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Time Running Out on Debt Ceiling Fix, White House Sets Time Frame

Jun 15, 2011

The White House last week urged Congressional members involved in Vice President Joe Biden's debt reduction negotiations to pick up the pace of those talks in order to have an initial framework for addressing the debt ceiling limit and the federal deficit. The White House called for the group to endeavor to schedule and hold at least three meetings a week throughout the remainder of June in order to have a potential deal in place by the July 4th holiday. The move was viewed by many inside the beltway as symbolic of the White House's new found critical urgency to finally arrive at a solution well before the Treasury Department's August 2nd deadline for raising the debt limit before the United States defaults on its extensive financial obligations.

The White House's move in setting a date by which they'd like to have a deal in place reflects both the political and the practical issues involved in the debate.

First, the July 4th target has a very practical aspect to it. It gives all parties involved, from those who negotiate the initial framework (namely the Biden group or the so-called "Gang of Six") to those who are going to cut a final deal, such as the President, Speaker Boehner and Senate Majority Leader Harry Reid enough time to strike those accords. It also gives both the House and Senate plenty of time to write complicated legislation that incorporates an increase in the debt ceiling as well as revisions to many federal programs who will have ultimately lost funding due to the provisions of the agreement.

Second, on the political side of the ledger, a recent spate of bad information regarding the general economic mood of Americans and the lagging economic recovery does not bode well for the Obama campaign for re-election. A struggling economy is public enemy #1 for any sitting president. To wit, just last week the monthly jobs report came forth with information that the U.S. economy added a paltry 54,000 jobs in May. Further, ratings giant Moody's has indicated that prolonged debate without action on the debt ceiling could force it to lower our Aaa debt rating, the gold standard in the ratings industry.

"The news economically on the jobs front in the last several days underscores the importance of the meeting we just came out of," said House Majority Leader Eric I. Cantor (R-VA) after the Biden group met for over 2 and a half hours last Thursday, a meeting which continued even after Vice President Biden excused himself from the talks to attend a White House meeting with President Obama.

"There's a commitment for next week that we will be engaging, once again, in a robust series of meetings to see if we can achieve a result."

"We believe that many of the problems surrounding the lack of job creation and growth in this country have to do with the fact that there isn't a credible plan to manage down the debt and deficit in this country," said Cantor. "That's what we're trying to produce here and we had much substantive discussion here today and look forward to more next week."

The main topic of conversation at Thursday's session revolved around the issue of enhanced revenues to be included in any possible compromise. Treasury Secretary Timothy Geithner was the Democrats' point man in advocating that any solution to the debt and deficit, a proposal Republicans in the House say is dead on arrival.

Suffice it to say, negotiators still have a long way to go before consensus can be reached on this very critical issue. The longer negotiations drag on, there is increased potential of skepticism on Wall Street that a deal can be cut before the federal government defaults on its financial obligations and that skepticism will continue to weigh on financial markets. Nonetheless, it is paramount that Congress not continue to kick the can down the road or even think that kicking the can down the road is still a viable option. August 2nd is looming just around the corner.

Obama Electoral Map Different Than in 2012

The team charged with organizing President Barak Obama's 2012 re-election campaign is considering intertwined state-by-state possibilities that foresee tougher than normal battles in states where the economic indicators are lagging or are flat.

"We are preparing a variety of scenarios to get to 270 (electoral votes needed to win). We are not putting our cards on any one state and I don't foresee doing that," said Obama campaign manager Jim Messina last week. "We're building our ground campaign now...2011 is about infrastructure."

Of great concern to the administration is the specter that the Midwest will not be as politically friendly in 2012 as it was in 2008. As mentioned above, that portion of the country has been especially hard-hit in terms of the economy. Furthermore, Democrats took a drubbing in that portion of the country in the 2010 midterm races. Particularly concerning to the President and his advisors are Ohio, Indiana and Pennsylvania (all states he carried in 2008). Those fears, however, are buoyed by encouragement in such states as Nevada and Colorado, where Democratic Senate Majority Leader Harry Reid and Senator Michael Bennett eked out slim victories in their respective states. Those victories renewed Democrats' hopes that those still are potentially squarely in play come 2012.

Conventional wisdom points to Obama holding on to either The Commonwealth of Virginia or North Carolina, two relative electoral surprises last time around. Prior to Obama taking the Old Dominion, Virginia had not voted for a Democratic presidential candidate since Lyndon Baines Johnson in 1964, in his bid to secure an outright election to the Office of the Presidency.

This complicated and, at times, daunting electoral map has prompted the Obama team to have extremely ambitious fundraising goals for the 2012 go-round. Estimates indicate that the administration plans to raise between $800 million to 1 billion dollars, further underscoring their uncertainty as to how the electoral map will unfold in relation to 2008 and how much money will need to be spent on grassroots outreach. In fact, many Democrats concede that the 2008 race against John McCain (R-AZ) was a much more predictable and calculatable contest than 2012 is shaping up to be. As with most things in the District of Columbia, only time (and money) will tell.


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