save the financial sectors from their sins. Voters see the politicians most vociferous about reining in the federal budget as those who are out of power and want to use it against the majority party. Too many politicians claim they are all for balanced budgets—but only by reducing the other party's priorities. Republicans want to reduce social spending. Democrats want to reduce military spending. It is Washington as usual.

Amid the clamor and counterpromises, the historic record is worth keeping in mind. We paid for World War II through growth. The national debt, as a percentage of gross domestic product, fell sharply through the postwar presidencies of Truman, Eisenhower, Kennedy, and Johnson (despite the Vietnam War) and continued edging down through most of Nixon's, rising a little with Ford's. We marked time in the stagflation of the Carter years, and then the debt percentage increased dramatically during the Reagan-Bush presidencies. It shot up again to the present dangerous levels under George W. Bush and Obama. The only good years were Clinton's.

An old saying that can apply to the deficit is called the "rule of holes" and goes as follows: "When you're in one, stop digging." But Washington politics remains the barrier. Government programs seem to live on forever. The budget becomes a perpetual-motion machine for higher spending. New programs for new needs get piled on top of old programs for old needs.

Then there are the retirees. Their numbers and their health costs will keep on rising. There were 35 million Americans over 65 in 2000 and the number of retirees is expected to double by 2030. The impending retirement of millions of baby boomers, with their claims on federal retirement programs, comes at a time when both parties seem to be willing to worsen tomorrow's problems to win more of today's votes. The result is that the federal budget is drifting into a future of huge deficits or unprecedented tax increases, or both.

Federal spending is moving toward a higher plateau—from roughly 18 percent of the GDP to almost 25 percent by 2030. We don't know how we are going to pay for this. We don't know how the economy would fare with much higher taxes. We have seen the clouds gathering for years but haven't invested in an umbrella by adjusting federal retirement programs or taking other steps to reduce entitlements. One response would have been to begin gradually phasing in eligibility ages and tying benefits more to income. No doubt we have to think about raising the eligibility age for Social Security and Medicare, perhaps by one month for each two-month increase in average life expectancy. We will have to think of ways to reduce the cost-of-living increases on Social Security benefits for wealthy seniors by slowly increasing their Medicare premiums and leaving everybody else's untouched. We may have to allow the Bush tax cuts to expire, certainly for households earning more than $250,000 (and more for the super-rich) given the concentration of wealth in the top 1 percent of the population. It is entirely appropriate that they begin to make a greater contribution to our longer-term fiscal health.

The United States simply seems to lack a system that can fund the government that the people say they want. We are good at crises, but we do not seem to be good at tackling chronic problems. If we wait until a crisis happens, it will be too late. It is simply not possible to close the gap entirely with the tax increases on the rich that Democratic liberals so desperately believe in. Nor can we close the gap with spending cuts, as the Republicans would like. The liberals will have to concede that benefits and spending ought to be reduced. Conservatives will have to concede the need for higher taxes.

Hope may lie in a new bipartisan panel headed by Erskine Bowles and Alan Simpson, two unique, wise, and centrist political leaders whose characters raise some degree of confidence that they might be able to come forth with productive programs. As former President Clinton said of them, they "are free enough to disregard the polls but smart enough to take them into account."

But let's not forget, current budgetary trends are capable of destroying the country. As Bowles pointed out, according to a Washington Post report, we can't just grow our way out of this. We can't just tax our way out of this. We have to do what governors do—cut spending or increase revenues in some combination that will begin to pull us back from the cliff.

Obama must know that if he doesn't address this, he will be the president who drove us toward a debt crisis. And so too must Congress, for both have now participated in the most fiscally irresponsible government in American history.
]]> http://www.klineforcongress.com/news/500/ Politico

Top Democrats are growing markedly more pessimistic about holding the House, privately conceding that the summertime economic and political recovery they were banking on will not likely materialize by Election Day.

In conversations with more than two dozen party insiders, most of whom requested anonymity to speak candidly about the state of play, Democrats in and out of Washington say they are increasingly alarmed about the economic and polling data they have seen in recent weeks.

They no longer believe the jobs and housing markets will recover – or that anything resembling the White House’s promise of a “recovery summer” is under way. They are even more concerned by indications that House Democrats once considered safe – such as Rep. Betty Sutton, who occupies an Ohio seat that President Barack Obama won with 57 percent of the vote in 2008 – are in real trouble.

In two close races, endangered Democrats are even running ads touting how they oppose their leadership.

“Democrats kept thinking: ‘We’re going to get better. We’re going to get well before the election,’” said one of Washington’s best-connected Democrats. “But as of this week, you now have people saying that Republicans are going to win the House. And now it’s starting to look like the Senate is going to be a lot closer than people thought.”

A Democratic pollster working on several key races said, “The reality is that [the House majority] is probably gone.” His data shows the Democrats’ problems are only getting worse. “It’s spreading,” the pollster said.

Not all Democrats – or Republicans, for that matter – share this pessimistic assessment 68 days before the election. Republicans need to pick up 39 seats, and polls show most voters still have a downbeat view of the GOP’s ability to govern any better than Democrats. Republicans have been out-raised and out-spent at the national level and in many of the key races.

“We have been saying for the past 18 months this will be a politically challenging environment,” said Chris Van Hollen, chairman of the Democratic Congressional Campaign Committee. “That being said, we will retain the majority in the House. All of what you are hearing is the inside-the-beltway chatter.”

A top House Democratic strategist who agrees with Van Hollen conceded pessimism is spreading rapidly – but mainly in Washington. This strategist said the mood among individual Democratic candidates, many of whom enjoy a considerable cash advantage, is more upbeat.

Yet Democratic concern continues to manifest itself in a variety of ways, including the purchasing of ads in districts – like that of veteran Ike Skelton of Missouri -- that historically are only in play in miserable political years and were not considered at risk several months ago. And then there are more subtle hints that professional Democrats are worried -- lobbyists are reporting a noticeable uptick in House committee staffers looking for jobs.

Democrats disagree on the best national strategy to prevent losing the House – but mostly agree there are few good options beyond grinding it out in each individual race.

“It’s individual Democrats that are going to have to defeat flawed Republican candidates,” said Indiana Democratic Party Chairman Dan Parker. “It’s important that Democrats succeed in individual races.”

Democrats also hoped to leverage a decisive fund-raising edge to bail out members over the final two months of the campaign. But, while they have raised way more money than Republicans, Democrats head into the final stretch worried that when spending by outside groups is factored in, they will have little or no advantage in spending over the next two months.

They had hoped Obama’s popularity – and appeal with base voters and donors – would help at the edges. “The concern I have is that the president is doing poorly in places you need him to perform strongly with your base,” a state party chair told POLITICO. “You need to have confidence in your leader.”

Several House Democratic sources said they are furious with the White House for keeping the debate over a New York mosque in play for two weeks – and then announcing Obama will use a prime-time address next week to discuss Iraq, not the economy. By the calculations of House Democrats, this means that by Labor Day they will have spent nearly nine weeks this summer beating back negative or unhelpful story lines instigated, in part or in total, by the White House.

Finally, Democrats had hoped memories of unpopular Republican rule under George W. Bush would convince swing voters against installing a Republican House again.

“The problem is that a lot of the message talks to the base, and we’ve got to talk to the middle,” a former state Democratic Party chairman said. “You can only blame Bush for so long.”

In some races, endangered Democrats are trying to carve out their own separate identities from the national party – even if that means bashing Obama and House Speaker Nancy Pelosi.

“The incumbent needs to shape the races in their district,” said Parker.

Indiana Rep. Joe Donnelly, a second-term congressman from South Bend, is airing a new TV ad in his South Bend-area district pointing out that he voted against “Nancy Pelosi’s energy tax on Hoosier families.”

“The Donnelly ad is who he is,” said Parker. “He’s independent.”

It’s a spot that is strikingly similar to one Pennsylvania Rep. Jason Altmire is running, which features supporters praising the second-term Democrat for “stand[ing] up” to Obama and Pelosi.

In Washington, Democrats are testing a new strategy of trying to make the national conversation about Minority Leader John Boehner (R-Ohio) – who would become speaker of the House with a GOP takeover -- a tough proposition given that most voters have never heard of him.

“We want to elevate John Boehner,” said a senior Democratic aide involved in party strategy. “We want him and his ideas to be in the forefront.”

Democrats may need this approach to stoke excitement among its base voters. But two different sets of data show Republicans with a big advantage when it comes to getting the base fired up for this campaign. A new Gallup poll out this week shows 46 percent of Republicans and just 23 percent of Democrats to be “very enthusiastic” about voting.

And before Tuesday night’s races, 15.4 million Republicans had already voted in primaries, compared with 12 million Democrats who have turned out for primaries so far in 2010.

“Hopefully, we can rally the base and turn people out,” said Jamie Franks, chair of the Mississippi Democratic Party, who predicted his party will retain control of the House.

What Democrats are watching most closely right now is to see if the field of at-risk seats does indeed keep expanding. There are fresh concerns about Reps. Allen Boyd of Florida, Jim Marshall of Georgia and Leonard Boswell of Iowa – all of whom were recently moved into the toss-up category by respected handicapper Charlie Cook.

In addition, Reps. Ben Chandler of Kentucky and Stephanie Herseth Sandlin of South Dakota were both outraised by their opponents this past quarter, increasing concern about their races.

Given that the DCCC has already purchased ads to defend 54 seats that the party controls, the last thing Democrats need is more seats to have to protect.
]]> http://www.klineforcongress.com/news/499/ Associated Press

WASHINGTON — The Obama administration claimed this week that $100 billion invested in innovative technologies under the economic stimulus law is "transforming the American economy" by putting the nation on track for technological breakthroughs in health care, energy and transportation.

But an examination of details in the 50-page report unveiled Tuesday by Vice President Joe Biden reveals something a bit different: a collection of rosy projections that ignore many of the challenges, pitfalls and economic realities in all those areas.

A look at how the administration's claims compare to the facts:

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EDITOR'S NOTE — An occasional look at government assertions and how well they adhere to the facts.

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Increasing renewable energy

The claim: Thanks to the stimulus, the U.S. is on track to "doubling U.S. renewable energy generation capacity and U.S. renewable manufacturing capacity by 2012."

The facts: While the Recovery Act has helped increase renewable energy, the fact that it is a one-time jolt makes it difficult to project that the growth will continue for the next couple of years. George Sterzinger, executive director of the Renewable Energy Policy Project, a Washington think tank that promotes renewable energy, said the Recovery Act's cash grant program for renewable energy projects "jump-started a lot of stuff. But there's nothing beyond that."

Sterzinger added that it would be a mistake to link the growth in renewable energy generation to the growth in American-made renewable energy equipment. While the U.S. could probably meet the first goal, he said, it isn't likely to meet the second because much of the equipment is made overseas.

Robert L. Nelson, a partner at the Akin Gump law firm who co-chairs its renewable energy group, said that the manufacturing claim reminded him of a story told in the old Soviet Union. A commissar, or government official, asks a farmer how good next year's crop will be. The farmer says it will be 10 times as good as last year's. The commissar thinks to himself, "Ten times zero is zero."

Nelson said, "When you're looking at where the U.S. is starting from, doubling isn't all that meaningful a statistic."

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Cutting the cost of solar power

The claim: Government stimulus money will lead to "cutting the cost of solar power in half by 2015, putting it on par with the cost of retail electricity from the grid."

The facts: That projection assumes a huge payoff from stimulus spending on technology improvements in solar energy. Nelson, who has worked in renewable energy for 25 years, called the prediction "highly unlikely," unless there is a big increase in utility-scale solar power projects.

Sterzinger said there was too much uncertainty in the world economy to make such a prediction.

"Projecting from the last few years looks at the effects of a global recession that lowers material costs and a temporary glut of module manufacturing capacity," he said. "They have influenced cost but are not based on any technology innovation."

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Quicker, cheaper genetic mapping

The claim: Stimulus funding is spurring National Institutes of Health research to make unraveling people's individual genetic codes, or genomes, easy and cheap enough that the number completed could "dwarf, by 50 times or so" the number so far finished.

The facts: NIH research kicked off the revolution in human genome sequencing and continues to play a crucial role, but it has lots of help today from universities, international research foundations and even private companies jockeying to sell better gene-scanning machines.

It cost about $3 billion and a decade of government research to come up with the first draft of a human genome in 2000. Last year, a Stanford University professor reported that he sequenced his genome in a week at a cost of $48,000, using a $1 million machine. Many specialists believe the price may drop to less than $1,000 in a few years. The more sequencing scientists do allows them to better explore variations that contribute to disease.

As promising as personal gnome sequencing is, people need to understand that it's basically a first step. The bigger challenge, still in its infancy, is deciphering what the genetic variations mean and how that information might be harnessed for better care.

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High-speed rail

The claim: "With $8 billion in funding, the Recovery Act is beginning to make high-speed rail a reality across the country." Projects selected for funds represent "strategic investments" that will yield high-speed service or lay the groundwork for future service.

The facts: The largest project is one that would connect San Francisco with Los Angeles, using trains traveling up to 220 mph. But some of the projects getting stimulus money would primarily upgrade existing freight rail tracks so they could be used for faster passenger service, reaching speeds of up to 110 mph at least part of the time — well short of the speeds in other developed countries.

Not everyone shares the White House's optimism about the prospects for high-speed rail. A recent analysis by the Government Accountability Office concluded that building high-speed rail service in the U.S. "is a difficult, multiyear effort" that hinges on financing that goes "far beyond the funds provided by the Recovery Act in a time of continuing federal and state deficits."

Another challenge for some projects will be meeting the 2017 deadline to spend Recovery Act funds, the GAO said. The capacity to manufacture passenger rail cars and other high-speed equipment exists in the U.S. But it may take years to design and test new rail cars that meet U.S. crashworthiness standards, which are different than much of the rest of the world.

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Health information technology

The claim: Stimulus spending is "a significant boost" to goals of converting to electronic health records, computerized prescriptions and remote treatment of patients in hard-to-reach locations.

The facts: The effort to get doctors' offices and hospitals using electronic medical records is in its earliest stages. Economic dividends from greater efficiency and fewer costly medical mistakes could be years away.

And there's plenty of potential for glitches. People involved with the issue give the administration high marks for trying, but many do not expect Obama's goal of getting all of America's medical records computerized within five years to be met.

For one thing, about 90 percent of roughly $20 billion the stimulus legislation allocated for this purpose has yet to be spent.

Most of the stimulus money is to help doctors and hospitals defray the cost of installing computer systems, but the Health and Human Services Department only recently spelled out the capabilities that those systems will have to have in order to qualify for federal money. No systems have yet been certified as meeting the required capabilities.

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Electric vehicles

The claim: The stimulus has helped produce "significant steps toward affordable electric cars that can drive 300 miles on a single charge, powered by $10 of clean electricity instead of $50 dollars of oil. Ultimately this means consumers may have the choice among a range of vehicles from a combustion vehicle with over 50 miles per gallon or an electric-drive vehicle for the same price."

The facts: While strides are being made, this vision of the future rests on assumptions that many regard as overly optimistic. Even a White House task force on the auto industry's recovery said while General Motors' extended-range plug-in hybrid, the Volt, "holds promise, it will likely be too expensive to be commercially successful in the short term." At $41,000, the Volt is about twice the price of a conventional midsize car. The price of electric cars will drop, but automakers are years from being able to sell them at the same price as cars with internal combustion engines.

Another hurdle is fuel prices, which are relatively low and provide little incentive to consumers to spend thousands of dollars extra for a hybrid or even more for a plug-in car; it would take years for the fuel savings to outweigh the higher price.

And there are questions about whether the large lithium ion batteries needed for electric cars are durable, safe and affordable enough for widespread use.

Associated Press writers Lauran Neergaard, Joan Lowy and Ricardo Alonso-Zaldivar in Washington and Tom Krisher in Detroit contributed to this report.
]]> http://www.klineforcongress.com/news/498/ Wall Street Journal

U.S. home sales plummeted in July to a level not seen in more than a decade, spurring fears of renewed weakness in housing prices and the broader economy.

Sales of previously owned homes fell 27.2% from June to a seasonally adjusted annual rate of 3.83 million, the National Association of Realtors said Tuesday, the lowest level since the industry group started its tally in 1999.

The expiration of a home-buyer tax credit in the spring was expected to damp buying, though less severely. Economists said the sales drop—together with a corresponding rise in the inventory of unsold homes—meant another decline in housing prices was on the horizon. House prices had stabilized last year after declining since 2006.

High unemployment and meager wage growth already are driving many Americans' reluctance to make major purchases, so a return of falling home equity could further depress confidence and consumer spending.

"At this point in the recovery, every little bit counts," said economist Paul Dales of Capital Economics. "A double dip in the housing market and house prices would not be enough to generate another recession. It would certainly help to hold back the recovery." He expects home prices to fall another 5% after a 30% decline during the recession.

The data sent stocks tumbling, briefly pushing the Dow Jones Industrial Average below 10,000 for the first time since early July. The index closed at 10040.45, down 133.96 points, with investors rushing into safer assets as they reassessed the economic outlook. A rally in Treasurys pushed the yield on the 10-year note as low as 2.47%, its lowest mark since early 2009. Oil prices and other key commodities such as copper fell on expectations of weaker demand.

Nick Timiraos and Steve Kerch discuss the latest housing data showing sales of existing homes plunged in July and what it means for housing market, including prices, going forward. Plus, microbes may be speeding up oil cleanup in the Gulf of Mexico.

The renewed worry about housing comes as economists downgrade their forecasts for the economy this year and early next year. Traditionally, the housing sector, along with purchases of durable goods such as furniture, would help pull the economy out of a recession as lower interest rates spurred higher demand. But this time, potential home buyers either don't have the jobs or savings to jump in or are wary of another decline in the market.

"Consumers and housing are in no position to lead us out," said Nigel Gault, chief U.S. economist at IHS Global Insight. "We've gone through the inventory-cycle boost. The stimulus boost is fading. We're falling back on whatever underlying strength there is in the private sector, in exports and business-equipment spending, and there's not a lot."

A sharp drop in mortgage rates in recent months appears to be doing little to stimulate demand. The average rate on a 30-year fixed-rate mortgage has fallen to less than 4.5%, reaching 50-year lows, but demand for new loans is weak. Many borrowers face challenges qualifying for loans because they have lost their jobs or aren't making as much money. Some are simply growing more cautious.

"I'm in no rush," said Steve Hamilton, who sold his Carlsbad, Calif., home two years ago and has been on the sidelines since. He said he was happy to continue renting a home that costs half of what the monthly mortgage payments were just a few years ago. "The tide is still going out," said the 41-year-old commercial-real-estate investor. "When I see a steady increase in local jobs, that's when we'll step back into the market."

Analysts say the big risk to the market is that consumers lose any urgency to buy homes because of new concerns that prices are poised to fall.

While tax credits to spur home sales helped stabilize housing markets across the country over much of the past year, the expiration of that stimulus in April has revealed lingering problems that have restrained housing.

Buyers who signed contracts by April 30 have until the end of next month to close on those sales and receive credits worth as much as $8,000. Sales of homes priced between $100,000 and $250,000, which would have received the biggest benefit from the tax credit, were off 35% in July from a year ago.

The number of unsold homes on the market grew by 2.5% to nearly four million in July. At the current sales pace, it would take 12.5 months to clear that inventory, the highest level in more than a decade.

