Washington Wonderland

by

John J. Kohut

Your estimated wait time: One Year!

Note to those in the financial services industry: anyone waiting for the GOP-controlled House to go about the work of gutting the Dodd-Frank law or taking the fangs out of the Consumer Finance Protection Bureau should instead make other plans for the balance of 2012 because it’s not happening.

The speed with which Congress has abruptly slipped into election year mode this week is dazzling even by Washington standards. The turning point was the decision by House Speaker John Boehner, House Majority Leader Eric Cantor and their lieutenants to throw in the towel rather than fight the extension of the payroll tax cut, thus avoiding a rerun of their defeat at the hands of the president in December. Specifically, the House GOP leadership decided that they would allow the extension without seeking equal amounts of spending cuts to offset its cost. While there will surely still be some bitter “no” votes from the Tea Party caucus, the deal is expected to pass as the majority of House Republicans eye a shifting political terrain back home in their districts.

Along with the uptick in economic indicators and multiple new national polls suggesting that the president’s approval rating is shifting to the magical 50-percent level, Republican campaign strategists are increasingly stymied over the troublesome presidential nomination fight which finds their once untouchable front runner down in the trenches doing battle with a former U.S. senator who racked up one of the worst reelection defeats in the history of that body, and in a key battleground state to boot! The subtle shift of the issue field away from the economy and into the social issue realm has veteran party operatives muttering about “Bob Dole ‘96” and beginning to game brokered convention scenarios. In short, this is not the same atmosphere of six months back.

Given the new emphasis on questions of income inequality and fairness, GOP congressional strategists know that it’s simply not the time to rush to the barricades to fight Wall Street “reform” or to be seen as opposing “consumer protection.” While both issues have their arguments, and employees of securities and investment firms are now ranked the number one industry in terms of giving money to candidates and their political action committees in the 2012 cycle, taking them on now is simply too risky for Republicans already branded as “in the corner” of Wall Street and its banks. Campaign politics is a one-sentence world and reform of either Dodd-Frank or the CFPB takes two to three sentences to explain, so that’s for 2013. And for any stalwarts holding out for full fledged top-to-bottom reform of the tax code itself, that takes far too many sentences. If they start in 2013, they may finish come 2017. No joke. The last “comprehensive” reform took three years to negotiate.

As for the balance of this year, or at least between now and Election Day on November 6th, Congress, when it’s in session, will mostly be busy with “show votes” that will go nowhere but will attempt to draw their opponents in the other party to vote on uncomfortable questions, like a millionaires surtax and other juicy topics the results of which will go nowhere except into a campaign commercial.

But for those who’ve been keeping close attention, the last weeks of this current Congressional session, between November 12th and Christmas, are shaping up to be quite dramatic. That’s because of the list of high value subjects that have all been stamped with an expiration date of “January 1, 2013.”

These include the just passed payroll tax extension (and its adherent sub issues of extended unemployment benefits and reimbursement rates for doctors treating Medicare patients), the George W. Bush tax package which originated in 2001 and 2003 (with its cuts on income rates as well as capital gains and dividend taxes), and the pending $1.2 trillion in across the board spending cuts which will descend on the Pentagon and other federal agencies due to the failure of last year’s “Super Committee” to come to an agreement on deficit reductions.

The scope of the deal making which would have to ensue during the “Lame Duck” session is staggering. And don’t even try to game the various election outcome scenarios that must be factored into account: who wins the presidency, which party controls the U.S. Senate, and whether the GOP holds on to control of the House and, if so, by what margin. Would either party, given the outcome of November 6th, cave in December hoping for a better deal under a new regime or go all out in “nothing to lose” mode?

You’d need a decision tree designed by Rube Goldberg to work that one out.

Washington Wisdom:

“If Romney loses Michigan, the perception is that it’s just a huge loss for him, one that could really cost him the nomination.”

Steve Mitchell, GOP pollster

“I didn’t want there to be 21% unemployment. Sometimes circumstances get in the way of philosophy.”

President George W. Bush, in a speech last week, defending the decision to bail out the domestic auto industry

“At the end of the day, this is the capital city. If you want to go someplace to find expertise, it’s probably going to be in Washington. And that’s why candidates look to us – some a little less, some a little bit more.”

Former Rep. Vin Weber, a Washington lobbyist and senior GOP “wise man,” on why presidential candidates seek out Washington lobbyists for their counsel, as well as for their fund raising abilities.

