Saturday, January 30, 2010

Sunshine Days for President Obama

- President talks about freezing some portion of government spending to establish the 'budget hawk' credentials along with small, but reasonably good measures about tax cuts and helping small businesses.
- President starts being a 'loud mouth' about Banks along side of some big sticks like Paul Volcker.
- President gives a reasonably well received State of Union address to Congress.
- Next, Fed Chief nominee Bernanke is confirmed.
- Engagement with Republicans in Congress goes as desired - some tough love talk.
- Finally, you have good GDP number.

Overall, President Obama is executing his much speculated pivotal turn in his political approach ruthlessly and with some initial success. It's objectives are two fold:

- to win back those of his Independent supporters who backed him and Democrats in 2008 and who have now crossed over to Tea Party camp and
- to prepare for 'above the fray' Presidency, modeled bit along Regan, when potentially Republican takes over Congress or for sure when they increase their presence at the cost of Democrats after Nov 2010 election.

Policy wise there seems to be a clear break with Paul Krugman line (more deficit spending) and seems that Summers camp has won here - get reappointment of Bernanke for the second term, restrained spending and explicit adoption of Export driven, Mercantile style economy. In his Saturday speech, President went so far even to proclaim that 'budgetary deficits' can undermine recovery as well! That is quite a turn from 'increasing deficit for recovery'.

It seems Administration wants to live by the risk of 'double dip' rather than extent budgetary support. (Prof. Roubini is back sounding Cassandra at Davos meeting.) Here Administration is adopting the 'standard projection' about American economy - it is going to be a V shaped recovery. Both Bernanke and Summers are betting on that (Geithner does not count when big boys are doing the serious business of money). President must be thinking even if we get 'double dip' it will not be politically harmful to switch back 'spending for recovery' route. He is having both ways, but who said Economic Policy Purity is needed for a politician?

As long as non-depressing economic news (like growing GDP) stays in the news and media portrays Admin as 'on top of deficit control'; public will bare with horrendous 'unemployment news'. Also, 'humble line of talking' (Summers not opening Champagne cork on GDP news); that is always handy too.

So all in all couple of weeks after the MA Senate loss, Obama White House is gathering itself at the cost of Congressional Dems. Those Dems will be left with carcass of Health Care Reform. Essentially Obama White House is 'washing their hands' with HCR to make Congressional Dems to pay the price. Thinking is, if Congressional Dems wanted, either they will come up with a bill on their own or will compromise with GOP for a more bipartisan bill. 'Congress is broken, Senate is hopeless and infighting between two chambers is intractable - so why bother?' that is what White House is thinking. 'Let us live for another day', such an expedient view is winning in White House now that they get a sense that it is possible to be at least a hobbled president like Clinton if not epochal FDR II.

American people - least interested in all this. As long as Obama stays above the muck of Congress and keeps working to help them and Economy starts showing some life; they all are fine.

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