Sales may have been even worse if mortgage rates hadn't been so low, said David Berson, chief economist at PMI Group Inc., a mortgage insurer in Walnut Creek, Calif. Low mortgage rates won't hurt, he says, but "they will give you less traction in the market than we would normally get."

How long the hangover from the tax credit will last depends on how long the economy takes to recover. Tuesday's housing report was "a wake-up call to anyone who's trying to understand why housing has not been recovering," said Ivy Zelman, president of housing-research firm Zelman & Associates. "The artificial boost from the tax credit masked the impediments."

Nearly one in four homeowners with a mortgage owes more than their home is worth, which means many are unlikely to sell unless their lender approves a short sale, in which the home sells for less than the amount owed.

Price declines could be shaped largely by how banks manage the volumes of more than five million loans that are either seriously delinquent or in foreclosure. If more of those loans are modified, or if the homes sell through short sales, that could spare the housing market from bigger price declines.

One troubling sign for the market is that banks appear to be listing more homes for sale, just as demand has dropped. The number of bank-owned listings increased 12% in August from the previous month. The figures, tracked by Zelman & Associates, include listings for the top 10 U.S. banks in 20 states and from mortgage companies Fannie Mae and Freddie Mac.

Price declines could lead to more delinquencies and foreclosures, and additional subsequent price drops. "You end up in a home-price-depreciation death spiral," said Laurie Goodman, a senior managing director at mortgage-bond trader Amherst Securities Group LP in New York. "It's not clear there's enough demand to handle this overhang without another round of price declines."

The median sale price increased 0.7% from one year ago to $182,600 in July, but that was down 0.2% from June. Median prices largely show the shift in the mix of homes that are selling, and analysts attributed the annual increase to a declining share of entry-level home sales.

While prices are expected to fall, fewer analysts expect double-digit plunges, in part because prices in many markets have already fallen sharply.

Sue Dempsey is under contract on a short sale for a three-bedroom home in Las Vegas that sold four years ago for more than $300,000. The price today: less than $120,000. While she missed the deadline for the tax credit, she said the price seemed unbeatable. "We got such a great deal on the house. Golly, we didn't need anything else," said the 58-year-old retiree.
]]> http://www.klineforcongress.com/news/497/ Washington Post

A rapidly weakening economy threatens to undermine President Obama's assertion that he has set the nation on a path to prosperity and, with barely two months until congressional midterm elections, Democrats find themselves with few options for reviving the faltering recovery.

The latest sign that the economy is losing steam: Home sales fell 27 percent in July, the steepest one-month drop since figures were first compiled in 1968, according to a report released Tuesday. Analysts had expected sales to decline following the expiration of a federal tax credit for homebuyers this spring, but the drop was nearly twice as large as forecast.

The housing report punctuated a wave of bad news that has been building all summer. The number of jobless claims has risen in each of the past four weeks and last week hit its highest point in nine months. Private-sector job creation is trending well below the level needed to keep up with population growth. Retail sales have also been disappointing.

Economists generally do not expect a dip back into recession, although many say the risk has grown with each new piece of disheartening data.

Obama and congressional Democrats have been working frenetically to counter the trend, winning a series of relatively small initiatives to extend unemployment benefits, avert state layoffs and cut taxes for firms that hire unemployed workers.

But with the budget deficit soaring and polls showing deep skepticism about the impact of Obama's economic policies, even many Democrats are reluctant to support additional spending on the economy. That has left Obama with few alternatives for improving the trajectory of the recovery and reducing a stubbornly high jobless rate, which was stuck in July at 9.5 percent.

"They have played their policy hand, and they've got to hope it's good enough," said Mark Zandi, chief economist at Moody's Analytics who has been advising congressional Democrats. Given the political environment, he said, "there's nothing they can do to make a significant difference in the next six months, or even a year."

Republicans quickly sought Tuesday to capitalize on the gloomy news. Addressing the City Club of Cleveland, House GOP Leader John Boehner (Ohio) blamed Obama for "an economy stalled by 'stimulus' spending and hamstrung by uncertainty." Casting the the November election as a referendum on Obama's "discredited" policies, Boehner urged the president to fire his entire economic team, starting with Treasury Secretary Timothy F. Geithner.

"The American people are asking 'where are the jobs?' and all the president's economic team has to offer are promises of 'green shoots' that never seem to grow," Boehner said. Noting that Obama's budget director and chief economist have already announced their resignations, Boehner said Obama "should ask for - and accept - the resignations of the remaining members of his economic team," including Geithner and Lawrence Summers, head of the National Economic Council.

Boehner offered few ideas for turning the economy around. House Republicans have not released a detailed economic agenda, and Boehner's speech - delivered amid a bus tour of battleground House districts in Rust Belt states - did little to expand on the GOP's long-standing platform of lower taxes and less federal regulation.

Vice President Biden, who stood in for a vacationing Obama, derided Boehner's economic plan as a rehash of the laissez-faire policies the led the country to the brink of a financial meltdown in the final days of the Bush administration. "Mr. Boehner is nostalgic for those good old days, but Americans are not," Biden said during an event called to showcase the success of last year's $814 billion stimulus package.

His voice dripping with sarcasm, Biden also thanked Boehner for suggesting that the president fire his top economic advisers. "Very constructive advice," he said, "and we thank the leader for that."

Later, White House deputy press secretary Bill Burton defended Geithner and Summers, calling them "the people who made the tough decisions, who did the hard work to get the economy going again."

As recently as this spring, the U.S. economic recovery appeared to be accelerating. Many economists gave credit to the stimulus package and the $700 billion bailout of the banking system proposed by Bush and carried out by Obama.

On Tuesday, the nonpartisan Congressional Budget Office affirmed that view of the stimulus package, estimating that it added as many as 3.3 million jobs to the economy during the second quarter of this year and may have prevented the nation from lapsing into recession. The CBO also said the package will cost about $814 billion through 2019 - less than the $862 billion previously estimated.

But momentum is fading fast. On Friday, the Commerce Department will revise its estimate of second quarter economic growth. Forecasters expect gross domestic product to have risen at a 1.4 percent annual rate during the April through June quarter - far below the 2.4 percent rate first estimated and below the 2.5 to 3 percent level at which the U.S. economy should expand based solely on population growth and increased productivity.

Instead of gaining ground in the second quarter, the United States economy lost ground.

While many private and government forecasters still agree that growth will return to about 2.5 percent for the second half of the year, that consensus could soon change if the economy continues to deteriorate. And even a 3 percent growth rate is not strong enough to significantly bring down unemployment.

White House economist Jared Bernstein said the administration is "by no means out of bullets." He cited billions of dollars that have yet to be spent from last year's stimulus package and ticked off a list of policies the White House is pursuing, including a measure designed to encourage hiring by small businesses that has been blocked by Republicans in the Senate. Democratic leaders in the Senate say they hope to push the bill to final passage when Congress returns after Labor Day.

Obama is also pressing for tax rebates for homeowners who invest in renewable energy projects and other green renovations, as well as for an extension of an existing tax credit for manufacturers of solar panels, wind turbines and other clean-energy equipment.

"We're continuously promoting the most effective ways to create the most jobs, and our agenda is demonstrably working to achieve that goal," Bernstein said. "The Recovery Act contributed to the turnaround from horrifying negatives to positives, and that's the momentum we are trying to build on."

He acknowledged that Congress had not approved all the stimulus money Obama had sought. But, he said, "In the world we live in, we're doing everything we can to create the conditions for greater job growth in key sectors of the economy."
]]> http://www.klineforcongress.com/news/496/ ABC News

After months of withering job losses and weak economic growth, summer was going to be the season of recovery, the Obama administration heralded in June.

Thousands of infrastructure and construction projects funded by the American Recovery and Reinvestment Act were to come on-line during June, July and August, helping to "create jobs for American workers and economic growth for businesses, large and small."

The White House dubbed it "Recovery Summer" and President Obama declared the economy had begun "growing at a good clip." Vice President Joe Biden predicted weeks earlier that creation of 250,000 to 500,000 new jobs a month could soon be on the horizon.

But with summer quickly coming to an end, those jobs gains and a robust economic recovery have not yet materialized, leaving Democrats on the verge of a fall election campaign in which Republicans are poised to make them eat their words.

"Sadly, this so-called 'Recovery Summer' could end up with more Americans finding themselves out of work then when it began," said National Republican Congressional Committee spokesman Ken Spain. "Expect Republican candidates across the country to ask one simple question of Democrat incumbents: 'Where are the jobs?'"

Private companies only added 153,000 jobs in May, June and July combined, according to the Labor Department. If you count government jobs and the shedding of special Census hires, the net gains were only 80,000 over the period. The economy would need to add 8 million jobs to reach pre-recession levels.

Most economists agree the $787 billion Recovery Act has helped prevent the recession from being significantly worse, boosting the gross domestic product and stemming job losses. But many say its effect has largely begun to wear off.

"One ironic thing about 'recovery summer' is that this is the first quarter that the impact of the Recovery Act is going to be very small," said Josh Bivens, an economist at the nonpartisan Economic Policy Institute.

Two thirds of all stimulus dollars will have been spent by the end of the summer, Bivens said. The economy grew 3.7 percent in the first quarter of 2010 but slowed to 2.4 percent in the second quarter.

Economic growth is "going to drop rapidly for the rest of this year and the Recovery Act is going to add zero. It will have run out," Bivens said.

Still, the Obama administration believes the economic rescue package has turned the economy around and put it on the right path for the future.

"The combined effect of government actions taken over the past two years -- the stimulus package, the stress tests and recapitalization of the banks, the restructuring of the American car industry and the many steps taken by the Federal Reserve -- were extremely effective in stopping the freefall and restarting the economy," wrote Treasury Secretary Timothy Geithner earlier this month in a New York Times op-ed entitled "Welcome to the Recovery."

"We're not going to get all 8 million jobs that were lost back overnight. It's going to take some time," President Obama said last week in Ohio. "And a lot of it's sort of like recovering from an illness. You get a little bit stronger each day and you take a few more steps each day."

Democrats are hoping those little steps forward will be enough to convince voters in November that the Democrats' economic policies are working and that things could have been worse without them.

Republicans "are counting on the fact that the American people are somehow going to have a bout of collective amnesia come these elections, because we all know that, George Bush's last day in office, we saw this country losing 700,000 jobs a month," Rep. Chris Van Hollen, chair of the Democratic Congressional Campaign Committee, said last week.

"I think we're going to get a fair amount of credit by November," said Vice President Biden. "I think we're going to do fine." Biden has predicted the Democrats will keep both the House and Senate.

But touting summer 2010 as "the most active Recovery Act season yet" and, implicitly, as a period of job growth, belies a reality many Americans say they are experiencing.

Only 27 percent of Americans see the economy as improving, according to the most recent ABC News/Washington Post poll. And a new low -- 43 percent -- approve of Obama's handling of the economy.

"'Recovery Summer' is their 'mission accomplished' without the banner," said Larry Sabato, director of the University of Virginia's Center for Politics, comparing the Obama administration's message to President George W. Bush's famous declaration of victory in Iraq in May 2003.

Sabato said the effort to infuse optimism about the economy into the electorate could backfire in November. "The amazing paradox about this election is that the likely winners [Republicans] are more unpopular than the likely losers," he said. "The only reason they could win is because the Americans who are voting& actually understand the system and they realize all they're doing is checking and balancing Obama. They don't trust anyone."

Claiming the economy was advancing when most Americans didn't share that view was precisely the pothole that swallowed George H.W. Bush in his unsuccessful re-election bid in 1992.

"When [President George H.W.] Bush went down in 1992, the economy actually had recovered. The recession ended in the last quarter of 1991. There was a full year of recovery before the election. & there is zero chance that things will improve."
]]> http://www.klineforcongress.com/news/495/ Politico

A federal judge on Monday issued a temporary ban on federal funding for embryonic stem cell research, sidetracking President Barack Obama’s executive order that had expanded federal funding for human stem cell research last year.

U.S. District Court Judge Royce Lamberth ruled that the order, which Obama signed in March 2009, violated a federal law that prohibits the use of federal funds for research practices that result in the destruction of a human embryo. According to the ruling, the Dickey-Wicker Amendment, which Congress passed in 1996, clearly prohibits the use of federal funds for stem cell research, regardless of whether the stage of research directly involves the destruction of an embryo.

The judge also ruled that two adult stem cell researchers, Theresa Deisher of AVM Biotechnology and James Sherley of the Boston Biomedical Research Institute — among several parties who objected to the order in court — had the authority to sue the government. Lamberth had initially denied their request, but the case was sent back to his court on appeal.

“The language of the statute reflects the unambiguous intent of Congress to enact a broad prohibition of funding research in which a human embryo is destroyed,” Lamberth wrote in the decision. “This prohibition encompasses all research in which an embryo is destroyed, not just the ‘piece of research’ in which the embryo is destroyed.”

Advocates believe that embryonic stem cells, which can be manipulated to mimic other cells in the body, could lead to significant breakthroughs in the treatment of debilitating conditions or life-threatening diseases, including quadriplegia and Parkinson’s disease. Opponents say the research is unethical and depends on the taking of a fertilized embryo, which abortion opponents consider a viable human life. They also argue that scientists have found other adult cells that can be used for the research.

The ruling also broadly concludes that the research, also known as ESC, depends on the destruction of a human embryo, and that research derived from embryonic stem cells is also subject to regulation under the amendment.

Embryonic stem cell "research is clearly research in which an embryo is destroyed,” the ruling said. “Thus, ESC research necessarily depends upon the destruction of a human embryo. Despite defendants’ attempts to separate the derivation of ESCs from research on the ESCs, the two cannot be separated.”

The ruling stems in part from an appeal by Nightlight Christian Adoptions, a nonprofit group that advocates for adoption of “snowflake babies” — children born from stored, fertilized human embryos. The group had argued that Obama’s executive order was illegal, and that embryonic stem cell research reduces the number of children available for adoption.

The court ruled that the injunction would not seriously harm embryonic stem cell researchers because of the availability of private funding, and that using taxpayer money to allow scientists to experiment with human embryos would “threaten the very livelihood of plaintiffs Sherley and Deisher.”
]]> http://www.klineforcongress.com/news/494/ Washington Post

Is it deja vu all over again for Democrats?

Some neutral observers and senior strategists within the party have begun to believe that the national political environment is not only similar to what they saw in 1994 -- when Democrats lost control of the House and Senate -- but could in fact be worse by Election Day.

A quick look at the broadest atmospheric indicators designed to measure which way the national winds are blowing -- the generic ballot and presidential approval -- affirms the sense that the political environment looks every bit as gloomy for Democrats today as it did 16 years ago.

"President Obama's job [approval] number is likely to be as bad or worse than [Bill] Clinton's when November rolls around, the Democratic generic-ballot advantage of plus 12 to plus 15 in 2006 and 2008 is now completely gone, and conservatives are energized like 1994," said Stu Rothenberg, an independent political analyst and editor of the Rothenberg Political Report, a well-read campaign tip sheet.

The generic ballot -- would you vote for an unnamed Democrat or an unnamed Republican? -- is either similar or worse for Democrats (depending on which poll you look at) than it was in 1994.

In an August 1994 Washington Post-ABC News poll, 49 percent of respondents said they would vote for the Democrat while 42 percent said they would back the Republican. Last month, 47 percent said they would support the Republican while 46 percent chose the Democrat.

The results were strikingly similar in several other national surveys. In an August 1994 Gallup poll, 46 percent said they would vote for the Democrat and an equal 46 percent said they would support the Republican. The most recent Gallup data give Republicans an edge of 50 percent to 43 percent over Democrats. A CNN/Opinion Research poll shows that in August 1994, Republicans had a generic-ballot lead of 46 percent to 44 percent, a margin similar to the numbers in CNN data, 48 percent to 45 percent, this month.

Presidential approval numbers paint a slightly more optimistic picture for Democrats. In mid-August 1994, Clinton's approval rating in Gallup polling stood at 39 percent; Obama is at 44 percent approval in Gallup's most recent weekly tracking poll. (By Election Day or slightly before it in 1994, Clinton's approval numbers had bumped back up to 46 percent.) In the Post-ABC survey, a similar trend is borne out: Clinton was at 44 percent approval in August 1994, and Obama is at 50 percent this month.

Combine the similarities between 1994 and 2010 on the generic ballot and presidential approval with a clear intensity gap between the Republican base (fired up to vote) and the Democratic base (less so), and Democratic strategists are worried that they are watching history repeat itself.

"Our losses occurred because Republican turnout was massive," said one senior party strategist deeply involved in the 1994 campaign. "The right was motivated in 1994, and while it would have seemed impossible to me then, it feels like the Republicans are much more motivated to participate in this election" than they were then.

Although few savvy Democratic strategists debate the difficulty of the national political environment, they do note that there are two important differences between the 1994 election and this one.

The first is the relative weakness of the Republican brand. In 1994, Republicans had been out of power in the House for four decades, and most voters had a limited sense of what a GOP House would be like. In 2010, the American public has fired Republicans -- in the House, Senate and White House -- twice in the past four years. And, in a recent NBC/Wall Street Journal survey, the GOP had its lowest favorability ratings ever. (We repeat: ever.)

Second, Democrats understand the building frustration and desire for change in a way that the party simply didn't get 16 years ago. "The one advantage Democrats have is early-warning radar that we are facing a tough environment, and many of our incumbents have geared up their campaigns much earlier than in 1994," said Fred Yang, a leading Democratic pollster. "The possible wave may be too big for any campaign, but we're going to be ready this time and run harder and more aggressive campaigns."

Yang's last point is the central question on which the comparison between 1994 and 2010 rests: Can well-run and well-funded campaigns by Democratic incumbents save them from being dragged out to sea politically? Democrats think so, Republicans hope not.

Charlie Cook, a political handicapper and editor of the Cook Political Report, acknowledged that every election has "its own set of unique characteristics and dynamics" but added that Democrats shouldn't take too much comfort in that. "Is 2010 the same as 1994? No, it isn't," he said. "But that doesn't mean that the outcome can't be roughly comparable."

Cook also noted that the state of the economy, which may have mitigated Democratic losses in 1994 with an unemployment rate of 5.6 percent, almost certainly will exacerbate them this year, as unemployment now stands at 9.5 percent.
]]> http://www.klineforcongress.com/news/493/
Speaking last Wednesday in Columbus, Ohio, President Obama asked, "How do we, over the long term, get control of our deficit?" Good question.

Here's the answer suggested by last Thursday's semi-annual budget summary from the Congressional Budget Office: Stop spending so much.

Jason Trennert of Strategas Research Partners says Uncle Sam relies too much on short-term borrowing.

CBO's mid-year review largely reinforces the bad news we already knew—to wit, that spending has exploded since Democrats took over Congress in 2007, first with the acquiescence of George W. Bush and then into hyperdrive after Mr. Obama entered the White House.