“The base is energized against Obama but they’re not energized for Romney. He has to make himself more appealing to the base or we’ll be looking at Bob Dole 1996 or John McCain 2008.”

Anonymous GOP insider

“He’s been trying to win this with overwhelming throw weight – with more money, negative ads and manpower. They’re trying to win this tactically in each state, separate from the other, which gets expensive and long. Either he elevates his purpose, he elevates from a campaign to a cause, or the big Romney bulldozer has to now turn, grindingly slow and powerful, and crush everything in its path.”

GOP strategist Alex Castellanos

Washington Wonderland

By: John J. Kohut

The Problem with Mitt

There are only three things you need to know about this week’s GOP contests in Missouri, Minnesota and Colorado. First, former Massachusetts Gov. Mitt Romney did not win a single county in either Missouri or Minnesota. Second, although he won the GOP caucus in Colorado with 60 percent of the vote in 2008, Romney placed second this time with just over 30 percent of the vote. Third, if the Romney machine does not spend tons of money on media in a given state, no one bothers to turn out to vote for its candidate.

The sweep of all three states by former Pennsylvania Sen. Rick Santorum points to the soft underbelly of the Romney campaign apparatus: when it comes to message there is no there “there.” Although they are only now beginning to voice their concerns, the GOP establishment in Washington that went all out to ensure that former House Speaker Newt Gingrich did not win the Florida primary last month knew all along that something was wrong. The argument that towering amounts of campaign cash and a huge, seasoned campaign organization equals “inevitability” only works if you’ve got a candidate at the top of the organizational pyramid with a great message to sell. This lack of a wining message is now more glaring in light of the new issue environment that is driving true blue conservatives to someone they believe is one of them.

Santorum is suddenly the right man in the right place at the right time to reap the harvest of a trifecta of social issue concerns – the uproar over the Susan G. Komen organization terminating (and then reinstating) its funding of Planned Parenthood, the court ruling overturning the ban on gay marriage in California, and the uproar among American Catholics over an Obama administration ruling that would require church affiliated employers to pay for birth control for their employees. In the face of slowly improving economic indicators, the conservative base has turned its attention back to hot button social issues that are the mainstay of their movement.

And front page wire photos of Christian ministers laying hands on and praying over Santorum this week speak volumes to conservative activists going forward. While party leaders have spent months pushing the “electability” argument to explain to their Tea Party base why they will eventually have to rally around Mitt, the same folks who backed Texas Gov. Rick Perry, businessman Herman Cain, Minnesota Rep. Michelle Bachmann and Newt, believe they are being true to their cause when they vote for Santorum. All of which suggests that the way forward for Romney is now a lot more cloudy.

What happens next?

Aside from this week’s Maine caucuses, the next big contests are on February 28th in Arizona and Michigan. The following week will see the ten-state bonanza of Super Tuesday on March 6th. The next debate isn’t until February 22nd in Meza, Arizona (CNN).

The Romney campaign has given no sign of retooling its message. So this week its candidate continued his stump speech slamming Santorum for having been part of “the culture of Washington.” The fact that Santorum voters do not buy this line of argument seems not to matter to the professionals guiding the campaign. Perhaps there just isn’t any other argument to be made against the squeaky clean ex-senator. So we can expect the Romney war chest will unleash its wrath in a blitz of television spots in Arizona and Michigan in an attempt to tamp down the Santorum surge. This in itself may elicit a firestorm from the right. After all, if the Romney camp does not tread lightly here, it could easily slip into the Empire vs. the resistance territory.

Meanwhile Santorum will be spending all his time and effort in Michigan in an attempt to usurp Romney in home territory (George Romney was governor there.).

Gingrich is focused on raising money and setting his sights on the southern states competing on Super Tuesday as well as the state of Ohio. A win there would set the Romney camp reeling.

Rep. Ron Paul continues his solitary sojourn through the caucus states but even he concedes he’s got to win one at some point.

Most immediately, this weekend is the big Conservative Political Action Committee conference in Washington. This event will bring thousands of grass roots conservative activists from around the country to confer about the campaign and listen to speeches from movement leaders and the candidates themselves. Expect a big free media boost to Santorum and Gingrich and a tough sell for Romney. The timing could not be worse for Mitt.

One thing’s for sure. This week’s change-up attempt by Romney to humanize himself with the phrase, “I’m the son of a carpenter” – complete with the awkward description of the senior Romney spitting out nails sharp side out – will not cut it. Next!

Washington Wisdom:

“There is not exactly Romney-mania right now.”

