Economy pitch mainly a blame game for both parties

[October 04, 2010]  WASHINGTON (AP) -- If you don't like the economy, blame President Barack Obama and Democrats because they're making times tougher, Republicans are telling voters entering the four-week homestretch to an election the GOP hopes will return the party to power in Congress.

Look, Democrats say, it's the Republicans who caused the financial meltdown and recession. Do you want them to do it again? As bad as high unemployment, record home foreclosures and bankruptcies are, they'd be worse if the GOP had succeeded in blocking financial and auto industry bailouts and Obama's stimulus plan, Democrats claim.

The dueling arguments will dominate the airwaves between now and Nov. 2 in an election that will turn on which message is believed. Because Democrats hold the White House and both the House and Senate, they're more likely to bear the brunt of an anti-establishment furor fueled by the ailing economy.

Each party suggests it holds the key to future prosperity.

Obama takes frequent credit for averting a Great Depression and for laying the groundwork for a recovery, which millions of people have yet to see. He blames the worst economic downturn since the 1930s on George W. Bush-era policies and Republican intransigence. It's up to him and fellow Democrats "to clean up after their mess," he says at party rallies.

Republicans are playing to their base and trying to tap into the indignation evident in the tea party movement. They blame soaring deficits and a near 10 percent joblessness on Obama and Democratic policies, which they say promote runaway spending and stifle investment and job creation.

The GOP is seeking to turn the races into a referendum on Obama, much as Democrats did in 2006 when Bush was in the middle of his second term.

"The mood of the country isn't anti-incumbent -- it's anti-taxes, anti-spending and anti-Obama," says House Republican leader John Boehner of Ohio. He's in line to replace Rep. Nancy Pelosi, D-Calif., as House speaker if Republicans regain control.

In the latest Associated Press-GfK poll, about twice as many blame Bush for the recession as blame Obama. But Republicans and Democrats in Congress alike are seen as at fault by about four in 10 adults, and Republicans hold a narrow edge as more trusted to handle the economy.

Republicans are expected to make big gains in November. Democratic leaders are having difficulty holding their troops together. So Congress left for four weeks of campaigning with lots of work undone, including the federal budget and the fate of Bush-era tax cuts that are set to expire Jan. 1.

Nineteen months into his presidency, Obama can point to a series of legislative accomplishments that under any other circumstances would be considered remarkable:

• The $814 billion stimulus program, which passed shortly after he took office.

• Landmark overhauls of health care and financial regulation.

• A major education bill.

• A $30 billion fund, enacted this month, to help small businesses.

• Overseeing a $700 billion bailout program for troubled financial institutions that was started under Bush.

• Helping complete the rescue of automakers General Motors and Chrysler.

The White House argues that Obama gets little credit for such an impressive run, accomplished with little or no Republican support.

Polls show widespread public skepticism toward the stimulus program, anger over the Wall Street and auto bailouts, mistrust of government in general, fears that jobs won't return and worries about a national debt that has grown to $13.6 trillion -- more than the nation's gross domestic product.

A White House report Friday claimed the stimulus program was on track to create or save 3.5 million jobs by the end of December and that about two-thirds of the money had been committed in government spending and tax cuts.

The nonpartisan Congressional Budget Office, by contrast, estimates the program is responsible for as few as 1.4 million jobs and as many as 3.3 million. Republicans scoff at the administration's use of the "jobs saved" category in its totals and point out that when the stimulus was passed, the White House said it would help hold unemployment at under 8 percent; it's now 9.6 percent.

With partisan rhetoric flying, Republicans and Democrats present starkly different perspectives of what's at stake.

Putting off a decision on the expiring tax cuts was a high-risk strategy that could backfire for Democrats. If no agreement is reached in a postelection session of Congress, taxes will rise on Jan. 1 for nearly every household. Neither party wants to be associated with that.

Obama and most Democratic leaders favor letting the cuts, passed in 2001 and 2003, lapse for the rich, but continue for everyone else. Republicans suggest that could wreck the fragile economic recovery; they want all the cuts extended.

The expiring tax cuts are not only on wage income. They also cover interest, dividends, capital gains and large inheritances. Relief from the marriage penalty would disappear, and the per-child tax deduction would slide from $1,000 back to $500.

Not knowing what tax rates will be just a few months from now adds to "the collective nervousness," said Mark Zandi, chief economist at Moody's Analytics. "With each passing day, the uncertainty increases."

Because neither party wants to be blamed for raising everyone's taxes in hard times, some compromise seems likely before year's end -- perhaps a temporarily extension for all the cuts. Efforts to slash taxes on businesses, though supported by Obama and both parties, have stalled without finding a way to avoid adding to the government's debt.

Democrats kept scolding Republicans as "the party of no," and then the GOP rolled out a "Pledge to America" last month. Full of rhetorical flourishes modeled on the Declaration of Independence and Newt Gingrich's "Contract With America" from 1994, this new statement of principles calls for extending all the Bush tax cuts while offering vague spending cuts. Nonessential government spending would return to 2008 levels, according to the blueprint.

"Putting spending, putting the policy of economic growth in place and cleaning up the way Congress works is not only a stark contrast to this president and this Congress. It's a contrast to the way we conducted ourselves a decade ago. We spent too much money. We lost our way," said Wisconsin Rep. Paul Ryan, one of the GOP's rising stars.

Both parties suffer divisions within their own ranks over goals and priorities.

Senate Republicans, for instance, did not join their House counterparts in lining up behind the agenda. Some Republicans have criticized it for lacking specifics on how to reduce deficits while extending tax cuts.

Fiscally conservative Democrats are resisting pleas by Obama, Pelosi and Senate Majority Leader Harry Reid, D-Nev., to extend the Bush middle-class tax cuts but allow taxes to rise on households making more than $250,000 a year.

Neither party "is getting a clear strategy or message together," said American University political scientist James Thurber. "The election will be about anger, with not a lot of content."

Economists disagree on the effectiveness of Obama's stimulus program. Much of the money has gone into tax cuts and helping hard-pressed states instead of directly creating jobs.

"The stimulus bill was a positive, but we didn't get nearly the bang for the buck that we should have," said David Wyss, chief economist for Standard & Poor's in New York.

"The financial regulation bill did fix some of the stuff that needed to be fixed, but it failed to fix a lot that should have been fixed and tried to fix what wasn't broken. And the health care reform concentrated on improving coverage and did nothing for cost control."

As for Republicans, he conjured up a reference to Harry Potter's school.

"I frankly haven't seen any recommendations from them that would have significantly helped," Wyss said. "They're all in favor of cutting taxes, not cutting spending, and balancing the budget by I guess Hogwarts Economics."

[Associated Press; By TOM RAUM]

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