To appreciate the magnitude of this spending blowout, compare CBO's budget "baseline" estimate in January 2008 with the baseline it released Thursday. The baseline predicts future spending based on the law at the time. As the nearby chart shows, in a mere 31 months Congress has added more than $4.4 trillion to the 10-year spending baseline. The 2008 and 2009 numbers are actual spending, the others are estimates. As recently as 2005, total federal spending was only $2.47 trillion.
[1spending]

Keep that $4.4 trillion in mind the next time you hear Mr. Obama or Speaker Nancy Pelosi say they "inherited" this budget mess. Let's assume the recession that Mr. Obama inherited—Mrs. Pelosi was already in power—was responsible for causing $1 trillion or so in deficit spending. That still doesn't explain why the annual deficit of roughly $1.4 trillion will be nearly as high in fiscal 2010, after a year of economic growth, as it was in 2009. Or why CBO says the deficit will still be nearly $1.1 trillion in 2011 even if all of the Bush-era tax cuts are repealed.

The deficit is barely declining because of the lackluster economic recovery, which continues to yield too little revenue, and especially because of the record levels of spending passed by the Democratic Congress and eagerly signed by Mr. Obama.

To pick one illustration: The annual average increase in domestic, nondefense discretionary spending—on the likes of education, food stamps, and things other than Medicaid, Medicare and Social Security—was 6.4% from 1999-2008. Yet in 2009, nondefense discretionary spending rose by 11.2%, and in 2010 it will grow by another 14.7%. Much of this increase has been added directly to the CBO baseline, compounding future spending levels as far as the green-eyeshade can see.

After all of this, CBO nonetheless predicts that nondefense discretionary spending will grow by only 2.3% in 2011. If you believe that, you probably believe that someone other than Mrs. Pelosi will be Speaker of the House.
]]> http://www.klineforcongress.com/news/492/ The Hill

It was "dumb" for President Obama and his aides to promise that unemployment would not surpass 8 percent if the stimulus act passed, a top House Democrat said Tuesday.

Rep. Barney Frank (D-Mass.), the chairman of the House Financial Services Committee, called into question the wisdom of projections issued by the Obama administration during the congressional fight over the stimulus bill that argued it would prevent higher levels of joblessness.

"President Obama, whom I greatly admire ... when the economic recovery bill — we're supposed to call it the 'recovery bill,' not the 'stimulus' bill; that's what the focus groups tell us — he predicted or his aides predicted at the time that if it passed, unemployment would get under 8 percent," Frank said Tuesday evening during an appearance on the Fox Business Network. "That was a dumb thing to do."

The administration famously released a chart during the fight over its signature $787 billion American Recovery and Reinvestment Act (ARRA) showing that, if that package were enacted, unemployment would not exceed 8 percent. The projection, authored by Council of Economic Advisers (CEA) Chairwoman Christina Romer, argued that without the stimulus, unemployment would reach a high of 9 percent in the third quarter of 2010.

The current unemployment rate, according to the Bureau of Labor Statistics, stands at 9.6 percent.

Republicans have hammered away at Obama and congressional Democrats who supported the stimulus act, calling it a failure for not spurring the kind of job growth that the president had promised.

Frank said the public projection was mistaken for two reasons: because it would have been impossible to precisely predict the impact of the stimulus, and because the case should have focused on how things for consumers would have been better for consumers than had the stimulus not passed. As things stand, Frank said, Democrats and Obama were saddled with a "false prediction."

The debate over the stimulus and Obama's handling of the economy has been a cornerstone of the GOP's election-year argument. They argue the stimulus added no jobs to the economy, while only worsening the deficit.

To that end, "Where are the jobs?" has become a constant refrain of House Minority Leader John Boehner (R-Ohio) and other GOP lawmakers and candidates this cycle.
]]> http://www.klineforcongress.com/news/491/ The Washington Times

The Obama administration says the stimulus worked by creating millions of jobs and staving off a depression - doing so with great transparency. It should be a crowning achievement as Democrats prepare for November's congressional elections.

Yet voters either reject or ignore those claims, with substantial majorities telling pollsters they don't think the $862 billion package, known officially as the American Recovery and Reinvestment Act, signed into law 18 months ago this week, has helped much.

Inside the Beltway, the stimulus, with billions of dollars still unspent, has become a pot of loose money that both parties argue over tapping. On the campaign trail, it trips up Democrats, who have to defend record deficits to an angry electorate, and some Republicans, who have been caught taking credit for projects funded by the stimulus bill they opposed.

What is clear is that Congress and the public have lost their appetite for another big round of deficit spending.

"The data on additional stimulus are mixed at best. The electorate's view that the initial round did not produce the advertised results or even noticeable improvement in the labor market will dominate this fall's contests," said William A. Galston, a former Clinton policy adviser who is now a senior fellow at the Brookings Institution.

In March 2009, the Pew Research Center found general support for the stimulus, with 56 percent saying it was a "good idea" and 35 percent responding that it was a "bad idea." By this summer, though, only 35 percent said it has helped keep unemployment from worsening, while 57 percent said it hasn't.

Republican candidates have pounced on the public sentiment, arguing that the nation's high unemployment rate and slow job growth show that the stimulus package simply has not worked.

Speaking to reporters on Tuesday, Carly Fiorina, the Republican candidate trying to unseat Sen. Barbara Boxer, California Democrat, said Mrs. Boxer should be wary of showing up at ribbon-cutting ceremonies for stimulus-funded projects.

"It's obvious they're not working," Ms. Fiorina said after meeting with a taxpayer organization in Sacramento. "When the stimulus bill was passed, our unemployment rate was 10.2 percent. Our unemployment rate is now 12.3 percent, and every study that has been done on these public works projects indicates that the projects were not shovel-ready as was promised [and] indicate that there is a huge amount of waste and abuse."

Similar lines are playing out across the country, including in Pennsylvania, where Rep. Joe Sestak, a Democrat, and Patrick J. Toomey, a Republican, are running for Arlen Specter's Senate seat. Mr. Specter's vote for the stimulus forced him to switch parties and become a Democrat, and he later lost in the primary to Mr. Sestak.

"We were told that this monster spending bill would create jobs and keep unemployment below 8 percent," Mr. Toomey said in Republicans' weekly radio address Saturday. "Well, since then we've lost 3 million more jobs and the unemployment rate hit 10 percent and in some states it is still well above that."

Like many of his fellow Republicans campaigning across the country, Mr. Toomey, a former congressman who served three terms, noted that the "so-called stimulus bill" included "$2 million to study exotic ants" and "$30 million for a spring training baseball complex."

In Nevada, Sharron Angle, the Republican seeking to topple Senate Majority Leader Harry Reid, has said the package included $72,000 for a study on how monkeys are affected by cocaine.

The Democratic Congressional Campaign Committee (DCCC) and the Democratic Senatorial Campaign Committee (DSCC) have been keeping track of lawmakers who opposed the bill and then took credit for projects it funded.

The DSCC list includes Rep. Michael N. Castle, a Republican running for Delaware's open Senate seat, getting "caught red-handed" earlier this year taking credit for a Department of Housing and Urban Development project funded through stimulus funds. The DCCC list, dubbed the "Hypocrisy Hall of Fame," says 129 House Republicans have taken credit for the economic bills they opposed.

"House Republicans need to immediately let their constituents know the truth - will they come out in favor of canceling funding in their congressional districts from President Obama's economic recovery policies or will they continue taking credit for jobs and local projects they fought against?" said the DCCC's Ryan Rudominer.

Democrats also say Republicans are gambling that their rhetoric will not haunt them in the fall elections.

"If Republicans want to slam good jobs being created in their districts for the sake of partisan politics, when jobs is the number one issue for voters, to talk about spending, which they can't speak to credibly given how they exploded the debt when they were in charge, that's fine with us," said Democratic National Committee spokesman Hari Sevugan. "They'll be seen, rightly, as hypocrites and lacking credibility."

Mr. Obama continues to campaign on the Recovery Act. On Tuesday, he praised the tax cuts included in the measure.

The administration says the stimulus has shattered all expectations by being free from major fraud and abuse - though Sen. Tom Coburn, Oklahoma Republican, has released several reports that argue money is being wasted.

When the bill first passed last year the Congressional Budget Office pegged the 10-year cost at $787 billion. But in January, CBO recalculated the cost and said the 10-year tab comes to $862 billion, in part because the unemployment rate was so high that the government was paying out more in benefits than had been predicted a year earlier.

Two top officials who helped Mr. Obama craft and sell the stimulus have either left or announced their departure from the White House. Peter R. Orszag, Mr. Obama's budget director, left last month, and Christina Romer, who runs the Council of Economic Advisers, is leaving soon.

Ms. Romer in particular has been bruised by the stimulus. In January 2009, while urging passage of the measure, she released a report arguing that it would keep unemployment from rising above 8 percent.

Instead, the rate climbed past 10 percent and remains at 9.5 percent, helping drown out the administration's claims that stimulus spending has created or saved up to 3.6 million jobs.

Stimulus opponents said the issue could last well into next year.

"Because the stimulus has failed, one of the first things a Republican-controlled House or Senate could do is a rescissions package to rescind a significant amount of the money that remains unspent in the agencies," said Rob Collins, president of the American Action Network, a conservative advocacy group.

This weekend, Rep. Kevin McCarthy, California Republican and the House chief deputy minority whip, said rolling back the stimulus could save $260 billion.

Republicans have made repeated efforts to try to cut unspent money and use it to pay for more urgent priorities such as unemployment funding.

Although each of the GOP's efforts was defeated, Democrats changed course just before the congressional summer recess and cut more than $2 billion from unspent stimulus money to extend aid to states for teacher salaries and Medicaid health care costs.

The White House, though, said that would be the only exception.

"Most of the money is either gone or allocated, and there aren't going to be a lot of opportunities for something like that in the future," White House deputy press secretary Bill Burton told reporters.
]]> http://www.klineforcongress.com/news/490/ Associated Press

The Senate's top Democrat on Monday came out against plans to build an Islamic mosque and cultural center near the site of the Sept. 11 terrorist attacks, breaking with President Obama on what has mushroomed into a hot-button election-year issue.

Locked in a tight race, Nevada Sen. Harry Reid became the highest profile Democrat to break with Mr. Obama, who last week backed the right for the developers to develop the complex near Manhattan's ground zero. Since his comments Friday, the Democratic president and his aides have worked to explain the statement, which drew criticism from Republicans and Democrats alike.

"The First Amendment protects freedom of religion," said Jim Manley, a Reid spokesman. "Senator Reid respects that, but thinks that the mosque should be built someplace else."

Critics have said the location of the mosque is insensitive because the terrorists who struck were Islamic extremists. The plans call for a $100 million Islamic center two blocks from where almost 3,000 people perished when hijacked jetliners slammed into the World Trade Center towers on Sept. 11, 2001.

Mr. Reid is in a close campaign for re-election. A spokesman for Republican Sharron Angle, Mr. Reid's opponent, said Muslims have the right to worship anywhere, but Mr. Obama's support for construction of the mosque at ground zero "ignored the wishes of the American people, this time at the expense of victims of 9/11 and their families."

Angle spokesman Jarrod Agen argued that the families consider the mosque at the World Trade Center site to be an "affront to the memories of their loved ones." He called on Mr. Reid to respond to Mr. Obama's comments.

Groups representing families of victims of the terrorist strike have been divided over the project. New York Mayor Michael R. Bloomberg is a strong backer of the mosque, but polls show that nearly two-thirds of Americans question the propriety of the project on the site.

On Friday, Mr. Obama used an annual dinner at the White House celebrating the Islamic holy month of Ramadan to weigh in on a controversy that grabbed New York and the nation.

"As a citizen, and as president, I believe that Muslims have the same right to practice their religion as everyone else in this country," Mr. Obama said.

"That includes the right to build a place of worship and a community center on private property in Lower Manhattan, in accordance with local laws and ordinances," he said.

While insisting that the place where the twin towers once stood was indeed "hallowed ground," Mr. Obama said that the proper way to honor it was to apply American values at the nearby property.

In days since, White House aides have worked to dampen the political power behind the president's words.

"I can't speak to the politics of what the Republicans are doing," deputy press secretary Bill Burton told reporters traveling with Mr. Obama to Wisconsin on Monday.

But top Republicans, including a number who could challenge Mr. Obama in 2012, have hammered Mr. Obama for backing the right of the Muslims to build the Manhattan mosque, and for his subsequent statement that he was not passing judgment on the wisdom of the project.

"We all know that they have the right to do it, but should they?" former Alaska Republican Gov. Sarah Palin asked on Twitter. "This is not above your pay grade."

More bluntly, former House Speaker Newt Gingrich accused Mr. Obama of "pandering to radical Islam," adding, "Nazis don't have the right to put up a sign next to the Holocaust Museum in Washington. We would never accept the Japanese putting up a site next to Pearl Harbor. There's no reason for us to accept a mosque next to the World Trade Center."
]]> http://www.klineforcongress.com/news/489/ Wall Street Journal

RICHMOND, Va.— Frustrated voters, fixing on the $1.5 trillion federal deficit as a symbol of Washington's paralysis, appear increasingly willing to take drastic steps to address the red ink.

Leonard Anderson, 56 years old, a Richmond, Va., drug-maker engineer and a Republican, said he would be willing to accept a national sales tax to raise revenues. Kimberly Moore, 46, a Richmond Democrat and bank information-technology analyst, said everyone will have to accept budget cuts. And at 67, Paul DesJardins, a Henrico, Va., Republican, said he would accept higher Medicare co-payments and deductibles.

"As Americans, we're all going to have to cut back and take less," said Lois Profitt, a 58-year-old small-business owner and political independent from Chesterfield, Va.

With the November midterm elections looming, voters appear ahead of Washington in grappling with the tough choices to come, according to national polling and a focus group commissioned by The Wall Street Journal in the bellwether city of Richmond.

That is a source of political peril for both Democratic and Republican parties, which are trying to talk about the deficit without addressing the specifics of how they would tackle it. Leaders on both sides of the aisle worry about being attacked if they produce a package of painful spending cuts or tax increases. And to reinforce lawmakers' anxiety, voters remain divided about what ought to be done.

"It's a brutal predicament for politicians because the rhetoric of deficit cutting is enormously popular, but the details are incredibly unpopular," said Matt Bennett, a vice president at the Democratic group Third Way, which has polled extensively on the issue.

For meaningful deficit reduction to happen, Republicans and Democrats likely would have to work together to slash spending or raise taxes. Instead, Republicans are attacking Democrats for planning to allow some Bush-era tax cuts to lapse. Democrats are accusing Republicans of plotting the privatization of Social Security. And neither party has convinced Americans it is serious about the problem.

Republicans are seen as the party most trusted to reduce the deficit by 32%, compared to 24% for Democrats, according to a new Wall Street Journal/NBC News poll. But a plurality of 40% see no difference between the two parties on the issue.

The White House professes to be relatively sanguine about the short-term deficits, half of which stem from collapsing tax receipts and rising spending on programs associated with the recession. The president has largely kicked deficit reduction to a bipartisan commission that will report back in December.

"If Barack Obama wasn't serious about this, he wouldn't have set it up," White House press secretary Robert Gibbs said of the commission. "We're not going to eliminate three gimmicks and a loophole and call it a day."

But the president may run into opposition in his own party. A group of liberal economists argue that deficit cutting now would kill off the struggling recovery and send the deficit soaring higher. And complicating matters for Democrats, some liberal interest groups argue that Social Security is sound and in no need of serious change.

Voters seem more impatient and say they want their political leaders to take a stand. "I wish the politicians would be hard-a—, and be like, 'You know what? It's going to be horrible for the next few years, but you've got to shut up," ' said Jennifer Ciminelli, a 35-year-old political independent in Richmond, Va., and one of 12 Virginians who participated in the Journal's focus group. It included four independents, four Republicans and four Democrats.

Virginia is a new swing state that voted for President Barack Obama in 2008 then elected a Republican governor, Bob McDonnell, the next year. Most of the focus group hailed from the congressional district of House Minority Whip Eric Cantor, a rising force in Republican politics who has made fiscal rectitude as well as tax cutting a mantra. Some came from the district of Rep. Bobby Scott, a liberal Democrat. Just to the west and south is the district of freshman Democratic Rep. Tom Perriello, one of the most embattled incumbents in the country.

Even among such diverse voices, the nation's fiscal problems were a central concern. At $1.47 trillion, the federal deficit this fiscal year exceeds all defense and nondefense spending at Congress's discretion by $110 million. In other words, lawmakers could eliminate the entire military, all federal education, agricultural, housing programs, federal prisons, the Central Intelligence Agency, Federal Bureau of Investigations, Coast Guard and border patrol, and the nation would still be in the red.

Half of the current deficit stems from falling tax revenues and rising spending on programs associated with the recession, such as unemployment insurance and food stamps, along with temporary measures such as the stimulus and the Wall Street bailout. The administration projects the deficit—now at 10% of the economy—will fall to 3.4% of the gross domestic product by 2014 as these programs end and the economy recovers.

But then long-term demographic problems kick in, which in some ways dwarf the short-term deficit spike. With the baby boom generation retiring, the deficit will begin rising again because of rising Social Security, Medicare and Medicaid spending. The accumulated debt held by the public will exceed 77% of the economy within a decade, not including the debt the government owes itself for raiding Social Security taxes for decades.

"The country's going to deteriorate," said Mary Beth Davis, a 27-year-old professional photographer and Democratic-leaning independent from Midlothian, Va. "It already is."
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Washington is making a show of tackling the problem. Republicans have started resisting politically inviting bills—such as a recent bill to prevent layoffs of teachers and police officers—in an effort to regain the mantle of fiscal rectitude. And a group of House Democrats last month broke with their leaders to propose unpopular spending cuts that they say are necessary to win the public's trust on the issue, such as cutting agriculture subsidies.

"The deficit plays into people's anxieties," said Rep. Peter Welch (D., Vt.), a founding member of the House's new Spending Cuts and Deficit Reduction Working Group. "They believe all this government spending is making their positions more precarious without helping them personally."

But the leadership of both parties have steadfastly resisted offering solutions. Mr. Cantor, who would likely become House majority leader if his party wins back control, pointed to the experience of his colleague, Rep. Paul Ryan (R., Wis.). Mr. Ryan's detailed "road map" to a balanced budget has been attacked by Democrats who have tried to tie his proposals, such as a voucher system for Medicare, to the GOP leadership.

Mr. Cantor acknowledged a hunger for straight talk on the deficit. But he added, "We have to embark on an incremental approach to rebuild confidence, so we can live up to what people want."

Mr. Ryan has drawn a different conclusion. On Tuesday, he said, he was putting air in his wife's tire in Janesville, Wis., when a constituent asked him about his deficit plan. The voter wasn't taken aback as Mr. Ryan spelled out big cuts in domestic spending. "These things are thought of as such third rails," said Mr. Ryan. "They become a political weapon to be used against you. But people are ready for this stuff. They're ready to hear the truth."

The focus group, however, also showed evidence of the perils most in Washington seek to avoid. Craig Christmas, 38, a Democrat and public-school guidance counselor, said he didn't want to cut education or see his taxes rise. Randy Rowekamp, 61, a retired information-services worker from Midlothian, Va., who describes himself as an independent who leans Republican, railed against Washington profligacy and was reluctant to embrace specific cuts.

"You hurt people. There are people living on Social Security. If you start taking that away or lowering it, you're impacting a person's life," he cautioned. Ms. Davis, the photographer, adamantly opposed raising the eligibility age for Medicare.

"This is a mirror of what Americans think," exclaimed Ms. Moore, the bank analyst, sounding exasperated. "You have an electorate that is impossibly fickle and difficult to please but who cannot articulate exactly what needs to be done."