Sen. Jon Kyl (R., Arizona)

“The Romney bandwagon just went in the ditch.”

Political analyst David Gergen

“I think what we saw yesterday was nobody is the inevitable anything.”

Former Arkansas Gov. Mike Huckabee

“If I were in Boston today, I would be very concerned. The reality is that conservatives want an alternative, and Romney just isn’t making the sale.”

GOP strategist Ed Rollins

“I think these states (Michigan and Arizona, which hold contests on February 28th) are up for grabs. I assume and think that Romney will have a distinct advantage in them, but I see no logic in anyone being certain of anything at this point.”

Veteran GOP media consultant Curt Anderson

Washington Wonderland

by

John J. Kohut

The Dirty Little Secret of Campaign 2012

Open marriage? Cayman Islands bank accounts? The 2012 GOP presidential race suddenly got very interesting. Unfortunately for politics fans, we currently live in a dual track world and over on track two the political grind that is Congress came back to work this week returning to that gloomy factory that produces only one product – gridlock.

Déjà vu all over again

First up this week was the meaningless vote in the House on the question of raising the debt limit. After rejecting the raise by a vote of 239 to 176, the increase will automatically take place due to last summer’s agreement that allows for such “show votes” in exchange for an automatic increase so as not to further endanger the nation’s debt ratings.

Next up: The coming battle over extending the payroll tax holiday, fully funding the long-term unemployed, and arranging for increased Medicare reimbursement rates to doctors. Once again, the buzz among Hill insiders is that what was assumed would be a pro forma vote [after all, the GOP just lost big on this issue at Christmas] is now expected to turn onto another paralyzing fight, this time centered around how to pay for the cost of all of the above.

Democrats will hold their ground, demanding that the GOP go along with increased revenues while Republicans are said to be considering a slew of options, from extending the federal pay freeze to changes to the earned income tax credit. Sound familiar? Over the next six weeks expect plenty of op-ed writers overusing allusions to the 1980s movie “Groundhog Day.” The big difference of course is that Bill Murray’s movie was funny.

The bottom line is this: For all the campaign rhetoric and Super PAC bluster that is to come, insiders know that come the cold dawn of November 7th, the country as a whole will be right back where we started.

The Election won’t change the conversation

The problems on the nation’s plate right now – unemployment, federal spending, skyrocketing heath care costs, a weakened global banking system – are not going away anytime soon. In fact, with continued Congressional inaction they are in danger of becoming multi-generational problems.

As economist Alan Blinder pointed out in this week’s Wall Street Journal, our current budget deficit problems are nothing compared with what’s coming down the line in the 2020s and 2030s and runaway health care costs will just compound the current argument over Medicare and Medicaid costs.

The next president will face the same limitations

Over the last several election cycles the balance of power has shifted back and forth between the two major parties thanks to the continued 50/50 divide among voters. 2012 is unlikely to change this dynamic despite changes in both House and Senate party ratios.

The latest take on Senate races suggests that the Democrats are likely to lose control of the chamber. Republicans need four seats to take the majority and there are plenty of Democratic seats in jeopardy. But with some GOP seats vulnerable (such as Massachusetts and Nevada) the thinking among most analysts is that the new majority will be slim and far from the 60-member majority that would make the minority ineffective. Thus a year from now the two parties in the Senate simply exchange roles, with the Democrats playing the muscular opposition role now held by Minority Leader Mitch McConnell.

Likewise, don’t expect much change in the House. Of the 60 or so seats that are “in play,” Democrats would have to hold all of their troubled seats (about 20) and then run the table on the 40 or so GOP seats that are in jeopardy in hopes of picking up the 25 they need to take control of the House. That is highly unlikely.

Right now the chances are that Democrats will pick up clusters of GOP seats in Illinois and California and a few others here and there – enough to reduce the size of the Republican majority and put House Speaker John Boehner in an even more precarious position when it comes to having to muster an increasingly unruly majority to pass legislation.

The upside (?)

There’s already a schism brewing in GOP ranks between Tea Party true believers and their less-orthodox brethren who dared vote to compromise on some issues this past fall as well as a widening split between House and Senate GOP leaders on legislative tactics. Expect that gulf to widen this year and for the fall election results to sober the new Republican majorities.

Meanwhile, savvy Democrats and Republicans in Congress are already looking to the post-Election Day lame duck session in November and December as the time when the real work will get done this year – considering whether to further extend or finally end the “Bush tax cuts” and addressing the pending across the board cuts to the federal budget enabled by the failure of last year’s Super Committee. Perhaps that experience will steel both sides for the legislative pragmatism that the challenges of January 2013 will demand. In politics, as elsewhere, hope springs eternal.