Such frustrations emerge nationally in the most recent Wall Street Journal/NBC News poll. In it, 74% said it would be acceptable to change Medicare to provide larger subsidies for low-income seniors, while cutting subsidies for the more affluent. Sixty-four percent would accept capping Medicare and Medicaid payments to health-care providers, while 58% backed subjecting incomes over $107,000 to Social Security taxes.

But 57% found cuts to national security and defense weapons systems unacceptable. Slowly raising the retirement age to 70 to reduce Social Security costs was acceptable to only 36% of those polled. Raising the eligibility age for Medicare was even less popular.

"Folks want to cut the deficit, but they say, 'Don't touch my Social Security. Don't touch my Medicare. Don't cut defense spending, and don't raise my taxes,"' said Rep. Gary C. Peters (D, Mich.), another member of the House budget-cutting task force. "This is going to take courage."

Still, veterans of the budget wars see one reason for optimism in the subtle shifts in public opinion. Unlike politicians, most Americans don't seem to place partisan blame on one party or another, so neither party can claim the high ground. "There's no end in sight, and it's both parties," said Dani Saunders, 31, a conservative independent who keeps the books for her husband's Richmond tattoo parlor.
]]> http://www.klineforcongress.com/news/488/ New York Times

HEREFORD, Ariz. — No migrant would have dared cross from Mexico into this particular stretch of Arizona on Sunday.

Hundreds of Tea Party activists converged on the border fence here in what is typically a desolate area popular with traffickers to rally for conservative political candidates and to denounce what they called lax federal enforcement of immigration laws. The rally brought a significant law enforcement presence as well as numerous private patrols by advocates of a more secure border.

But rallies, even daylong ones, are no way to seal the border. The Obama administration insists that its statistics show that significant financing increases in the federal Border Patrol have helped bring down crime at the border and make the smuggling of immigrants and drugs harder than ever.

But the activists who gathered Sunday had a decidedly different take. The border, in their view, is still far too easy to get across and has become so dangerous that some of them brought their sidearms for protection. Organizers urged participants to leave rifles in their cars.

“Instead of finding bugs in our beds, we’re finding home invaders,” said Tony Venuti, a Tucson radio host who attached a huge sign to the fence that told immigrants to head to Los Angeles, where they will be more welcome, and even offered directions for getting there.

Addressing the crowd, Sheriff Joe Arpaio, who conducts controversial sweeps in immigrant neighborhoods in Phoenix and other parts of Maricopa County, said the problem could be solved if the Border Patrol was given permission to track down migrants on the Mexican side before they crossed.

“If I had all the national TV here, I’d probably climb the fence to show you how easy it is,” Sheriff Arpaio said from the rally’s stage, a flag with the words “Don’t Tread on Me” flapping behind him.

Also among the speakers was Russell Pearce, the state senator who sponsored Arizona’s controversial immigration law known as 1070, part of which was blocked by a federal judge last month.

The event was monitored on the Mexican side. A rally participant spotted a group of people in the rugged terrain in Mexico and alerted Border Patrol officers, who identified them with binoculars as members of Grupo Beta, a Mexican agency that aids migrants in distress.

Sheriff Larry A. Dever of Cochise County, where the event was held, said the area was a hotspot for traffickers.

“We’re right at the point of the spear where human and dope smuggling takes place,” Sheriff Dever said. “These mountains are a beehive of activity.”

He said he had no doubt that migrants and drug smugglers were using lookouts to keep track of the rally.

“They know this rally is going on,” he said. “They are not fools. They’re experts. They probably know more about this than we do standing here.”

J. D. Hayworth, who is challenging Senator John McCain in the Republican primary to be held later this month, used the event to question Mr. McCain’s commitment to fighting illegal immigration. Trying to outflank Mr. Hayworth, Mr. McCain has made several stops in the border region recently.

The Obama administration has similarly started a defense of its border policies in recent days.

“Is there more work to be done? Absolutely. Is the problem a significant one, a challenging one for the nation? Absolutely,” John T. Morton, director of federal Immigration and Customs Enforcement, said in Phoenix last week, vowing that his agency was committed to securing the border.

The rally was held on private land, not far from where a popular Arizona rancher died in late March in a killing that helped fuel the immigration debate in the state.

Cindy Kolb, a border activist who lives nearby, yelled out through the thick metal slates in the border fence, which had been decorated on the American side with tiny flags, “Hey, don’t come over here anymore.”

She added: “We don’t like illegals hiding under bushes when our kids wait for the school bus. This border needs to be secure.”
]]> http://www.klineforcongress.com/news/487/ Wall Street Journal

The Obama administration has paid out less than a third of the nearly $230 billion allocated to big infrastructure projects in the economic-stimulus program. Now Republicans are zeroing in on the unspent stimulus money in fresh attacks on the administration's economic policy.

"More people believe that Elvis Presley is alive than [that] the stimulus created jobs," U.S. Rep. Kevin McCarthy (R., Calif.), a member of the House Republican leadership, said Sunday on CNN's State of the Union. "And that's because what have they spent the money on?"

They are suggesting that unspent stimulus money should be used to cut the deficit or pay for other initiatives, such as extending the Bush tax cuts. "I would roll back the stimulus," Mr. McCarthy said. "That's $260 billion."

House Republican leader John Boehner (R., Ohio) has called in recent days for a halt to stimulus spending and recently sparred with the White House over whether stimulus projects have boosted hiring in his district.

A train makes its way along a newly laid track in Brunswick, Maine on Aug. 2, 2010, during a ceremony. The rail line that will connect Brunswick to Portland, Maine, is scheduled to be completed by 2012, said Gov. John Baldacci.
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The administration has said that stimulus spending was always intended to roll out in stages, over two years, and that the pace of outlays for infrastructure would be slower than for parts of the package that provided tax cuts and subsidies for programs such as Medicaid.

White House economist Jared Bernstein, in an Aug. 11 blog post, said that when Republicans call for a halt to stimulus spending, "they're essentially talking about taking away middle-class tax cuts, leaving unemployed workers unexpectedly high and dry without an unemployment check, halting road and bridge projects and leaving them unfinished, leaving contractors unpaid for the work they've already done and more."

Recent opinion polls suggest the White House has struggled to communicate its message, particularly after its emphasis on "shovel-ready" projects during the debate over the plan's passage in early 2009.

Criticism of the pace of the stimulus appears to be resonating with voters. In a Wall Street Journal/NBC News poll in May, 18% of respondents said the plan was already helping to improve the economy, and 20% said they thought it would help in the future. Confidence appears to have slipped from July 2009, when 48% of respondents said the plan was helping the economy already or would help it in the future.

President Barack Obama's stimulus package had three main elements. The largest chunk was allocated to tax breaks and other help for individuals and businesses. Most of that, with an estimated price tag of $336 billion, has been paid out.

A second portion, projected to cost about $296 billion, was allocated to pay for unemployment benefits and food stamps and to plug holes in states' school and Medicaid budgets. Most of this money has also been spent, prompting congressional efforts to extend the funding for state budgets. That legislation was signed into law Tuesday, providing another $10 billion for schools and $16 billion for Medicaid, offset by cuts to food stamps.

The third piece of the package offered $230 billion to fund an array of projects ranging from road repaving to modernizing the electricity grid to launching new high-speed rail services. Administration officials said when pushing for the program that the money would target projects that could create jobs quickly. So far, $182 billion of the infrastructure money has been awarded, though the government has paid out only $66 billion of the total.

The biggest projects have been the slowest to start. None of the $17.5 billion for incentive payments for doctors and hospitals to start using electronic health records has been spent yet, because rules for payment were finalized only in July. A few recipients of $7.2 billion in grants allocated to the expansion of broadband Internet services have started laying cables, but the rest are still busy with pre-construction work, such as environmental assessments, local approvals to attach fiber to utility poles, permits for rights of way and hiring subcontractors.

Ground breaking for the first major high-speed rail project took place this month, when steel rails were delivered to Brunswick, Maine, for upgrades to a 30-mile stretch of track running to Portland. The ceremony came seven months after the administration announced the recipients of $8 billion in grants for the projects. The administration is still finalizing the grant agreements, and most of the money hasn't formally been made available yet.

New ties are put into place along the rail track in Brunswick, Maine.

Efforts to award the remaining $48 billion in infrastructure funds have been hampered in some cases because government agencies have had to respond to protests from vendors who didn't win contracts in the bidding process. In other cases, federal agencies have discovered that bids for certain projects were coming in lower than expected.

Mr. Bernstein said the pace of stimulus spending was appropriate and that even the major investments were moving relatively rapidly. "I think anyone familiar with this kind of economic evolution would view these projects as coming online especially quickly," he said.

The apparent lag between when stimulus funds are awarded and when they are spent doesn't mean people aren't benefiting, the White House says. Activity on projects can begin as soon as funds are awarded, because companies start hiring and carrying out work ahead of getting paid.

The state of the stimulus became the focus of congressional sparring this month as Democrats and Republicans debated whether to extend the plan's aid provisions. Democrats argued that the additional help for cash-strapped states was essential to preserve the jobs of teachers and other public-sector employees. Republicans said the need for the extension was proof that the plan wasn't working.

William Eggers, global director for Deloitte's public-sector industry-research program, said that rushing implementation, especially on large investments, would make it more likely that the projects would fail or that funds could be misused. Mr. Eggers has studied federal projects going back to the 1960s and said the stimulus was progressing about as quickly as such a large initiative could go.

Republicans, meanwhile, are using the slow progress as a tool in the broader debate with Democrats over the widening federal deficit. Rep. Tom Price (R., Ga.) has introduced a bill in the House to cancel all infrastructure spending which hasn't been awarded, with the funds going toward paying down the deficit.

The bill has little chance of success, however. "That die is cast," said Mr. Price. "The die that will need to be cast to reverse it is the votes that will be cast in November," when midterm elections are held.
]]> http://www.klineforcongress.com/news/486/ Wall Street Journal Editorial

To treat Washington's spending addiction, the November elections are the taxpayer's best chance to stage an intervention. But until then, President Obama and the Democratic Congress are determined to keep pushing strung-out state governments to take one more fix.

Witness yesterday's 247-161 largely party-line House vote to approve a Senate bill shovelling another $26.1 billion out to state education and Medicaid programs. The White House has promoted the bill as emergency assistance for strained state budgets. But this unique brand of therapy drives states to spend more, not less. The "assistance" is so expensive that several governors were begging for relief even before Mr. Obama signed it into law.

Standing with teachers yesterday in the White House Rose Garden, Mr. Obama said, "We can't stand by and do nothing while pink slips are given to the men and women who educate our children or keep our communities safe." Maintaining the salaries and generous benefit plans for members of teachers unions is indeed a top Democratic priority. That's why $10 billion of the bill's funding is allocated to education, and the money comes with strings that will multiply the benefits for this core Obama constituency.

Specifically, the bill stipulates that federal funds must supplement, not replace, state spending on education. Also, in each state, next year's spending on elementary and secondary education as a percentage of total state revenues must be equal to or greater than the previous year's level.

Governor Haley Barbour of Mississippi did the math and figured out his state will be worse off. Mr. Barbour says the bill will force his state "to rewrite its current year [fiscal 2011] budget. Preliminary estimates of the Mississippi Department of Finance and Administration show that we will now have to spend between $50-100 million of state funds—funds that must be taken away from public safety, human services, mental health and other state priorities and given to education—in order for an additional $98 million of federal funds to be granted to education. There is no justification for the federal government hijacking state budgets, but that is exactly what Congress has done."

For Texas, and only Texas, this funding rule will be in place through 2013. This is a form of punishment because the Beltway crowd believes the Lone Star State didn't spend enough of its 2009 stimulus money. Apparently Texas politicians have been clinging to the quaint notion that the government should try to live within its means.

Texans also seem to have an old-fashioned appreciation for the rule of law. On Friday, 22 GOP Members of the state's Congressional delegation sent a letter to House Speaker Nancy Pelosi. "This provision would have Texas violate her own State Constitution," they wrote. "The Texas Legislature has sole authority to determine State appropriations. Moreover, one Legislature cannot bind a future Legislature. Requiring the State to assure that a future Texas Legislature would commit to spend funds in accordance with these provisions would violate the Texas Constitution."

Texas Governor Rick Perry is also opposed to this new "assistance" from the federal government. He understands that one-time payments that force permanently higher state obligations are a windfall for government employees. But if given the choice, taxpayers would just say no.

That's because taxpayers are figuring out that these state bailouts are only making unions more reluctant to share their sacrifice. While Mr. Obama quotes the union figure of 160,000 potential lost teacher jobs, those don't have to come out of the classroom. According to research by Eric Hanushek of Stanford University, student enrollment grew by 22% from 1990 to 2007, but teacher employment grew by 41%. Since 2000, enrollment has grown by 5% but teacher employment by 10%.

The unions themselves could have prevented some layoffs had they been willing to adjust their rich benefits. In Milwaukee, for example, nearly all of the 500 teacher layoffs announced earlier this year could have been avoided if the unions had agreed to change health plans that cost $23,000 per teacher per year for family coverage. They could have accepted a still-rich $17,000 plan. The unions chose the layoffs, betting (correctly) that Democrats in Washington would come to their rescue.

Keep in mind that this teacher bailout also amounts to a huge contribution by Democrats to their own election campaigns. The National Right to Work Committee estimates that two of every three teachers belong to unions. The average union dues payment varies, but a reasonable estimate is that between 1% and 1.5% of teacher salaries goes to dues. The National Education Association and other unions will thus get as much as $100 million in additional dues from this bill, much of which will flow immediately to endangered Democratic candidates in competitive House and Senate races this year.

So in the name of still another "stimulus," Democrats are rewarding their own political funders, putting the most fiscally responsible states into even greater distress, and postponing the day of reckoning for spendthrift states. Oh, and Mr. Obama rushed to sign the bill Tuesday, violating his campaign pledge to give the public five days to read legislation online. As we say, the only way for voters to stop such fiscal abuse is to run this crowd out of town.
]]> http://www.klineforcongress.com/news/485/ The Hill

A labor group took to radio on Wednesday to thank key Democratic incumbents for their vote yesterday to approve a bill aiding states.

17 House Democrats, many from the midwest, received support from a new "major" radio ad campaign by the American Federation of State, County and Municipal Employees (AFSCME), a big backer of the $26 billion state aid bill passed Tuesday and signed into law by President Obama.

The radio ad campaign -- described as a "six-figure" ad buy -- thanks the lawmakers for returning to Washington for a special session  to approve the state aid package, which helped fund state education and healthcare deficits.

"The national recession is endangering the jobs of thousands of teachers, police and firefighters," the ad says. "Without help from Washington, there would be more layoffs in the private sector, too."

This ad is part of a $2.5 million campaign AFSCME plans during the August recess in order to bolster members who support the union's agenda, months before midterm elections in which Democrats are expected to fare poorly.

The 17 Democrats enjoying the ads on their behalf are: Reps. Betsy Markey (D-Colo.), Suzanne Kosmas (D-Fla.), Leonard Boswell (D-Iowa), Baron Hill (D-Ind.), Mark Schauer (D-Mich.), Paul Hodes (D-N.H.), Dina Titus (D-Nev.), Steve Driehaus (D-Ohio), Mary Jo Kilroy (D-Ohio), John Boccieri (D-Ohio), Kathy Dahlkemper (D-Pa.), Tom Periello (D-Va.), Bill Owens (D-N.Y.), Kirk Heinrich (D-N.M.), Allen Boyd (D-Fla.), and Frank Kratovil (D-Md.).
]]> http://www.klineforcongress.com/news/484/ Roll Call Staff
 
Top union brass are shuttling back to Washington, D.C., today to make last-minute pleas with undecided House Members, who interrupted their recess to vote on a $26.1 billion state aid package, a priority for organized labor for nearly a year.

American Federation of Teachers President Randi Weingarten on Monday was busy finalizing her Beltway comeback from a vacation spot on eastern Long Island. National Education Association lobbyist Kim Anderson was plotting her return from Martha’s Vineyard.

“This is a big deal,” said Weingarten, who, like Anderson, has been part of a massive lobbying effort to warn Members about possible revenue shortfalls for states and local municipalities.

For the past four months, Weingarten has visited two cities per week to rally support for the legislation. Although the proposal had been dormant for months, she said it gained traction in the spring, when local officials across the country began new rounds of teacher layoffs and furloughs.
“We have a rhythm about us. By April, May, June, you start planning for the next school year,” she said. “That’s when it started to hit Members: This is real, and somebody has to step in.”

Earlier this summer, the National Governors Association also told Senate leaders that even though states have cut spending by 11 percent during the past two years, their governments still face a $127 billion shortfall until 2012. The group sounded an alarm on an extension to Medicare funding, which is included in the legislation Members will vote on today.

The vote also will cap off 12 months of intense advocacy work by the NEA, which spent $4.1 million lobbying Members on the emergency funding bill. Anderson said her group purchased two rounds of television advertisements in the Washington area and radio spots in targeted House districts in recent months. But the bulk of the money, the union lobbyist said, was spent on grass-roots activities, such as fly-ins to meet with lawmakers who she said were overwhelmed with local news coverage of possible budget cuts.

“We just kept hammering away,” Anderson said. “The press has declared this bill dead at least 15 times.”

NEA members also sent 300,000 e-mails to Congressional offices and made 100,000 telephone calls in support of the funding measure.
 
The American Federation of State, County and Municipal Employees spent more than $1 million on television and newspaper advertising to push for passage. And its members logged more than 60,000 telephone calls, e-mails and letters to Congressional offices.

“This bill is going to save the jobs of hundreds of thousands of American workers in the private and public sectors, including teachers, police and firefighters — and it won’t add a penny to the deficit,” AFSCME Secretary-Treasurer Lee Saunders said in a statement. “While Democrats protected American jobs, Republicans voted to hand pink slips to nearly one million Americans and tried to wreck the economy for political gain.”

Such political rhetoric will not end with today’s vote.

Teachers unions are promising retribution for lawmakers who do not authorize the spending package — a threat that is likely to target Republicans as well as conservative Democrats, who face tough midterm re-election contests but are worried about spending more taxpayer dollars.

As of Monday, only a handful of GOP Members were considered possible “aye” votes, including Reps. Timothy Johnson (Ill.), Mark Kirk (Ill.) and Mike Castle (Del.). Kirk and Castle are both running for the Senate in 2010.

“This is about whose side you’re on,” Weingarten said. “Are you on the side of kids or not?”

Should Democrats muster enough votes to pass the funding bill, which the Senate approved last week, not everyone will walk away happy.

Poverty and religious groups are concerned that the legislation is being paid for with cuts to the federal food stamp program, but they expressed optimism the offsets will be restored before the money runs out in 2013.

“We regret the source of the funding for the extension and that it’s coming from food stamps,” Families USA health policy analyst Jennifer Sullivan said. “We’re hopeful that the House will otherwise look for alternatives to restore the cuts down the line.”

Candy Hill, a government affairs executive with Catholic Charities, also was critical of how Members paid for the state-funding legislation. Still, she wants the bill to pass. “We don’t want the offset to be on the backs of people who are already suffering,” Hill said.

The Catholic Archdiocese of Washington is furious that Democratic leaders are not including District education assistance in today’s package. On July 22, Archbishop Donald Wuerl asked Congressional authorizers to renew the $13.2 million D.C. Opportunity Scholarship Program, a voucher plan that pays for students to attend parochial elementary and high schools.

Jennifer Daniels, the director of government relations for D.C. Catholic schools, called today’s vote the result of “a political game” designed to appease union members.

“It’s destroying our program, and they’re handing out billions of dollars for unneeded reasons,” she said. “It’s a stab in the back to see this kind of lunacy.”

]]> http://www.klineforcongress.com/news/483/ The Hill

Embattled Rep. Charles Rangel (D-N.Y.) faces a new ethics complaint Monday from a conservative watchdog group that questions the lawmaker’s support for a nonprofit group.

The National Legal and Policy Center (NLPC) filed a new complaint Monday with the ethics committee that questions a $2.6 million grant the Upper Manhattan Empowerment Zone provided to Alianza Dominicana, a social-services agency. Rangel sits on the board of the empowerment zone.

NLPC is questioning whether the grant should have been provided, given what it says are outstanding liens against Alianza Dominicana.

“There are a number of real questions about whether the empowerment zone, under its own rules, could give money to this group,” said NLPC Chairman Ken Boehm. “One of its rules says grants can’t go to groups that have outstanding liens.”

In its complaint, NLPC further questions Rangel’s support for Alianza and the political donations that the nonprofit’s executive and chief supporters dole out to him.

"The basis for this request is a series of facts that have recently been brought to light regarding questionable taxpayer funding to Alianza Dominicana supported by Rep. Rangel despite a documented failure of the nonprofit to pay its taxes, meet its payroll and manage itself responsibly," Boehm wrote.

The complaint also highlights what Boehm calls a "mosaic of cronyism" that includes tens of thousands of dollars in political donations to Rangel’s campaign by nonprofit’s supporters and those whose firms are directly involved in building and financing the group’s new headquarters.

Alianza, according to a report Monday in the New York Post, owed $526,000 in back wages to 200 workers last month. The Post reported it has since paid $268,000 of what it owes. Among other financial woes, the Post reported that a landlord threatened to evict the group from its old offices for failing to pay hundreds of thousands of dollars in rent.

The nonprofit, which runs various programs including day care and domestic-violence prevention, plans to use the money for a new $19 million headquarters in New York City. It also plans to rent space to commercial tenants and house a cultural center there.

The group has close ties to Rangel. Its founder, Moises Perez, has donated to Rangel’s campaign over the years, and in December Rangel secured a $250,000 earmark for the group, according to the Post.

Rangel spokesman Elbert Garcia has defended Rangel’s support for Alianza, saying the group has done a lot of good work for the community. He did not respond to a request for comment on Monday.

An ethics panel in July charged Rangel with 13 violations of House ethics rules and statutes. He has chosen to fight the allegations and faces a public ethics committee trial this fall.

After a 21-month investigation, the ethics panel accused Rangel of failing to pay taxes on rental income from a Dominican Republic villa; of improperly using his office to solicit millions of dollars in funds for an education center bearing his name at the City College of New York; and of improperly using a rent-stabilized apartment for his campaign offices.

Rangel has accused the committee of violating his due process rights, and has insisted he is innocent of all charges.

NLPC has filed several complaints against Rangel, including that he improperly took a corporate-sponsored trip to the Caribbean. The ethics committee eventually admonished Rangel for taking the junket, and that ruling led to Rangel relinquishing the chairmanship of the powerful Ways and Means Committee earlier this year.
]]> http://www.klineforcongress.com/news/482/ The Washington Times

House investigators on Monday charged Rep. Maxine Waters  with "improperly" exerting influence to help bail out a bank in which her husband held stock, handing more ammunition to Republicans eager to blast House Speaker Nancy Pelosi for overseeing a "House of scandal."

The House ethics panel said the office of the senior California Democrat violated conflict of interest rules by repeatedly lobbying the Treasury Department for bailout money on behalf of minority-owned OneUnited in which her husband held as much as $350,000 in stock. The bank received a $12 million slice of the taxpayer-funded Wall Street bailout.

Ms. Waters has fiercely proclaimed her innocence and asked the committee to make public the 10-page "statement of alleged violation" against her. Like Rep. Charles B. Rangel of New York, she has opted to let the matter play out in a public hearing before the bipartisan ethics committee, demanding that one be scheduled as soon as possible.

For Republicans, the looming ethics trials of two high-profile Democrats provides an ironic campaign issue heading into November's congressional elections. Republicans say the charges against Ms. Waters could further play into GOP charges that Mrs. Pelosi and other Capitol Hill Democrats have failed in their pledge to "drain the swamp" in Washington.

"Nancy Pelosi's 'most ethical Congress in history' has turned into a House of scandal. The inability or unwillingness of the Democrat leadership to crack down on corruption serves as a reminder to the voters that the November elections will be a referendum not only on President Obama and his failed policies, but on the failed leadership of the Democrat-led congress," said Ken Spain, a spokesman for the National Republican Congressional Committee.

Democratic leaders have been largely noncommittal when asked specifically about either of the proceedings, saying that the cases are being handled appropriately. Rep. Chris Van Hollen, head of the House Democrats' campaign arm, said the charges may serve to help the party in November by demonstrating that Democrats take the ethics process seriously.

"The reason people are hearing about the cases of Charlie Rangel and Maxine Waters is because we put in place accountability measures to make sure that we have high standards and that people are held accountable to those standards," the Maryland Democrat said in an appearance on MSNBC last week.

Even so, two ethics trials ahead of November's midterm elections - when the size of their majority and even the majority itself is on the table, according to some political observers - is a thorn in the side for Democrats who swept to power in 2006 in the wake of Republican ethics scandals, such as that involving former House Majority Leader Tom DeLay, Texas Republican.

The charges against Ms. Waters are not as extensive as those facing Mr. Rangel, who stands accused of 13 ethics violations ranging from failure to properly disclose financial assets to using his office to lobby for donations to a school established in his honor. All three charges in the case of Ms. Waters relate to OneUnited's quest for government assistance and the help she and her chief of staff, who is also her grandson, gave the firm, which bills itself as "the largest black-owned bank in the country" with offices in Boston, Los Angeles and Miami.

The bank was seeking bailout money to curb losses related to its investments in Fannie Mae and Freddie Mac, which were taken over by the government.

Ms. Waters' husband, Sidney Williams, served on OneUnited's board of directors from January 2004 until April 2008 and owned stock worth about $350,000 in the bank as of June 2008. The government's takeover of Fannie Mae and Freddie Mac cut the value of his holdings in half, to about $175,000 by the end of September, and ultimately threatened to make them "worthless," according to investigators.

Ms. Waters helped secure a September 2008 meeting between bank executives and top Treasury officials while her chief of staff, Mikael Moore, helped draft legislation that would authorize the administration to provide the firm a lifeline. Congress passed the so-called Wall Street bailout in October, and language in the bill ensured that OneUnited would be eligible for funding.

In the midst of the talks, investigators say, Ms. Waters, a member of the House Financial Services Committee, went to Chairman Barney Frank and informed him of her husband's past board position at the bank, at which point he said she should no longer be involved in assisting the firm. But her chief of staff continued to press the case, leading to a charge that she did not behave in a manner reflecting "creditably on the House."

The other charges include violating the spirit of House rules against receiving compensation that occurs as a result of improper influence and the "dispensing of special favors."

In a letter to ethics panel members last week, Ms. Waters did not address the charges specifically but said the failure to schedule a hearing "violates the fundamental principles of due process, denies my constituents the opportunity to evaluate this case, and harms my ability to defend my integrity."

Some have accused ethics investigators of having a racial bias, given that both Ms. Waters and Mr. Rangel are senior members of the Congressional Black Caucus. In an interview Monday on Fox News, Mr. Van Hollen said he didn't see any racial motivations.
]]> http://www.klineforcongress.com/news/481/ The Wall Street Journal
Michael P. Fleischer

With unemployment just under 10% and companies sitting on their cash, you would think that sooner or later job growth would take off. I think it's going to be later—much later. Here's why.

Meet Sally (not her real name; details changed to preserve privacy). Sally is a terrific employee, and she happens to be the median person in terms of base pay among the 83 people at my little company in New Jersey, where we provide audio systems for use in educational, commercial and industrial settings. She's been with us for over 15 years. She's a high school graduate with some specialized training. She makes $59,000 a year—on paper. In reality, she makes only $44,000 a year because $15,000 is taken from her thanks to various deductions and taxes, all of which form the steep, sad slope between gross and net pay.

Before that money hits her bank, it is reduced by the $2,376 she pays as her share of the medical and dental insurance that my company provides. And then the government takes its due. She pays $126 for state unemployment insurance, $149 for disability insurance and $856 for Medicare. That's the small stuff. New Jersey takes $1,893 in income taxes. The federal government gets $3,661 for Social Security and another $6,250 for income tax withholding. The roughly $13,000 taken from her by various government entities means that some 22% of her gross pay goes to Washington or Trenton. She's lucky she doesn't live in New York City, where the toll would be even higher.

Some Firms Struggle to Hire Despite High Unemployment Faces—and Fates—of the Jobless Employing Sally costs plenty too. My company has to write checks for $74,000 so Sally can receive her nominal $59,000 in base pay. Health insurance is a big, added cost: While Sally pays nearly $2,400 for coverage, my company pays the rest—$9,561 for employee/spouse medical and dental. We also provide company-paid life and other insurance premiums amounting to $153. Altogether, company-paid benefits add $9,714 to the cost of employing Sally.

Then the federal and state governments want a little something extra. They take $56 for federal unemployment coverage, $149 for disability insurance, $300 for workers' comp and $505 for state unemployment insurance. Finally, the feds make me pay $856 for Sally's Medicare and $3,661 for her Social Security.

When you add it all up, it costs $74,000 to put $44,000 in Sally's pocket and to give her $12,000 in benefits. Bottom line: Governments impose a 33% surtax on Sally's job each year.

Because my company has been conscripted by the government and forced to serve as a tax collector, we have lost control of a big chunk of our cost structure. Tax increases, whether cloaked as changes in unemployment or disability insurance, Medicare increases or in any other form can dramatically alter our financial situation. With government spending and deficits growing as fast as they have been, you know that more tax increases are coming—for my company, and even for Sally too.

Companies have also been pressed into serving as providers of health insurance. In a saner world, health insurance would be something that individuals buy for themselves and their families, just as they do with auto insurance. Now, adding to the insanity, there is ObamaCare.

Every year, we negotiate a renewal to our health coverage. This year, our provider demanded a 28% increase in premiums—for a lesser plan. This is in part a tax increase that the federal government has co-opted insurance providers to collect. We had never faced an increase anywhere near this large; in each of the last two years, the increase was under 10%.

To offset tax increases and steepening rises in health-insurance premiums, my company needs sustainably higher profits and sales—something unlikely in this "summer of recovery." We can't pass the additional costs onto our customers, because the market is too tight and we'd lose sales. Only governments can raise prices repeatedly and pretend there will be no consequences.

And even if the economic outlook were more encouraging, increasing revenues is always uncertain and expensive. As much as I might want to hire new salespeople, engineers and marketing staff in an effort to grow, I would be increasing my company's vulnerability to government decisions to raise taxes, to policies that make health insurance more expensive, and to the difficulties of this economic environment.

A life in business is filled with uncertainties, but I can be quite sure that every time I hire someone my obligations to the government go up. From where I sit, the government's message is unmistakable: Creating a new job carries a punishing price.

Mr. Fleischer is president of Bogen Communications Inc. in Ramsey, N.J.

]]> http://www.klineforcongress.com/news/480/ Roll Call

Democrats might prefer to spend the August recess focusing on jobs and the economy — and not on the much thornier issue of immigration reform — as they draw distinctions with the GOP leading up to Election Day.

But with the White House and Arizona officials continuing to spar over the state’s controversial law, and immigration activists still agitating for comprehensive reform, immigration likely will remain a hot issue through the November elections.

And when a $600 million border security bill abruptly passed in the Senate on Thursday night, an issue many Democrats had hoped to put behind them for the year suddenly was front and center again.

While many Democrats are still uncomfortable with the issue this election season, the bill could end up providing them with a concrete example of how they are willing to confront the nation’s immigration challenges.

House Democratic leaders have considered adding it as an agenda item for House action this week as well.

The measure, authored by Senate Democratic Conference Vice Chairman Charles Schumer (N.Y.), calls for deploying 1,500 new Border Patrol and immigration agents, as well as increasing funding for unmanned aerial border patrols. The cost of the bill would be offset by raising the fees on foreign corporations that abuse visa programs to bring workers to the U.S. from India and other countries.

A Senate Democratic operative said the border bill makes it easier for Democrats to argue that “we want a comprehensive immigration bill that cracks down on employers who hire illegal immigrants, secures the border, makes those that are here illegally get to the back of the [citizenship] line, and learn English.”

And Schumer on Friday previewed the Democrats’ case. “The bottom line is we’ve heard a lot of talk about controlling the border … over the last year. We’re finally doing something about it,” he said.

Schumer also said he hopes work on comprehensive legislation can continue. “Hopefully colleagues on both sides of the aisle will [now] come together and we can pass comprehensive reform,” he said.

Republicans dismissed those arguments. “It’s laughable on so many levels,” a GOP aide argued. “Their knee-jerk reaction to immigration problems is to figure out how to legalize all the illegal aliens that are already here … and then they offer a couple hundred million dollars to secure, I don’t know what, and they think they’re on top? ”

Indeed, Democrats acknowledge they’re not looking to make much of the issue this summer.

Democratic Senatorial Campaign Committee Chairman Bob Menendez (N.J.) — one of the Senate’s most vocal champions of comprehensive reform — said the issue was not one Democrats were planning to talk about during the August recess. Rather, Democrats want to keep the focus on jobs and the economy, where they believe they have the upper hand over Republicans.

“What we’re going to spend our time doing is talking about what average families around the kitchen table want to talk about,” Menendez said.

“How do I preserve and or get a job, who’s standing on my side to make those jobs happen here at home versus off-shoring them overseas ... who is giving me some relief, who stood with me when I was unemployed versus who tried to keep me without any money for my family, who stands with me in the context of creating an economy that will grow jobs,” are the types of issues Democrats want to focus on, he added.

Menendez said immigration is not at the top of the public’s agenda at the moment — and so it’s not at the top of the Democrats’ agenda.

“The bottom line is if immigration was the No. 1 issue, you know, I may have a great interest in it,” Menendez said. “We’re going to talk about what constituents want to talk about. What constituents want to talk about is their lives, their livelihood, their future.”

Still, some Democrats acknowledge the political reality is that immigration remains a top-tier issue in this year’s elections, and they hope enactment of the border bill will help weaken its political potency.

Meanwhile, House Democratic leaders Friday afternoon were considering whether to bring up the bill during this week’s special session.

“That’s something that we will look at,” said Assistant to the Speaker Chris Van Hollen (Md.), who also is chairman of the Democratic Congressional Campaign Committee.

Van Hollen told reporters during a conference call that there were “ongoing discussions” about adding the border security measure to the chamber’s agenda when the House meets Tuesday to attempt to send a $26 billion state aid package to President Barack Obama.

Speaker Nancy Pelosi (D-Calif.) decided Wednesday to interrupt House Members’ six-week recess for one day to facilitate final action on the state aid bill after Senate Democrats broke a filibuster of the measure with the help of two Maine Republicans — Sens. Susan Collins and Olympia Snowe.
]]> http://www.klineforcongress.com/news/479/ The Washington Times

On this day in 1981, Congress passed President Reagan's plan to cut tax rates by 25 percent over three years. The proposal had been a central pillar of Reagan's presidential campaign a year earlier, and six months into his first term - in the face of a recession unequaled until today - he was determined to get it done.

It already had been a busy year for the new president, who was on something of a legislative hot streak. Congress had passed his budget proposal, which had included significant program cuts coupled with a $25 billion increase in the defense budget. The administration also had just nominated the first woman to the Supreme Court, Sandra Day O'Connor. And let's not forget that four months earlier, Reagan literally had come within an inch of losing his life to an assassin's bullet.

But suffering one legislative defeat after another, House Democrats, led by Speaker Thomas P. "Tip" O'Neill, weren't about to lie down meekly and let Reagan have his way - again. Knowing they had lost the debate over whether to cut taxes, O'Neill and the Democrats proposed a smaller cut for people earning less than $50,000 a year.

It was this counterproposal that Reagan took on in a prime-time address to the nation on July 27.

"This is not the time for political fun and games," he said that night. "This is the time for a new beginning. I ask you now to put aside any feelings of frustration or helplessness about our political institutions and join me in this dramatic but responsible plan to reduce the enormous burden of federal taxation on you and your family."

Two days later, on July 29, the Republican-controlled Senate approved Reagan's plan by a vote of 89-11. In the Democratic-controlled House, where I was a staff member for a freshman Republican from Oregon who had swept in on Reagan's coattails, the Capitol switchboard was jammed from countless Americans calling to voice their support for the president's plan. The vote was 238-195 in favor - 48 Democrats crossed the aisle to vote for the largest tax cut in American history.

The rest of the story is well-known, but let's look again at the numbers. Over the eight years of the Reagan administration, 20 million new jobs were created; inflation dropped from 13.5 percent in 1980 to 4.1 percent in 1988; unemployment fell from 7.6 percent to 5.5 percent; the net worth of middle-income families grew annually by 27 percent; and the overall economy grew by 40 percent.

It's instructive to consider the differences between then and now. Once again, America has a president in his first term wrestling with massive economic dislocation. But with the 2001 and 2003 tax cuts set to expire at the end of the year, the fight has been enjoined over whether to allow for what many are calling the largest tax increase in history.

Reagan's tax cuts didn't save him politically, at least in the near term. The ensuing and prolonged Fed-driven recession would pull the president's approval rating below 40 percent, and Republicans would lose 26 House seats in the 1982 midterm elections.

Despite the political beating he took, Reagan stubbornly refused to back away from his domestic agenda. Nervous House and Senate Republicans looking to the 1984 elections, who had supported the president and survived 1982, were urged to "stay the course." Tensions grew in Republican cloakrooms as the mantra morphed into "stay the curse." Even Reagan, his eye on deficits but ever the cheerleader for tax freedom, had his doubts at times.

We too often discuss Reagan's greatest achievements - winning the Cold War and reviving the economy - as separate and distinct policies. But both of these achievements were based on a deeper, more fundamental policy: advancing freedom, first at home, then abroad.

Winning the Cold War required more than simply increasing military spending. It required, as Reagan said, returning America to its historic role as an "exemplar of freedom" and proving to the Soviet regime that communism was a historical dead end. That required restoring America's economic might through an expansion of economic freedom at home.

Reagan's freedom agenda also worked wonders on the minds of the American people. By 1984, Gallup found that a majority of Americans were satisfied with the direction of the country - up 30 points since 1979. Two years later, it would reach as high as 70 percent. Reagan's re-election theme, "Morning in America," was more than just a slogan - it was how Americans truly felt.

But during Reagan's prime-time address to the nation in late July 1981, all of that was aspiration and a long way off. "Our struggle for nationhood, our unrelenting fight for freedom, our very existence," he concluded, "these have all rested on the assurance that you must be free to shape your life as you are best able to, that no one can stop you from reaching higher or take from you the creativity that has made America the envy of mankind."

In other words, it starts with freedom.

John Heubusch is executive director of the Ronald Reagan Presidential Foundation and Library.
]]> http://www.klineforcongress.com/news/478/ Washington Times

Call it the law of unintended consequences.