Meanwhile, on the campaign trail, President Obama has been highlighting his administration’s accomplishments over the last three years with the added refrain, “change doesn’t happen overnight,” while on the GOP side, Mitt Romney has proclaims that “we are that change.”

Or as the poet said, “the more things change…….”

Washington Words:

“The upside is that the president gives a great speech before a large enthusiastic crowd. The downside is if the crowd looks like a cult meeting, like the GOP debate did in South Carolina.”

Brad Bannon, Democratic strategist, on the news that President Obama’s acceptance speech at the Democratic convention this summer will be at an outdoor venue

“The more you get into the presidential campaign, the more the Senate becomes an echo chamber for the presidential race.”

Sen. Sheldon Whitehouse (D., Rhode Island)

“There’s only one way that Obama can regain momentum among white working-class people, and only one way Mitt Romney can do it, and that’s using economic populism.”

David “Mudcat” Saunders, a veteran Democratic strategist specializing in outreach to rural Southern voters

“It is not a simple issue, but voters will look at it simply. And the simple version ain’t pretty for Romney. Voters are not going to get an MBA class in private equity. The danger is that the experience that qualified Romney to be the GOP nominee in the primary election may in the end be the issue that disqualifies him in the general election. Team Obama knows the power of this issue.”

Mark McKinnon, veteran GOP strategist

“The election makes it tougher to deal with issues now…..More is going to happen in November and December than in the first ten months of the year.”

Rep. Brad Sherman (D., California), predicting that Congress will wait until the post-Election lame duck session to address the toughest issues on its legislative agenda.

Washington Wonderland

by

John J. Kohut

A January Political Calendar

Washington will now bring 2011 to a close in much the same way it began, with a hyper-partisan Congress once again locked in hopeless gridlock over spending issues. Thankfully, the impending holiday season will distract most Americans from the by now hollow “threat” that the government could once again shut down. Meanwhile, in just over two weeks, Americans will begin their quadrennial ritual, huddling in caucus meetings and lining up outside polling places to cast their choice for a presidential contender. And as the presidential contest heats up, the 112th Congress will likely be relegated to the role of “punching bag” in the big stakes drama to win the White House. With that, here are the political dates worth watching:

Tuesday, January 3rd: The Iowa Caucus

Home of the political upset, Iowa Republican caucus goers regularly defy the general consensus and send “true conservatives” to the front of the line. In 1988 they went for Kansas Sen. Bob Dole over sitting Vice President George H.W. Bush. Eight years later Dole barely pulled out a victory over conservative firebrand Pat Buchanan. This time around, look for Texas Rep. Ron Paul to be the big surprise. He has the best ground operation in the state and is poised to finish in the top two, potentially raining all over former House Speaker Newt Gingrich’s parade.

Saturday, January 7th: The New Hampshire GOP Presidential Debate

Presented by ABC (9p.m.-11p.m. EST), this will be the last debate before the state’s primary. Since last summer the GOP presidential field has enjoyed tons of free media exposure thanks to the crowded debate schedule. The only question is will candidates like former Pennsylvania Sen. Rick Santorum and Minnesota Rep. Michelle Bachman still show up for this one. Otherwise it’s everybody else’s last time to pile on former Massachusetts Gov. Mitt Romney before his big test.

Tuesday, January 10th: The New Hampshire GOP Primary

This could be a make or break night for the Romney campaign. They’ve given Iowa short shrift for months and put all their eggs in this basket. They had better win and win big or the political perception machine will have Romney limping out of New Hampshire. Second-place finishers don’t matter much here the next morning, unless it’s a close second.

Tuesday, January 17th: The U.S. House of Representatives Convenes

The GOP-controlled House is back to kick off the New Year. Their schedule lists only 109 workdays in 2012 and you can expect next to nothing to happen after July. Let the gridlock resume!

Saturday, January 21st: The South Carolina GOP Primary

In the recent history of GOP presidential politics South Carolina is looked on as the “firewall” that can bolster any true blue right-wingers still in the hunt. Gingrich still has a good lead here but even Texas Gov. Rick Perry could do surprisingly well. If Romney comes in a strong second that could be a big boost for his campaign. A Romney win here would be an enormous upset.

Monday, January 23rd: The U.S. Senate Convenes

This could be the last hurrah for a Democratic-controlled Senate for quite some time. They’ve only scheduled 114 work days between January and next September.