That's what many finance experts are saying will be the result of Congress' latest attempt to micromanage the world of consumer credit through the financial-reform measure President Obama signed into law last week.

Many are predicting that well-meaning provisions to force banks to lower their fees for debit card services will boomerang once again and result in less credit available for consumers — the same phenomenon seen when Congress enacted a law a year ago to rein in credit card fees.

Banks reacted to the earlier measure by further constricting credit for consumers — which already has dropped by the biggest amount on record and could fall by an additional $2 trillion in the next year — while abandoning the fees targeted by Congress and raising fees elsewhere to compensate for the lost revenue.

Analysts are predicting that the latest round of restrictions forcing banks to lower their so-called "swipe fees" on debit card transactions will simply prompt banks to raise charges elsewhere. Some foresee the end of free bank checking accounts, as well as the return of annual fees on many credit cards as a result of Congress' efforts to shave a fraction of the 1 percent to 2 percent swipe fees paid by merchants.

"Regulations may be needed, but they are not free," said Bill Hardekopf, author of the Credit Card Guidebook. "Banks respond quickly when their income is restricted in one area. Unfortunately, the first victims of these new fees will probably be the people with a basic checking account who need every dollar they make."

Consumers have grown used to free checking accounts and cards with no annual fees. Such service charges became the exception rather than the rule, as they were during the boom years when credit flowed freely.

But as of this month, one major bank — Wells Fargo — has stopped providing free checking, while Bank of America is testing account fees and other options that it plans to add later this year. Most other banks are expected to join in.

"Banks have already lost billions of dollars in fees and revenue" because of the restrictions on credit card fees and checking account overdraft fees passed last year, Mr. Hardekopf said.

The changes were made at a time when major banks like Citigroup and Bank of America were experiencing record losses because of recession-driven credit card defaults, driving up charge-off rates to as high as 15 percent for some banks.

"The new regulations will increase the losses," Mr. Hardekopf said. "They have to make changes to increase their revenue" to turn their credit card lines into sound and profitable businesses again.

Since new regulations are designed to make credit and debit cards permanently less profitable, banks also have responded by closing accounts and cutting back credit for customers who are most likely to default and cause losses — accelerating a broad and historic retrenchment in credit that began with the financial crisis in 2007.

The share of consumers using credit cards dropped to 56 percent last year from 87 percent in 2007, while use of debit cards — which directly access a consumer's bank account for payment — has grown at double-digit rates, according to Javelin Strategy, a banking research group.

Banks have cut credit limits for more than 58 million customers since 2008, slashing limits overall to $3.3 trillion this spring from a peak of $4.7 trillion at the height of the boom, according to JP Morgan Chase.

Chase will no longer offer credit cards to about 15 percent of the people it had been targeting as potential customers.

Partly in response to the legislation, banks may chop off another $2.1 trillion in credit card lines in the next year, wiping out about 45 percent of the spending power U.S. consumers hold on their credit cards today, according to estimates by the Oppenheimer & Co. investment bank.

Such a further retrenchment in credit would have a powerful effect on the economy, contributing to sluggish growth in consumer spending and the economy overall.

Consumers have been trying to pay down their credit card debt, even without coaxing from their banks. Some consumers were prompted to pay off debt by new disclosures banks are required to make in monthly statements showing how long it would take to pay off balances if consumers make only required minimum payments each month.

Polina Vlasenko, a research fellow at the American Institute for Economic Research, said what irks her the most is that responsible borrowers are becoming the new victims under Congress' "law of unintended consequences."

"Borrowers with solid credit and a history of paying off their credit card charges on time are treated exactly the same as those with poor credit and a history of late payments," she said, because banks are no longer allowed to differentiate fees and rates for customers based on good or bad behavior.

People who always paid their bills on time and never went over their credit or checking account limits are now being hit with higher interest rates and fees, the reintroduction of annual card fees, fewer bonus features such as rebates and airline miles, and the refusal of some merchants to accept credit cards without minimum purchases.

Ms. Vlasenko said banks' practice of differentiating between customers based on credit risks is sound and necessary, and the high rates and fees on credit cards serve a purpose.

"There is a reason why credit cards carry high interest rates. It's because credit cards provide loans that are convenient for borrowers and risky for lenders," she said.

"Borrowers can get unsecured loans up to their credit limit on the spot, no questions asked, and can repay these loans at any time. No other financial product allows people to do this."

Todd J. Zywicki, law professor at George Mason University, said the new swipe-fee restrictions will put a major crimp on consumer spending and the economy, all to satisfy Democratic political constituencies and millions of merchants like Wal-Mart that lobbied to shift a fraction of the 2 percent swipe-fee burden from stores back to consumers and banks.

"Payment cards are a secure, inexpensive, welfare-increasing payment mechanism largely unlike any other in history," he said.

He predicted that merchants will end up paying a price as consumers revert to cash and other less-efficient paper-payment methods and simply spend less overall.

But consumer advocacy groups charge that banks have forced everyone to pay higher prices at stores to cover their exorbitant charges. Now, they are just up to their old "tricks and traps" by trying to shift fees into new areas.

Activists pledge to keep trying to shut down bank profit centers through the powerful new consumer regulator set up under the finance law at the Federal Reserve.

"Congress can't write laws fast enough to keep up" with the banks, said Travis Plunkett, legislative director of the Consumer Federation of America. "That's why we need a Consumer Financial Protection Agency" to keep pursuing banks as they invent new schemes, he said.
]]> http://www.klineforcongress.com/news/477/ Washington Times

The summer of the discontented voter steams onward and, unfortunately for President Obama, polls show voters are no longer blaming the bad times on the George W. Bush administration.

Add Hispanics to the growing list of Obama supporters disgruntled by aspects of the presidents performance, in what has become for the White House and Democrats a seemingly daily beat of gloomy polls.

Mr. Obama gets only lukewarm ratings on issues important to Hispanics in a Univision/AP poll released Tuesday, and, according to a separate Reuters-Ipsos survey, Americans overwhelmingly believe the president has failed to focus enough on job creation.

"A lot of these folks wouldn't like him no matter what, but I think the country has pretty much the same problems it did before Obama took office — at least that's how voters feel — and more and more that's becoming Obama's fault rather than Bush's fault," said Tom Jensen, director of Public Policy Polling.

Support for Mr. Obama has eroded among whites, independents, men and now Hispanics, who were part of the coalition that powered him to the White House in 2008.

While the AP-Univision poll found that 57 percent of Hispanics still approve of Mr. Obama, it revealed deep skepticism among the key Democratic voting bloc. Only 43 percent of Hispanics said Mr. Obama is meeting their needs, according to the poll, while 32 percent were unsure and 21 percent said he has done a poor job.

The Reuters-Ipsos poll, also released Tuesday, found that an overwhelming majority of Americans — 67 percent — do not think Mr. Obama has focused enough on creating jobs, compared with the administration's emphasis on overhauling health care and rewriting the nation's financial rules. The survey said only 34 percent approved of the president's handling of the economy and jobs while 46 percent rejected it as unsatisfactory.

Pollsters said the drop is not unusual for a president confronting so many thorny issues, but that it does show voters want solutions and think Mr. Obama has had enough time to deliver.

White House press secretary Robert Gibbs shrugged off questions about Mr. Obama's sagging numbers Tuesday. With high unemployment and troops still engaged in two wars, he said, "It's understandable that people are frustrated."

But the numbers pose a more immediate problem for Democrats in Congress and in the states as the midterm elections loom. Other polls show Republican voters consistently more enthusiastic about voting this fall, as Democrats struggle to preserve their majorities in the House and Senate.

Mr. Gibbs said the tough decisions Mr. Obama has made, such as propping up struggling auto giants Chrysler LLC and General Motors Co., saved jobs even if they were unpopular.

Mr. Obama has argued at town-hall meetings that he isn't governing by polls but is following through on what he promised during the 2008 campaign.

"That's why stuff in Washington doesn't get done, because people put their finger out to the wind," he said while campaigning for Democrats in Missouri earlier this month. "People get surprised when we follow through and keep our campaign promises. It's like, well, he went ahead and did health care. Why did he do that? I said I was going to do health care. It was the right thing to do."

It's not clear what impact Mr. Obama's numbers will have on Democrats across the country this fall. He has made several campaign trips already and has scheduled a flurry of activity for this week, including a D.C. fundraiser for the Democratic National Committee on Tuesday night and another party fundraiser in New York on Wednesday.

Mr. Jensen warned that rank-and-file Democrats should be wary of appearing alongside Mr. Obama on the trail, noting that his polling firm's numbers show the president would be a drag on Democratic candidates even in such places as his home state of Illinois.

An analysis in the Wall Street Journal of a year's worth of Quinnipiac University poll data by Peter Brown, assistant director of the Quinnipiac Polling Institute, showed that large numbers of whites, men and independents have deserted Mr. Obama since his election. His support among whites slid from 51 percent in July 2009 to 37 percent in July 2010, from 52 percent to 38 percent among independents, and from 54 percent to 39 percent among male voters overall.

Mr. Brown said the loss in support among these key groups is problematic for Mr. Obama, but not surprising given the drop in his overall approval ratings from 57 percent a year ago to their lowest levels now at 44 percent, according to Quinnipiac.

"A year ago if you had told me that his overall numbers were what they are, I would have suggested the places he'd lose support first would be independents, men and whites. This isn't rocket science," Mr. Brown said. "This is just what happens to a Democratic president when his numbers come down overall."

Mr. Obama fares slightly better when voters are asked about his handling of the war in Afghanistan. Polls this month show support ranging from 43 percent to 50 percent. But when asked how they view the war effort itself, voters say it's going poorly.

A CBS News poll earlier this month found just 31 percent said the war was going "very well" or "somewhat well," while 41 percent said the war was going "somewhat badly" and another 21 percent said it was going "very badly."

Asked about support for the war Tuesday, Mr. Gibbs said public opinion matters when forces are in harm's way, but stressed that the right decisions are not always popular.

"You can't just decide that if it's too hard to do something because public opinion is against it," he said. "Obviously, while important, I don't think it's the only determinative factor."
]]> http://www.klineforcongress.com/news/476/ Wall Street Journal

Arizona authorities battling the Obama administration over the state's new immigration law may face an unforeseen obstacle in enforcing the measure: While local police can arrest illegal immigrants, only the federal government can deport them.

Because the federal immigration-enforcement agency has suggested it won't necessarily cooperate in helping meet the law's goal, local police could be forced to choose between holding detainees in their own jails or releasing them.

The Arizona law, which takes effect Thursday, makes it a state crime to be in the U.S. illegally and requires police who stop people for such routine infractions as speeding to check their immigration status if there is "reasonable suspicion" they are here unlawfully. The police can detain them while clarifying their status, but deportation can only be conducted by federal authorities.

On Tuesday, Matthew Chandler, a spokesman for the Department of Homeland Securtity—which houses U.S. Immigration and Customs Enforcement—said the priorities for federal enforcement apply to recent border crossers, felony re-entry cases and serious criminals who pose a public-safety risk.

Police officers in Arizona and across the U.S. currently have the capability to contact ICE to verify the immigration status of people they stop. The agency then confirms whether a person is deportable. If the person doesn't fall into a priority category, they might be issued a notice to appear before an immigration judge but wouldn't be detained by the federal government. That means the individual could remain in the country for months or years while they fight their removal.

Arizona is home to about 460,000 illegal immigrants, according to the DHS. If the new law goes into effect—a challenge by the Obama administration is pending before a judge—police could shower ICE with calls. Without its cooperation, police likely would have to release suspects, because the law doesn't give them the authority to detain an individual indefinitely based on suspicion of unlawful presence in the U.S.

To achieve the law's stated goal of attrition through enforcement, "ICE needs to play with us," said John Harris, president of the Arizona Association of Police Chiefs. "Without ICE, it makes it much more difficult for us to arrest people."

Asked about its plans regarding Arizona's new law, the agency said that "ICE is focused on smart, effective immigration enforcement that focuses first on criminal aliens who pose a threat to our communities." It added that the outcome of the Justice Department's challenge to the law—on grounds that immigration enforcement is the purview of the federal government—"will inform the government's actions going forward."

ICE now works with local law enforcement in Arizona and other states. For example, illegal immigrants who have committed serious crimes normally are turned over to the agency after completing sentences for state crimes. The agency also has agreements with more than 70 localities that empower about 1,200 personnel, who have received special training, to verify the status of immigrants.

Arizona's law would require the state's 15,000 local law-enforcement officers to check the status of those they suspect are in the U.S. illegally.

Juan Pedrosa, an immigration -policy researcher at the nonpartisan Urban Instititute, said ICE's response would be crucial because it is being closely watched by other state lawmakers seeking to promote the arrest and deportation of large numbers of illegal immigrants.

About 11 million illegal immigrants are believed to live in the U.S. In a June 30 memo to ICE employees, agency chief John Morton said it had the capability to remove "less than 4% of the estimated illegal alien population in the United States."

A record 387,790 people were deported from the U.S. in the fiscal year ended Sept. 30. ICE removed 81,429 in Arizona, including 23,550 criminals. Mr. Morton has said he opposes Arizona's law because it isn't the role of states to draft their own responses to illegal immigration.

In a declaration with the federal lawsuit, David Palmatier, head of ICE's Law Enforcement Support Center, said an increase in queries from Arizona "will delay response times…and risks exceeding the capacity of the center to respond to higher priority requests for criminal alien status determination."
]]> http://www.klineforcongress.com/news/475/ Politico

Roughly two-thirds of the Democrats whose election vaulted their party to the House majority in 2006 and bolstered its advantage in 2008 face grave prospects this November — and could take control of the House down with them if they lose.

Of the 57 Democrats who took control of GOP-held seats in the past two elections and are now seeking reelection, 34 are facing highly competitive races, as rated by the nonpartisan Cook Political Report.

And only three of the 42 House Democrats in the Democratic Congressional Campaign Committee’s Frontline Program for endangered incumbents are not freshmen and sophomores, an equally revealing statistic.

Recognizing that the fate of the Democratic majority hinges on protecting these precariously positioned junior members, House Speaker Nancy Pelosi is scrambling to ensure their safety, taking public and private steps to reinforce them and boost their public profiles, even as the members attempt to survive by putting some distance between themselves and their leadership and by running ultralocal campaigns.

The House Democratic leadership is letting them sponsor politically beneficial legislation, such as manufacturing bills, on the floor, spotlighting them at news conferences and naming them to conference committees — all typically the domain of more senior House members.

“I would venture to guess that new members of Congress have offered more amendments on the floor of the House than at any time since the beginning of the Republic,” DCCC Chairman Chris Van Hollen (D-Md.) told POLITICO.

Behind the scenes, junior members once dubbed “majority-makers” are getting just as much assistance.

Both classes meet separately every Wednesday with the Speaker in her office for sessions devoted to hearing their ideas and concerns; Pelosi and Van Hollen have staffers devoted to member services for both classes, even helping with constituent case work. House Democratic leaders also look the other way if some of the imperiled members vote against the daily “journal,” a procedural vote acknowledging the day’s proceedings — to lessen the percentage of votes they cast with the leadership and pre-empt GOP attacks about the high degree to which they vote with Pelosi.

Perhaps most significant, however, is what House Democrats are doing for the members financially: Of 40 members for whom the DCCC has reserved $28 million in TV ads, 27 hail from the past two classes.

The only advice Van Hollen said he’s sharing with freshmen and sophomores is that they should “focus on the issues important to constituents.”

Even as Democratic officials say that junior members should be true to the votes they’ve taken, the leadership is helping them highlight issues closer to home.

“We try to position these guys as the mayor of their congressional districts,” a leadership aide said.

“Keep it local and tout what you’ve done for your district,” said another leadership aide.

From suburban Las Vegas to Southside Virginia, in centrist districts and in the deeply conservative countryside, the Democrats most pivotal to their party’s House majority are doing just that.

In Nevada, freshman Rep. Dina Titus is running against gale force headwinds — her district has some of the highest unemployment and foreclosure rates in the country.

Titus, a former University of Nevada, Las Vegas professor, laid out a strategy fit for the political science classes she used to teach on how candidates run when the national political environment is working against them: Focus on the granular, keep distance from party leaders and hope voters recall the personal touch.

The game plan: “We have put from the beginning our emphasis on constituent services,” she said in an interview. “I’ve had six housing workshops; I’ve got four people in the district working on housing cases, 1,000 housing cases, and a lot of emphasis on bringing home dollars for people with Social Security, Medicare, and veterans’ benefits. It’s about what’s happening at home.”

Titus was clear to distinguish herself from her colleagues.

“I’m not [Barack] Obama; I’m not Harry Reid; I’m not Nancy Pelosi. I’m Dina Titus and I’ve been there for you every day,” she said.

So far, the strategy has been enough to keep Titus competitive. Earlier this month, an independent poll showed her leading her GOP rival by 2 percentage points.

Rep. Thomas Perriello (D-Va.), a freshman who was swept in on President Obama’s coattails in 2008, is a favorite of the White House for his unapologetic votes for the stimulus, energy and health care reform bills. But running for reelection in a district that, outside of Charlottesville, is largely rural and conservative, Perriello’s first ad made no mention of his backing for such controversial and sweeping legislation.

Instead, he touted his efforts to deliver jobs for dairy farmers, secure money for a landfill project and wire district schools for broadband access.

Democratic Rep. Gabrielle Giffords , a member of the class of 2006, is also zeroing in on what she’s doing locally in her southeast Arizona district.

“Gabrielle Giffords gets it,” a rough-hewn Republican rancher said in one of her first commercials, touting the incumbent’s efforts to bolster border security.

A GOP poll conducted earlier this month showed Giffords deadlocked with her likely GOP opponent.

Rep. John Boccieri (D-Ohio), a freshman, used a nationally televised press conference earlier this year to announce that he would support the final health care bill after opposing it the first time it came to the House floor.

But asked whether he would campaign on such national issues or focus more on parochial matters, Boccieri was unambiguous: “I’d say all politics are local.”

He’s already being hit by his GOP opponent for switching his health care vote — “He let Nancy Pelosi twist his arm,” asserts Republican Jim Renacci’s ad — but Boccieri suggested he thought voters may care more about the $3 million he helped get to renovate highways into Canton.

Rep. Gerry Connolly (D-Va.) sounded much like the Fairfax County Board of Supervisors chairman that he was before winning his House seat in 2008.

“I’m trying to enhance the economy of Northern Virginia,” Connolly said when asked to crystallize what his message will be to the voters.

He ticked off his efforts on extending rail access to Dulles Airport and expanding local roads but also noted that he was responsible for “the first puppy parks in Fairfax County.”

Said Connolly: “Those aren’t unimportant things. There’s a reason why Tip O’Neill said all politics are local.”

The first- and second-term Democrats who agreed to discuss their races — some would not — indicated that they appreciate the extra attention from Pelosi, Van Hollen and their caucus elders.

But they evinced more desire to talk about how they used the opportunities to get the leadership to recognize how perilous their paths to reelection are.

“I’m the one that used the ‘f’ bomb in one of those breakfasts,” Titus, with no prompting, recalled of the time she used a freshmen meeting with Pelosi to argue that, “We’re all f’d if we don’t get the message and start creating jobs.”

“At home in the district, people appreciated it. — It was kind of like, ‘You go girl; you stand up and fight for us.’”

Another vulnerable freshman, who requested anonymity to candidly discuss internal House politics, said that, while the leadership had lavished attention on the most junior and endangered members, the caucus as a whole was too fixated on their special-election victory in a heavily Republican, upstate New York district last November to appreciate what GOP wins in the Virginia and New Jersey governors’ races indicated.

“They were the truly early warning signs that should have warned us that public opinion had turned,” the freshman said. “Had more folks here paid more attention earlier, we may have been able to cauterize some of the hurt.”
]]> http://www.klineforcongress.com/news/474/ Roll Call

House Democrats were struggling Monday to come up with a plan to deal with Rep. Charlie Rangel’s ethical troubles and do it quickly.

Publicly, Democratic leaders were trying to put a positive spin on the New York Democrat’s upcoming trial before his peers on charges that he may have violated House ethics rules. Privately, however, Democrats were scrambling to contain the damage and hoping Rangel cuts a deal in the next few days to avoid a public spectacle that could unfold weeks before the November elections.

The House Committee on Standards of Official Conduct, also known as the ethics panel, announced late last week that one of its investigative subcommittees had found substantial reason to believe that Rangel broke House rules. And a special adjudicatory panel is set to organize Thursday and is expected in September to review the matter in a proceeding similar to a trial.

It’s possible that panel may not have to convene, however, if the ethics committee is able to reach an agreement with Rangel beforehand on a punishment. A source close to the negotiations said Monday that the talks are ongoing.

“We’re still open to resolving this before Thursday,” the source said. The individual declined to detail whether that agreement might include a formal apology or other sanctions, which under House rules may range from a formal letter of reprimand to expulsion.

One senior Democratic aide laid out the problem for Democrats: They clearly want Rangel to reach some kind of accommodation with the ethics committee but worry he will dig in if they push him too hard. The broader fear is that white, moderate Democrats in swing districts will start demanding he resign, prompting a racially tinged backlash from the Congressional Black Caucus.

“This potentially creates a civil war inside the party,” the aide said.

Any sense that Rangel, one of the most powerful black lawmakers in history, is being railroaded without a fair trial could hurt black turnout in the midterms, especially coming on the heels of the hasty firing last week of Department of Agriculture official Shirley Sherrod, the aide added.

“The last thing we need is something that is going to depress turnout,” the aide said.

Indeed, the CBC issued a statement Monday warning against a rush to judgment: “Attempts by Republicans and Democrats to presume guilt before the Committee on Standards of Official Conduct completes its review of the facts, which are only known to them and Congressman Rangel, violates the core American principle of the presumption of innocence.”

Democratic leaders, meanwhile, tried to downplay the potential electoral implications. Democrats promised to usher in a more ethical Congress when they were swept to power in 2006, and the ethics problems surrounding Rangel this late in the 2010 cycle could further complicate their fortunes on Nov. 2.

Still, Democratic leaders weren’t prepared to cede any ground.

“I think the public understands what’s happening,” House Majority Leader Steny Hoyer (D-Md.) said Monday. “The ethics committee process is working like it should.”

Likewise, Speaker Nancy Pelosi tried to downplay the situation.

“The fact is the committee has made its announcement and its timetable, and I think we just have to wait and see how that plays out because none of us, not any of us except if you are on the ethics committee, has any knowledge [of the situation],” the California Democrat said.

Both leaders said they hadn’t spoken to Rangel since the committee’s announcement last week, although Hoyer acknowledged having read news reports of discussions between the ethics panel and the veteran New York Democrat.

But the 2-year-old case, which has already cost Rangel his Ways and Means chairmanship and more than $2 million in legal fees, clearly has worn on his fellow Democrats.

“The quicker this gets resolved one way or the other the better,” said Rep. Dennis Cardoza, who represents Blue Dogs in leadership meetings. “It needs to be resolved forthwith.”

Still, the California Democrat insisted Rangel’s ethics woes shouldn’t have an effect who wins or loses this fall.

“The elections are about individual people running in their own districts,” he said.

“I’m glad it’s coming to an end,” Rules Chairwoman Louise Slaughter said. But the Democrat refused to throw her fellow New Yorker under the bus. “Rangel is asking for this investigation,” she noted. “I think you shouldn’t prejudge him.”

Republicans aren’t feeling as charitable. Indeed, the incentive for Republicans now that a public trial has been set is to ensure that it goes off as scheduled — and the longer and messier, the better.

“Now that the ethics committee has assumed it’s responsibilities, it is important that we tone down the politics and let the ethics committee do its job,” Republican Conference Chairman Mike Pence said. “This is a very serious matter; I believe that it will be dealt with in a very serious way.”

And the Indiana Republican defended his party’s response to the ethics announcement: “The question here was about action on the floor, action within the institution itself. I would never want or expect the ability to restrain the political debate on either side of the aisle.”

Republicans have been using the latest Rangel ethics announcement — the panel admonished Rangel earlier this year for taking part in two trips that violated House rules on corporate funding — to once again pressure Democratic lawmakers to return Rangel donations.

The National Republican Congressional Committee kept up the heat on its list of vulnerable Democrats, and Rep. Kathy Dahlkemper (Pa.) became the latest to give her Rangel cash to charities. She joined Rep. Brad Ellsworth, an Indiana Democrat running for the Senate, who announced last week that he would give away the Rangel money. Numerous other Democrats had previously given up Rangel donations, as each wave of news seems to prompt more Members to want to shed any hint of scandal.

Many Democrats clearly want the issue to go away, but the machinery of the ethics process leaves them stuck politically. As long as Rangel continues to fight the charges — and he indicated again Monday that he intended to do so in public appearances in New York — there is little they can do.

While the ethics panel has not released its own set of charges against Rangel, it has been investigating numerous allegations against him, largely at his own request.

That inquiry encompasses his use of multiple rent-stabilized apartments in New York, failure to report rental income or pay taxes on a Dominican Republic villa, failure to report items valued at more than $600,000 on his financial disclosure forms, use of a House parking space for vehicle storage and fundraising for the Charles B. Rangel Center for Public Service at City College of New York, including an alleged legislative quid pro quo for a $1 million donation.
]]> http://www.klineforcongress.com/news/473/ The Hill

Business icon Steve Forbes on Sunday called President Obama anti-business, just days after he signed an extensive financial reform measure into law.

The president and CEO of Forbes Inc. said that Obama has wrongfully categorized the business community under the umbrella of excess.

“Well, the president clearly is [anti-business],” Forbes told Candy Crowley on CNN’s "State of the Union."

“I mean you can take excesses and tar the whole business community, which is like taking election fraud and saying that's why we shouldn't have free elections.”

Forbes also said that recent negative reaction to the White House by the business community was completely warranted and that Obama wasn’t taking their concerns seriously. Forbes pushed to delay altering tax codes until at least two years had passed and the economy had a chance to bounce back on its own.

“They just think they're a bunch of greedy crybabies, and the business community is reacting to that,” he said.

“If they took that health care bill, financial reform bill, suspended it for three years, left the tax code alone for two years, three years, you'd see this economy roar up and you’d see the stock market immediately go up 20 percent.”

]]> http://www.klineforcongress.com/news/472/ Resurgent Republic

Overview

Voters in the dozen states with 2010 U.S. Senate races designated as "toss ups" by the Cook Political Report overwhelmingly oppose tax increases scheduled to take effect on January 1, 2011, and do not believe Members of Congress should address important legislation in a lame duck session of Congress after the November elections, according to Resurgent Republic's analysis. These dozen states - Arkansas, California, Colorado, Florida, Illinois, Kentucky, Missouri, New Hampshire, Nevada, Ohio, Pennsylvania, and Washington - are very likely to determine which party controls the U.S. Senate in 2011.

Resurgent Republic's most recent survey of 1,000 likely voters was conducted from July 17-20, 2010

TAX INCREASES

On January 1, 2011, the largest tax increase in the nation’s history will go into effect unless Congress acts to prevent it, but the Democratic Congressional leadership has yet to schedule legislation to stop the tax hikes.

Somewhat surprisingly, only a little over half of all voters (54 percent) are aware of the looming tax increases. There is an interesting partisan divide in the awareness, however: 70 percent of Republican voters in these states and 57 percent of Independents have heard about the impending tax increases, compared to only 38 percent of Democrats.

Would you say you have heard or have not heard about a significant increase in federal income taxes that is scheduled to occur on January 1, 2011?

Regardless of whether they have heard about the impending increases, a majority of these voters opposes bringing back the “marriage penalty” (87 percent), raising the tax rate on dividend income (79 percent), reducing the child tax credit (74 percent), raising income tax rate on all wage earners (73 percent), reviving the “death tax” (63 percent), raising capital gains tax (61 percent) and increasing the number of families paying the alternative minimum tax (50 percent).

If the Democrats who control Congress do not stop or delay these scheduled tax increases before the November election, 55 percent of the voters in these states would be less likely to vote for Democratic candidates for the House or Senate, including 57 percent of Independents.

Among the partisan groups, a majority of Republicans and Independents opposes all seven of these tax increases, compared to Democrats who support raising the capital gains tax (56 to 41 percent), the “death tax” (50 to 46 percent) and split on the alternative minimum tax (40 to 40 percent). Failure to extend all the tax relief slated to expire will once again put Democrats at odds with Independent voters.

If the Democrats who control Congress do not act to stop or delay these scheduled tax increases before the election, would that make you more likely or less likely to vote for Democratic candidates for House and Senate?

How did these voters respond to all seven tax increases tested? Read the full report here.

REDUCING THE DEFICIT

Widespread opposition to tax increases is grounded in the perception that the federal deficit is driven by too much spending rather than too little revenue. The survey posed two alternative statements:

We need more tax revenue as well as spending cuts to reduce the federal deficit. We will never get the deficit under control unless we make the difficult but necessary decision to raise taxes.

Our federal deficit is a result of too much spending in Washington, not too little tax revenue. Instead of raising taxes on anyone, Congress should make the difficult but necessary decisions to get spending under control.

The debate over whether additional tax revenue is needed to address record deficits might still be alive in Washington, but it is already settled with voters.

These voters prefer the second statement over the first by 73 to 24 percent, with a majority of all three partisan groups believing that the deficit is primarily a spending rather than a revenue problem. The debate over whether additional tax revenue is needed to address record deficits might still be alive in Washington, but it is already settled with voters.

LAME DUCK CONGRESSIONAL SESSION

Voters in these toss-up Senate states believe it is a bad idea to pass major legislation in a lame duck session of congress. Three-fourths of Republicans and two-thirds of both Independents and Democrats agree that "a lame duck session of Congress is a bad idea. Members of Congress should cast votes on important bills before facing the voters, not wait until after an election to cast those votes."

A majority of voters in these states believes that if Congress does not vote on tax increases, card check, cap-and-trade legislation or immigration reform before the November elections it is because Democrats are afraid their positions will be unpopular with voters, not because they think Republicans are obstructing the political process. The critical swing group of Independents blames any failure to address these issues on Democratic fears rather than Republican obstruction by 57 to 32 percent.

By a margin of 63 to 19 percent, voters in toss-up Senate states would be less likely to vote for their member of Congress if he or she refused to rule out voting on important issues like tax increases, immigration reform, cap-and-trade legislation or card check in a lame duck session of Congress, including 69 to 19 percent among Republicans, 63 to 19 percent among Independents, and 59 to 21 percent among Democrats.

If your member of Congress refused to rule out voting for those important bills in a lame duck session of Congress, would that make you more or less likely to vote to re-elect him?

When should Congress address these issues if they fail to do so before November? Read the full report here.

CONCLUSION

Speaker Pelosi only last week refused to rule out a lame duck session of Congress to consider controversial legislation, seeking to set up Republicans for blame if they do, citing obstructionism. She is cutting against the grain of public opinion in key swing states, and Republicans should reinforce voter wariness of a possible lame duck session of Congress.

Yesterday, Treasury Secretary Geithner rejected extending all of the tax relief measures saying, “I don’t believe it should and I don’t believe it will.” If Democrats enact only targeted tax relief (i.e., marriage penalty, child tax credit, 10% bracket only) they will be opposed by the vast majority of Independents on the tax cuts they do not extend, while making clear not only whose taxes will remain at current levels but also whose will be going up. Yet, failing to enact any tax relief before adjourning for the November elections will make voters less likely to vote for Democrats.

Lastly, all incumbents in both parties seeking re-election should be asked if they will pledge not to vote for controversial bills like tax increases, cap-and-trade legislation, card check or immigration reform in a lame duck session of Congress after the elections. Democrats who do so will make it harder for the current majority to pass such bad policies (and will make clear to liberal voters that any secret plan to do so is not viable). If they don’t, their voters will be able to cast an informed vote on their incumbent congressman or senator.
]]> http://www.klineforcongress.com/news/471/ Boston Herald

The Patrick administration faces renewed criticism over its job creation efforts with the state unemployment rate at 9 percent and a measly 23 stimulus-funded openings on the state’s official online jobs board.

“It’s laughably small,” said David Tuerck, executive director of the Beacon Hill Institute at Suffolk University. He added the stimulus spending has simply not addressed the lack of jobs within the private sector.

The Patrick administration has doled out $5.1 billion of an anticipated $6 billion federal stimulus haul. Overall, the state is expected to rake in $13.8 billion in stimulus funds when tax cuts and direct federal grants to cities, towns, universities and favored companies are included.

So far, more than half of that money has been spent and only 30,800 workers can thank the feds for a portion of their paycheck. That number represents the reported head count for created or retained jobs statewide. State statistics show the vast majority of the money has been spent to retain government jobs at taxpayer expense.

“The stimulus (program) is a perfect example of politics as usual,” said Treasurer Tim Cahill, an independent candidate for governor.

“We need to grow the private sector,” said Rick Gorka, a spokesman for GOP candidate Charlie Baker.

A representative for Gov. Deval Patrick defended the stimulus program yesterday and the administration’s overall efforts to improve the economy.

“Job creation continues to be one of the Patrick-Murray administration’s top priorities,” said Jeffrey Simon, Patrick’s director of the Massachusetts Recovery and Reinvestment Office. “It is why we included specific regulations in our state (stimulus) legislation that all contractors post their job openings through JobQuest. To date, close to 1,500 (stimulus) jobs have been posted on this site.”

But to explain the current 23 job listings, the Patrick administration quietly claims that private companies don’t always comply with state regulations that stimulus-related jobs should be posted.

Observers such as Tuerck, Cahill and Gorka counter that the 23 job postings reflect how little impact the entire stimulus program has had on creating jobs in the private sector.
]]> http://www.klineforcongress.com/news/470/ Wall Street Journal

The Obama administration will allow tax cuts for the wealthiest Americans to expire on schedule, Treasury Secretary Timothy Geithner said Thursday, setting up a clash with Republicans and a small but vocal group of Democrats who want to delay the looming tax increases.

Mr. Geithner said the White House would allow taxes on top earners to increase in 2011 as part of an effort to bring down the U.S. budget deficit. He said the White House plans to extend expiring tax cuts for middle- and lower-income Americans, and expects to undertake a broader revision of the tax code next year.

"We believe it is appropriate to let those tax cuts that go to the most fortunate expire," Mr. Geithner said at a breakfast with reporters.

Treasury Secretary Timothy Geithner said the Obama administration will allow tax cuts for the wealthiest Americans to expire despite calls from a small group of Democrats to delay tax increases. Kelly Evans talks to John McKinnon in Washington.

His comments came as a number of Democrats, among them North Dakota Sen. Kent Conrad, have begun agreeing with Republicans and some economists who want to extend the Bush-era tax cuts for all earners, including couples earning above $250,000 and individuals earning above $200,000. Sen. Joseph Lieberman, a Connecticut independent, added his voice on Thursday, saying through a spokesman that he was "concerned about the impact of allowing the tax cuts to expire during our fragile economic recovery."

Mr. Geithner said there's "still some uncertainty about how strong the recovery is going to be," which may be affecting spending decisions by businesses and individuals. He discounted that as a reason to extend the tax cuts for top earners, saying most private forecasts show moderate economic growth and increasing public confidence in the recovery.

Pressure is growing on the administration from a small number of Democratic lawmakers to extend all the Bush cuts, which include taxes on investment income and capital gains.
Journal Community

"I think given the fragility of the recovery, the timing is wrong for any kind of tax increase of this nature," Rep. Gerry Connolly (D., Va.) said. "I know that puts me out of step with many in my own caucus, but it's important for members to remember the top 5% [of earners] generates 30% of consumer spending."

Mr. Connolly said there were "lots of conversations going on sotto voce" among House Democrats over whether to extend current tax levels for all earners, not just the middle class.

Federal Reserve Chairman Ben Bernanke told lawmakers Thursday the U.S. "should maintain our stimulus in the short term." Extending the Bush tax cuts "is one way" of doing that, he said. "There are other ways as well."

Many economists say raising rates on top earners could prompt consumers to rein in spending. A Goldman Sachs research report projects the expiration of the tax cuts could shave just under 0.5 percentage points off growth in 2011.
[TAXES]

All the Bush-era tax cuts are set to expire at the end of this year, meaning Congress must act if it wants to avoid raising taxes across the board. Political strategists said that could give Republicans an edge, since they could essentially hold the entire package hostage unless Democrats agree to extend the cuts for high-income earners.

"The question is, do Republicans think they can get this to the end game, where Democrats face a choice of seeing an income tax increase on everybody," said Tom Gallagher, a Washington-based analyst with ISI Group, a Wall Street research firm. He speculated that a compromise could include a short extension for higher earners.

A Senate Democratic leadership aide said as of now, neither a partial extension of the Bush tax cuts nor a full extension could win the 60 votes needed to break an expected Senate filibuster. Liberals would try to block a full extension. Republicans would try to block an extension of just the middle-class tax cuts.

House Majority Leader Steny Hoyer of Maryland planned to lay out Democrats' agenda on the economy in a speech Friday. He is expected to criticize Republicans by lumping their support for tax cuts with their opposition to government regulation of Wall Street and the oil industry.

Even if Republicans and centrist Democrats succeed in winning an extension of current tax levels for the next year or two, taxes could be going up after that. A top Republican on President Obama's blue-ribbon fiscal commission, Sen. Judd Gregg of New Hampshire, said tax increases are on the table in the bipartisan panel's negotiations, along with spending cuts.

The administration estimates that allowing tax cuts to expire for upper-income earners would increase U.S. revenue by more than $800 billion over the next 10 years. It also plans to push to reinstate the estate tax to the 2009 level of 45%.

House Speaker Nancy Pelosi of California appeared to back Mr. Geithner in ruling out a compromise. "Our position has been that we support middle-income tax cuts," she said at a press briefing. "The tax cuts at the high end have increased the deficit enormously and…have not created jobs in the eight years of the Bush administration."

Write to Deborah Solomon at deborah.solomon@wsj.com and John McKinnon at john.mckinnon@wsj.com
]]> http://www.klineforcongress.com/news/469/ The Hill

Democrats are considering a plan to delay tax hikes on the wealthy for two years because the economic recovery is slow and they fear getting crushed in November’s election.

It could mean a big reprieve for families earning $250,000 and above annually.

President George W. Bush’s tax cuts will expire at the end of the year unless Congress acts to delay their sunset.

Some Democrats are now arguing forcefully that a delay is a win-win plan that would help the federal budget without hurting the economy.