Tuesday, January 24th: President Obama’s State of the Union Address

This marks the president’s first time back before a joint session of Congress since his September “jobs” speech. When he turns his attention to his agenda for the coming year he can’t help but lay out an argument for a second term as he steps on GOP toes. This could get ugly.

Tuesday, January 31st: The Florida GOP Primary

Back in October it was businessman Herman Cain who had the big lead over Romney in the state. For the past several weeks it’s been Gingrich seemingly running away with it. Romney remains a strong second. The outcomes of Iowa, New Hampshire and South Carolina will go a long way toward shaping the final days of this contest.

By month’s end we may have more questions than answers when it comes to national politics. Will Ron Paul cash in his chips and make a third-party run? Will Romney be sewing up the nomination in a matter of weeks or girding for a months-long battle? Will the president go all in on an anti-Congress campaign? What does the Occupy Wall Street movement have planned for 2012? As Don Rumsfeld knew, it’s always the “unknown unknowns” that can keep you up all night.

———————————————————-

Washington Words:

“The meaning of the caucus that you cannot deny and will not change is it’s the first opportunity for a candidate to win. And winning is the most important thing a candidate can do……and the other states look to that.”

Veteran Iowa pollster Ann Selzer

“[If Romney] doesn’t win New Hampshire by double digits, it’s not going to look good.”

New Hampshire State Rep. Jack Flanagan, a Romney supporter, on the upcoming primary

“If you’ve been on Capitol Hill for the close of sessions you will have witnessed the phenomena where the House of Representatives passes a spending bill, throws it at the Senate chamber and heads for the airport.”

Senate Majority Whip Dick Durbin of Illinois

“If he is a nominee, well, hold your seats. They’re going to describe us all as asset strippers; we’re flippers of assets, we just put on a lot of debt, fire a lot of people and that’s how we make money. You know that’s not the case.”

Henry Kravis of Kohlberg Kravis Roberts, predicting the effect on his industry if Mitt Romney wins the GOP nomination

“I’m not sure people could concentrate long enough to follow them today.”

Historian Doris Kearns Goodwin on Newt Gingrich’s proposal that next year’s presidential candidates conduct a series of “Lincoln-Douglas” style debates

Washington Wonderland

 By: John J. Kohut

Things Have Changed

Now just three weeks away from the start of 2012 the national GOP finds itself suddenly on the ropes, being pummeled in the press daily by the incumbent Democratic president, while  their “sure thing” presidential nominee finds himself locked in mortal combat with a widely dismissed party entity from twenty-five years ago. What happened?

The current White House/Congress political dynamic was succinctly (but unknowingly) explained this week by GOP Sen. Bob Corker (Tennessee). Asked to comment on the payroll tax holiday extension by a reporter, Corker admitted, “It’s a heck of a messaging problem.” Both in terms of this one issue and in the broader big picture of today’s politics, the GOP has no message. For too many months the constant refrain from House and Senate GOP leaders that whatever the White House was pushing in any given week was a “job killer” simply lost its effectiveness. Rather than trying to construct a positive, upbeat argument to take into next year’s elections (a la 1994’s “Contract with America”), the GOP has appeared weighed down with gloom amidst its own intra-party arguments over a direction forward.

Meanwhile President Obama suddenly hit his old rhetorical stride this week with a speech in Osawatomie, Kansas. Piecing together an argument that was months in the making, the president managed to invoke Teddy Roosevelt to dismiss the current GOP as still hopelessly locked into a “trickle-down economics” of years past while portraying himself as the new champion of the middle class. Along the way he hit the key words of the day – “equality” and “fairness.”

Republican responses included House Majority Leader Eric Cantor complaining to reporters that the president “stole” the term “fair shot” from a speech Cantor had given last month, and Senate Minority Leader Mitch McConnell (R., Kentucky) lamenting for the umpteenth time this week that the president and Democrats in the Senate were merely conducting “show votes” on the payroll tax that they knew would fail just so they could later use them to bash the GOP. Neither was much of a coherent retort.

While Cantor, McConnell and House Speaker John Boehner have all signaled that they want to pass the extension (along with the coming battle over extending unemployment benefits for the long-term unemployed), their failure to come up with a wining strategy for their own caucuses points to the underlying problem for the GOP going into the election year. They don’t have a unifying message because their party is not unified. Constant worry over how to present legislative arguments to the hard core Tea Party cadres in their midst continues to trip up party leadership and rob it of any momentum.

Veteran House Republicans are quietly dismayed over this, suggesting that “in the old days” leadership would have seen these problems coming weeks in advance and would have moved quickly to avoid giving Democrats an edge on the issue. Other old GOP hands say that this whole “message” issue will disappear once the party has coalesced around a presidential nominee. But that’s asking a lot.

Has the fact that former Massachusetts Gov. Mitt Romney, former House Speaker Newt Gingrich and Texas Rep. Ron Paul have all come out on the side of the party’s congressional leaders, urging a quick extension of the payroll tax holiday, meant anything to the party’s rank and file in the House? If Romney takes the nomination next spring will the conservative base within the GOP House suddenly cave to the more moderate nominee’s policy positions? Suppose Gingrich takes the prize and embarks on his eternal quest to save Western civilization. How’s that for a winning message to take control of the Senate? No matter who takes the nomination all signs point to a three-pronged message war next year – the president’s message, the GOP nominee’s and more of the current muddle coming from Republicans in Congress.

Over the next seven days look for two events to further solidify public opinion about the GOP. The first will be the ongoing Congressional effort to wind up all the lingering financial issues by next Friday, the 16^th. How they find a way to solve payroll taxes, unemployment benefits, Medicare reimbursement rates for doctors and hammer out budgets for two-thirds of federal agencies is beyond comprehension given the existing gridlock. There is a very real possibility that this could drag beyond the 16^th and look very ugly when it does finish up, playing right into the president’s hands.

Second, and much more fun, will be this Saturday’s GOP presidential debate at Drake University in Iowa. Sponsored by ABC News and the Des Moines Register, frontrunners Gingrich and Romney will be center stage the whole night. This will be the first meeting since Gingrich surged to the front of the national polls as well as this week’s surveys in Iowa and Florida. Romney simply can’t afford to lose the Florida primary so this will be a make or break night for him. Expect fireworks.

Washington Words:

“Parties sometimes make big mistakes. Democrats nominated McGovern and lost 49 states. I hope my party doesn’t make one.”

            Former GOP Rep. Vin Weber of Minnesota

“I’m not inclined to be a supporter of Newt Gingrich, having served under him for four years and experienced personally his leadership.”

            Sen. Tom Coburn (R., Oklahoma)

“This is a race that could go all the way to the convention.”

        Former GOP Rep. Robert Walker of Pennsylvania

“I don’t quite understand the marching to his office. I didn’t realize he had the ability to lay on hands and anoint people.”

            Texas GOP Rep. Ron Paul on Donald Trump

“If they pick somebody who I think can’t win, and if they pick somebody who is, in my opinion, the wrong person…and if the economy continues to be bad, I might run as an independent.”

         Businessman Donald Trump, threatening to run as a third party presidential candidate if he find the likely GOP nominee lacking

Washington Wonderland

by

John J. Kohut

The Damage is Done

Whether or not Mitt Romney wins next week’s Florida GOP primary, his candidacy’s air of inevitability has vanished and his original campaign narrative has been permanently rewritten. The patrician businessman/politician who came onto the national scene in the 2008 race suddenly appears out of place and time just four years later. It’s as if [George H. W.] “Poppy” Bush decided to enter the fray again twenty years after losing to Bill Clinton. With his reserved manner and inability to deliver simple off-the-cuff sound bites, Romney has morphed into the stranger in a strange land come down from the big house on the hill to rub elbows with the ordinary folk.

Putting aside the candidate’s limitations and some campaign missteps (i.e. delaying the tax return release), the Romney campaign is largely a victim of circumstance. This is the first presidential election since the birth of the GOP’s rowdy, unpredictable step-child: the Tea Party.

The great big disconnect of campaign 2012 is the bewilderment of the GOP establishment in realizing that this faction of the party cannot be co-opted into the service of the greater good – electing a moderate front-runner who can appeal to independent swing voters in the fall. Much as House Speaker John Boehner cannot corral their votes when he needs them, neither can campaign surrogates lead them to drink the Romney water.

Newt Gingrich’s rise is solely due to his ability to tap into Tea Party-fueled angst and rev it up to full throttle. The thousands of Tea Party-aligned voters who turned out to hear him speak in Florida this week care little if Karl Rove and other GOP establishment mouthpieces are wringing their hands about the general election. Newt speaks the language of the crowd: anti-establishment anger. The opening lines of his South Carolina victory speech hit “the elites in Washington and New York” and “the powers that be.” His audience cares not about his past personal excesses because he is the only person on the primary stage speaking to them with the bravado and bombast they crave. “Wait until he debates Obama!”