Wealthy families would not have an incentive to cut back on spending and budget writers could assume an inflow of tax funds in future years, making five- and 10-year budget projections look less scary.

Rep. John Yarmuth (D-Ky.), a member of the Ways and Means Committee, which has jurisdiction over taxes, said some of his Democratic colleagues have discussed the idea out of fear of impeding the nation’s economic recovery.

“I’ve heard some sentiment about raising the rate but not making it effective until 2012,” he said.

During the 2008 presidential campaign, President Obama said he would not extend the Bush-era tax cuts for families earning more than $250,000.

Obama promised that families earning less than $250,000 would not see their taxes increase.

But vulnerable Democrats in Congress are worried about talk of raising taxes, even on the wealthiest families, when the national economic recovery has slowed.

“I think the recovery is sufficiently fragile that we ought to leave tax rates where they are,” said Rep. Gerry Connolly, a freshman Democrat from Virginia.

Connolly said Democrats should not allow the 2001 Bush tax cuts to expire for anybody.

“People in the upper tax brackets have a huge impact, a disproportionate impact on consumer spending,” he said.

Sen. Kent Conrad (N.D.), a senior Democrat on the Senate Finance Committee, said he could support a short-term extension of the Bush tax cuts for the highest income earners.

He noted that experts predict continued economic weakness over the next 18 to 24 months.

“My reaction would be don’t cut spending, don’t raise taxes and that would mean on anyone,” he said.

Rep. Bobby Bright, a Democrat facing a tough reelection race in Alabama, said tax increases, even if limited to the wealthiest families, could imperil the recovery.

“I don’t care if it’s the wealthiest of the wealthy, you don’t raise their taxes,” he said. “In a recession, you don’t tax, burden and restrict. The economy is like a ship, and if you sink the ship, all the good you might do goes down with it.”

Families who make up the 5 percent of highest earners account for about 30 percent of consumer spending.

Mark Zandi, chief economist for Moody’s Analytics, recently declared that a drop in spending by the rich has slowed the economic recovery.

“One of the reasons that the recovery has lost momentum is that high-end consumers have become more jittery and more cautious,” he told The New York Times.

Liberals who favor the tax hikes note that these families also take in almost 30 percent of the nation’s income, according to Congressional Budget Office data from 2007. The top 1 percent of earners collect 17 percent of the nation’s income, according to CBO.

Yarmuth said Connolly and Bright, who don’t want to touch the tax rate on the wealthiest, represent a minority opinion in the Democratic Caucus.

But he added concern over the economic impact of raising any taxes has spurred the idea of postponing when higher taxes go into effect.

Discussions are in the earliest stages and it’s not yet clear whether the tax impact would be postponed until after November of 2012, when Obama faces reelection.

Even liberal lawmakers from the Northeast have begun pushing to shield some of the nation’s highest income-earning families from tax increases.

Rep. Jerrold Nadler, a Democrat from Manhattan, has proposed legislation that would provide adjustments in income tax rates to reflect regional costs of living.

The legislation is sponsored by five Democrats representing New York City, its suburbs and Long Island where living standards and incomes are high.

They are Reps. Tim Bishop, Steve Israel, Nita Lowey, Carolyn Maloney and Carolyn McCarthy.

Rep. Jared Polis, a freshman Democrat from Colorado, said lawmakers are torn between concerns over the economic effect of raising taxes and the budget impact of keeping rates low for earners in the top brackets.

Allowing income tax rates to reset to pre-Bush levels for individuals earning more than $200,000 and families earning more than $250,000 could generate close to $700 billion over the next 10 years.

Families earning more than $374,000 a year in taxable income would see their rate jump from 35 percent to 39.6. Families earning above $250,000 in gross income would see their rate jump from 33 percent to 36.

The debate promises to get more contentious as Democrats near the end of the year.

Speaker Nancy Pelosi (D-Calif.) has reiterated her support for raising taxes on individuals and families who earn the most.

“My position is also that the Bush tax cuts for the wealthiest people in America did nothing to grow the economy during the Bush administration, did not create jobs, did not reduce the deficit,” she said at a recent press conference.

In the Senate, some liberal Democrats such as Sen. Tom Harkin (Iowa) would like to see the Bush tax cuts expire for families earning $200,000 a year, or even less.

Sen. Byron Dorgan (D-N.D.) disputed the argument that raising taxes on the wealthy could hurt the economy.

“One of the most robust periods of economic growth was prior to the Bush tax cuts,” he said.

He said large federal deficits, which would be addressed by tax increases, have caused people to lose confidence in the economy.

Chuck Marr, director of federal tax policy at the Center on Budget and Policy Priorities, a left-leaning think tank, said the economic impact of raising taxes on the wealthy is overstated.

He said the spending of high-income people is less affected by moderate shifts in income than is that of middle-income people, who often live “paycheck to paycheck.”

“If lawmakers are concerned about the impact on the economy, they would be better off taking money raised from taxing the wealthy and channeling it in policies that deliver more bang for the buck,” he said.

Some Democratic policy experts cite unemployment aid and infrastructure spending as policies with greater economic impact than keeping taxes low for the wealthy.

]]> http://www.klineforcongress.com/news/468/ Politico

In the eyes of corporate America, President Barack Obama relied on a healthy dose of industry-bashing to sway votes in Congress for health reform and the new Wall Street regulations signed into law Wednesday.

Now those efforts threaten to undermine the one agenda item essential to Democrats’ hopes in the midterms and Obama’s chances for reelection: turning around an economy still just a half step out of recession.

Some corporate leaders said Obama’s comments prove that he’s hostile to business. Others cited corporate fears of a credit crunch as banks comply with financial reform or the possibility of significant tax hikes if the Bush administration tax cuts are allowed to expire.

But it all adds up to a lack of confidence in Obama among some in corporate America — and that’s fueling a reluctance among executives from Wall Street to Main Street to deploy their large cash reserves to make new investments and hire new workers.

That, in turn, has made a positive shift in the economic climate less likely, especially in the short term, when Democrats need it most.

“There is still a great deal of anxiety over the demonization of business, and it is a serious problem” for Obama, said Mort Zuckerman, the billionaire chairman of Boston Properties and owner of the New York Daily News, who has long supported Democrats.

Executives “really feel there is a deliberate attempt, as a populist political measure, to blame the business world for all the problems we have been having, when, in reality, the housing bubble was provoked by Fannie Mae and Freddie Mac. And it wasn’t business or the public that lowered interest rates and created the credit bubble. It was the Federal Reserve.”

White House officials strongly rejected the argument that the administration has been anti-business, with Obama senior adviser Valerie Jarrett telling POLITICO that Obama has been careful to direct his remarks only at specific behavior in corporate America, rather than vilify business as a whole. She sends copies of the president’s remarks to corporate executives so they can see their full context rather than just sound bites that might irritate them.

“We have an open-door invitation to the business community to come forth and dialogue with us to foster an environment that is conducive to investment and growth and job creation while at the same time [protecting] the American people,” Jarrett said.

Jarrett said she believes some of the unease in corporate America stems from the ongoing impact of the economic crisis and that the White House had made great strides in shoring up the financial and automotive industries and moving from 750,000 job losses per month to slow but steady gains in employment. And she said the administration continues to work hard to open up trading barriers as part of its goal to double exports in five years.

The administration can point to a rising Dow (up about 12 percent under Obama), as well as swelling corporate profits, as evidence that the current White House has been anything but bad for the business community.

Corporate executives counter that the market recovery began as a result of a bank bailout that predates Obama and that the bulk of corporate profits in recent quarters have come not from business expansion but from massive layoffs and cost cutting.

And they do not see a friendly environment for job creation ahead, citing a possible credit crunch and an exploding budget deficit saddled by more health care spending.

Many see complying with new health care and financial regulations as their only promising areas for growth.

“What I think bothers businesspeople is, they feel like they have a multitude of new regulations to comply with, and now they have to hire compliance experts and lawyers and other cost-generating personnel rather than revenue-generating workers,” said Scott Shay, chairman of Signature Bank, which has $10 billion in assets and serves companies in the New York metro area.

“When the devil is in the details, when you are dealing with a lot of new regulation at a time when we desperately need to be [generating] revenue-creating jobs rather than cost-center jobs, it causes concern. I hear it time and time again: ‘Give us broad rules, but don’t micromanage us like this.’”

Other observers said that while the White House has strong arguments to make that it has only tried to re-establish fair ground rules for industries that wreaked havoc on the economy (Wall Street), the health care industry (health maintenance organizations) and the environment (oil and gas companies), executives still feel demonized as part of the effort to pass these new rules.

And many executives said they feel they lack a sympathetic ear at the Treasury Department or in the West Wing — someone like Robert Rubin in the Clinton White House, who, while perhaps not agreeing with them, could at least hear them out and understand them.

Treasury Secretary Timothy Geithner is respected by industry but has a government rather than a private-sector résumé and is not viewed as a soothing voice in the way Rubin was.

“From the standpoint of really big business, I think it was a combination of Obama’s body language and a lack of savvy communication that really raised their ire to begin with,” said Jeffrey Garten, a former Wall Street executive and Yale School of Management dean who served as undersecretary of commerce during the Clinton administration.

“It is symbolic but nonetheless very important that [Obama] failed to have anyone around him with really high-level business experience,” Garten added. “It sent a signal. Also, if he had it to do over again, maybe leading with health care was not the best thing to do in terms of restoring business confidence and aiding the economy. But what comes next is what is really important. All this finger-pointing is very corrosive and has to stop. We are all in this soup together.”

That fact — that it is an end to the dysfunctional White House-business relationship that matters now — is what had some on Wall Street disappointed with the way in which Wednesday’s signing ceremony for the Dodd-Frank financial reform bill was handled.

The administration invited only a handful of industry executives deemed fully supportive of the legislation, such as Citigroup CEO Vikram Pandit, leaving some thinking an opportunity to change the tone had been missed.

Bank leaders viewed as insufficiently supportive or politically untouchable, such as JPMorgan Chase CEO Jamie Dimon and Goldman Sachs CEO Lloyd Blankfein, were left out.

“The obvious political thing would have been to pick the 25 biggest financial companies impacted by this bill and personally invite the heads of each one,” a financial executive said. This executive added that the White House could have sent the message that the battle was over and it was time to rally together for the sake of the broader economy.

The White House said it’s much ado about nothing. The banking chiefs didn’t complain about being left out, noted one White House official — and it’s actually the first time the administration invited opponents of the bill being passed in the first place. Besides, there were only 400 seats in the auditorium in the Ronald Reagan Building, precious real estate for folks who wanted to be there when history is made.

“The choice was to leave out someone who spent 16 months fighting for reform so that someone who spent millions fighting to defeat reform could be in the audience,” this official said.
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By MICHAEL J. BOSKIN
Wall Street Journal

A president's most valuable asset—with voters, Congress, allies and enemies—is credibility. So it is unfortunate when extreme exaggeration emanates from the White House.

All presidents wind up saying some things that make even their own economists cringe (often the brainchild of political advisers unconstrained by economic principles, facts or arithmetic). Usually, economic advisers manage to correct these problematic statements before delivery. Sometimes they get channeled into relatively harmless nonsense, such as President Gerald Ford's "Whip Inflation Now" buttons. Other times they produce damaging policies, such as President Richard Nixon's wage and price controls. The most illiterate statement was President Jimmy Carter's late-1970s plea to the Federal Reserve to lower interest rates to combat high inflation, the exact opposite of what it should do. Not surprisingly, the value of the dollar collapsed.

President Obama says "every economist who's looked at it says that the Recovery Act has done its job"—i.e., the stimulus bill has turned the economy around. That's nonsense. Opinions differ widely and many leading economists believe that its impact has been small. Why? The expectation of future spending and future tax hikes to pay for the stimulus and Mr. Obama's vast expansion of government are offsetting the direct short-run expansionary effect. That is standard in all macroeconomic theories.

So, as I and others warned in 2008, the permanent government expansion and higher tax rate agenda is a classic example of what not to do during bad economic times. Worse yet, all the subsidies, bailouts, regulations and mandates are forcing noncommercial decisions on the economy, which now awaits literally thousands of new diktats as a result of things like ObamaCare and the financial reform bill. The uncertainty is impeding investment and hiring.

The president does not say that economists agree that the high future taxes to finance the stimulus will hurt the economy. (The University of Chicago's Harald Uhlig estimates $3.40 of lost output for every dollar of government spending.) Either the president is not being told of serious alternative viewpoints, or serious viewpoints are defined as only those that support his position. In either case, he is being ill-served by his staff.

Mr. Obama's economic statements are increasingly divorced not only from competing viewpoints but from those of his own economic advisers. It is surprising how many numerically challenged pronouncements come from this most scripted and political of White Houses. One slip is eventually forgiven, but when a pattern emerges, no one believes it is an accident.

For example, on the anniversary of the stimulus bill, Mr. Obama declared, "It is largely thanks to the Recovery Act that a second Depression is no longer a possibility." Yet his Council of Economic Advisers just estimated the stimulus bill's effect on GDP at its trough was 1%-2%.

The most common definition of a depression is a long period in which GDP or consumption declines at least 10%. The decline in GDP in the recent recession was 3.8%, in consumption 2%. No one disputes the recession was severe, but to reach a 10% GDP decline requires tripling the administration's estimate (three times their 2% effect) added to the actual 3.8% decline. On the alternative consumption standard, the math is even more absurd. The depression statement isn't credible. The stimulus bill has assumed certain mystic powers in administration discourse, but revoking the laws of arithmetic shouldn't be one of them.

The recession would have been worse if not for the Fed's monetary policy and quantitative easing. Also important were the unmentioned automatic stabilizers—taxes falling more than income, cushioning declines in after-tax incomes and consumption—which were far larger than the spending and tax rebates in the stimulus bill. Arguing that all these policies (including injecting capital into banks, which was necessary but done poorly) may have prevented a depression is perhaps still an exaggeration but at least is within hailing distance of plausibility. On that scale, the effect of the stimulus was puny.

On his recent "Recovery Tour," Mr. Obama boasted, "The stimulus bill prevented the unemployment rate from "getting up to . . . 15%." But the president's own chief economic adviser, Christina Romer, has estimated that the stimulus bill reduced peak unemployment by one percentage point—i.e., since the unemployment rate peaked at 10.1%, it prevented the unemployment rate from rising to just over 11%. So Mr. Obama claims that the stimulus bill was several times more potent than his chief economic adviser estimates.

Perhaps the most serious disconnect concerns the impending expiration of the 2001 and 2003 tax cuts, which will raise the top two income tax rates and the rates on dividends and capital gains. If these growth inhibiting tax increases occur—about $75 billion in tax increases next year, $1.4 trillion over 10 years—there will be serious economic damage.

In the most recent issue of the American Economic Review, Ms. Romer (and her husband David H. Romer) conclude that "tax increases are highly contractionary . . . tax cuts have very large and persistent positive output effects." Their estimates imply the tax increases would depress GDP by roughly half the growth rate in this so-far-anemic recovery.

If Mr. Obama is really serious about a second stimulus, by far the best thing he can do is have Congress quickly extend the expiring Bush tax cuts, combined with real spending cuts set to take effect as the economy improves.

The president badly needs to make more realistic pronouncements. No one expects him to say his policies have failed (although most have delivered far less than claimed at large cost). A little candor about the results of experimentation in uncharted waters would go a long way. But at the very least, his staff needs to avoid putting these exaggerations on the teleprompter. It undermines confidence and raises concerns about competence. It's doing nobody any good—not the economy and certainly not Mr. Obama.

Mr. Boskin is a professor of economics at Stanford University and a senior fellow at the Hoover Institution. He chaired the Council of Economic Advisers under President George H.W. Bush.
]]> http://www.klineforcongress.com/news/466/ The Hill

In what may be a preview of the fiscal battle to come, a group of House Democrats criticized their party on Tuesday for failing to back specific deficit-reduction proposals.

“We have been frustrated, quite frankly, with both parties,” said Rep. Gary Peters (D-Mich.), who formed a working group with four other Democrats that is devoted to advancing spending cuts. “We can’t just be talking about generalities.”

Peters and Reps. Peter Welch (D-Vt.), Jim Himes (D-Conn.) and John Adler (D-N.J.) challenged the Democratic leadership to embrace proposals that have specific dollar figures and programs attached to them.

“You have to get specific if you want to get real,” said Welch, a member of the Congressional Progressive Caucus. “Anything other than specific proposals is just generalized talk, and talk, and talk. People rightly are skeptical that it is going to go anywhere.”

Under the banner of the Spending Cuts and Deficit Reduction Working Group, the four Democrats are proposing budget cuts that would total $72 billion over 10 years — a modest proposal for a budget that clocks in at over $3 trillion per year.

The budget items offered for elimination include select defense programs, agricultural subsidies and tax breaks for the oil and gas industry. The group touted the measures as “concrete, actionable ideas” that could be implemented immediately.

Many of the cuts suggested by the group have failed to make it through Congress in the past. Cuts to farm subsidies have been shot down numerous times by lawmakers from rural states. And the proposed termination of the C-17 military aircraft program has been pushed by the Defense Department for years, with little success.

The lawmakers steered clear of more far-reaching reforms, such as changes to entitlement spending, though one Democrat did say a proposal to cut the defense budget by $1 trillion over the next decade deserves more consideration. That plan was recommended by a panel led by Reps. Barney Frank (D-Mass.) and Ron Paul (R-Texas).

“The Frank-Paul approach is asking some very systemic questions,” said Welch, who authored the defense portion of the group’s spending reduction proposal. “Those are questions Congress should ask.”

The package “doesn’t really fix the problem,” Himes conceded. “It is a down payment, if you will. It’s an indication of seriousness. It’s an indication of willingness to put some specifics on the table.”

Specifics have been largely absent from much of the deficit-reduction rhetoric espoused by Democratic leaders, many of whom have been quick to criticize plans put forth by Republicans. They say GOP proposals are fanciful exercises designed to score political points with an angry public.

Democrats have been particularly critical of House Republican Whip Eric Cantor’s (Va.) “YouCut” initiative to find deficit-reducing solutions.

“I agree that every dollar counts — even when we’re discussing .002 percent of our debt, which was the size of the first YouCut winner,” House Majority Leader Steny Hoyer (D-Md.) said on June 22. “But sadly, this partisan gimmick is emblematic of the way Republicans have behaved in the minority: sound bites, not sound policy. We have hard choices and actual sacrifices to face, and pretending that a series of small items will even put a dent in the real problem is just the false impression of real action.”

At his weekly session with reporters Tuesday, Hoyer said he hadn’t yet looked at the working group’s proposal. While he praised the effort of “four very responsible members of the United States Congress,” the majority leader said he wasn’t going to endorse or condemn every deficit-reducing proposal that comes before him.

“Any suggestions that are made and positive proposals to look at ways and means to get to fiscal balance, I think, are useful,” Hoyer said. “That doesn’t mean I support all of them.”

But if a seemingly ever-growing group of Democrats has its way, leaders will be forced to pick deficit-cutting proposals — perhaps even ahead of the November midterm elections.

To bring about such a day of reckoning, the lawmakers leading the working group said they would encourage other members to come forward with proposed cuts, and even held out the hope that their working group would become a bipartisan organization. Welch said rank-and-file members of the Democratic Caucus would have to step up.

“What leadership can do is really affected by what the membership is willing to do,” he said.