This is not your father’s Republican Party. Today’s GOP is roughly forty percent “establishment,” forty percent Tea Party, and twenty percent a new generation of Libertarian-leaning college kids and internet acolytes under the tutelage of field marshal Ron Paul, who at a moment’s notice could bolt from the pack, taking his troops with him.

The Tea Party’s Washington influence goes well beyond their small numbers in the House because they carry with them the constant threat that they could muster their forces to “primary” any moderate Republicans who stand in their way. Just watch what they are doing to six-term GOP Sen. Orrin Hatch in Utah.

Given these circumstances, a Romney candidacy seems to forever be forcing a square peg into a round hole.

If Romney loses Florida:

If Newt Gingrich wins the Florida primary, it will at once fuel further Tea Party support for his candidacy in the coming caucuses in February, while weakening perceptions that Romney still “has what it takes.”

The GOP establishment will go into full melt-down mode. The party wise men will amplify their newly tested line that in giving the nomination to Gingrich, they could lose control of the House in November (most probably true).

The intra-party chatter that Republican voters would “love to see someone else enter the race” would blow up big time despite the fact that the constraints of the primary calendar and its filing deadlines make this increasingly unlikely.

But the most important aspect of a Gingrich win in Florida is that the former House Speaker will undoubtedly continue bashing the one-time GOP frontrunner – the GOP’s nightmare scenario.

Meanwhile the next barrier to be crossed would be the Nevada caucuses on February 4th. Romney is so strong there that if he were to lose or just barely win (the biggest of long-shots), his continuing candidacy would really be in question.

If Romney wins Florida:

A Romney victory would take the air out of the Gingrich balloon. Newt can still play through February (which will be a pretty quiet month with sparse contests) but the March 6th “Super Tuesday” schedule, with its ten state primaries, would most probably put an end to things. But, again, win or lose, how much further damage can Gingrich inflict over the next five weeks? After all, given what’s been said, is there anyone anywhere who foresees a defeated Gingrich graciously leaving the stage and giving Romney his endorsement?

The bigger question is what does Romney do post-Florida? Can a retooled Mitt Romney 2.0 appear with a fresh reason to entice Republican voters? Will his rhetoric have to continue to tack rightward to curry favor with the extremes of his party or will Mitt decide to begin his long walk back to the middle in preparation for the general election? A presidential candidacy that fails to steer its own course through the primary season will find it near impossible to suddenly find its true bearings come Labor Day.

Finally, the growing fear among GOP insiders is that their once entertaining prime-time reality show that is the GOP primary debates has, like Fonzi, jumped the shark and that there’s no going back. Jeb Bush, please call your office!

Washington Words:

“The establishment is right to be worried about a Gingrich nomination. We are going to demand real change in Washington.”

Former House Speaker Newt Gingrich

“The inevitability of Romney has now been wiped away. He didn’t live up to all the hype.”

Former Pennsylvania Sen. Rick Santorum

“The more delegates I have, the more leverage I have. We’ll go after the delegates, and we have staying power.”

Texas Rep. Ron Paul

“Mitt’s problem isn’t Newt. It’s Mitt!”

Chris Matthews, host of MSNBC’s “Hardball”

“Banks aren’t bad people.”

Former Massachusetts Gov. Mitt Romney

Washington Wonderland

 By: John J. Kohut

Dodd/Frank without Dodd or Frank

The announcement this week that Rep. Barney Frank (D, Massachusetts) would not be seeking reelection next year left many in the Washington establishment nodding their heads sagely about Democratic chances in 2012, while many more in the financial services industry sat with wide grins, assuming that the passing of their arch nemesis signaled the dawn of a new day in the nation’s capital. Both were way off.

First, as Freud once opined, “Sometimes a cigar is just a cigar.” Although official Washington measures all developments on a sliding scale of who’s about to gain power versus who’s about to lose power, it’s best to take Frank at his word and believe that it’s just time for him to do something else rather than do something he didn’t want to do – raise a lot of money and spend most of next year introducing himself to the new parts of his redrawn congressional district. Those Republicans gloating that he ran from a fight are also off – there would be some GOP-heavy areas in the new district but there was little doubt that the newly drawn lines would still leave him the heavy favorite to win – after he raised a lot of bucks and spent it on paid media.

Yes, the chances of Democrats retaking the House (and Frank the chairmanship of the Financial Services Committee) a year from now are not good. But the lack of a gavel in his hand has hardly deterred Frank from continuing to be the one true media personality on that committee.

Now, as to the fate of the Dodd/Frank financial services overhaul bill, any perception that Frank’s announcement somehow signals the eventual repeal of his namesake legislation is misguided at best. Given the current political terrain, no serious Republican player on the Hill (we’re not talking about Tea Party bomb throwers here) is going to stand up and make the case for a rollback of the law in the way most GOP members still talk about repealing “Obamacare.” No one is willing to stand in the well of the House and declare the need to liberate the oppressed “one percent.” Much in the same way that the changing political atmosphere has now put the Republicans on the defensive on the question of extending the payroll tax holiday, a full scale repeal of Dodd/Frank is not on the horizon. After all, the industry’s disdain for Dodd/Frank has always been directed at its complexity and the cost of its implementation. Even Wall Street acknowledged that following the 2008 crisis there would be a demand for a new legislative vehicle offering oversight and transparency.

Instead, Republicans will continue to deal with Dodd/Frank in the same way they have for many months – delay, defund, ask for more study and wait for pending court challenges to strip it of its power.

Now that the Securities and Exchange Commission has agreed to GOP demands that quantifying the costs of new regulations means not just old cost-benefit analyses but attempting to quantify “real economic impact” on the “broader economy,” House appropriators are still stalling funds to the agency that would get its new division (designed to do just that) up and running. Likewise, Senate Republicans have made clear that no one should expect to see an appointee to head Dodd/Frank’s new Consumer Finance Protection Bureau anytime soon (or maybe ever).

And lest anyone think that Republican members of Congress are averse to getting in the game and doing a little bit of dumping on Wall Street themselves, just wait for later this month as Jon Corzine, CEO and Chairman of MF Global Holdings, is called to explain himself before the Senate Agriculture Committee (December 13^th) and the House Financial Services Committee’s Oversight and Investigations Subcommittee (December 15^th). A prominent Democratic figure with years of Wall Street dealings plus gazillions of missing funds equals a perfect storm for the GOP House.

As for the Barney Frank haters – his decision means he’ll officially leave the House at the end of the current Congress. That’s over a year away. Until then, he’ll still be sitting in his chair as Ranking Member of the full committee. He will still be the go-to guy for reporters covering the financial services industry beat. He will not be mute. He will still be Barney Frank.

Washington Words:

“I think there’s an 85 percent chance he’s going to be on “Dancing with the Stars” next season.”

GOP operative Steve Schmidt on Herman Cain

“But the Tea Party point of view of no compromise whatsoever is not a point of view that will eventually produce a presidential candidate who will win.”

  Former Secretary of State Colin Powell on the GOP

“[Romney] is giving all his opponents the opportunity to get back into this contest. If Romney doesn’t energize his campaign soon, somebody might actually try to win this race besides him.”

GOP consultant Alex Castellanos

“There’s just too much unrest out there for this to be put back in the box. Something is going to explode.”

  Democratic pollster Peter Hart on the growing likelihood that there will be a serious third-party candidate for president in 2012

“I can see very clearly how the ground is ripe for this but in no way would it be good for us.”

   GOP pollster Kellyanne Conway on a third party presidential candidate next year  

Washington Wonderland

By: John J. Kohut

Looking for Leverage

After almost three months of going absolutely nowhere, the Congressional deficit reduction “Super Committee” ground to an agonizing halt last week with barely a whimper. If it had been a play, a stage hand would have mercifully stopped the production before the end of the first act with the news that the audience had already left the theater. Instead, in true Washington fashion, the chosen twelve committee members went through the motions in their own highly stylized kabuki dance, holding several public hearings and numerous “closed door” members-only sessions, suggesting that something very important was brewing.

By now everyone understands that the same dynamic that has stymied every other attempt at compromise in this Congress was also at play in this committee. Intransigence on the issue of increasing revenue on the part of the Tea Party clique within the House GOP continued to rule the day. What a surprise! Imagine the committee actually presented a plan on November 23^rd. Now, what do you think its chances of passing both chambers by December 23^rd would have been?

The only “take away” that too many talking heads are suggesting has crawled from the wreckage of this debacle is also a misnomer. That’s the mistaken belief that the GOP side of the committee showed some willingness to consider tax increases as long as they came from closed loopholes and zeroing out certain longstanding tax deductions. In a sense that is true. That was a part of the offer made by Pennsylvania Sen. Pat Toomey to his Democratic counterparts. However, the caveat attached to the offer – lowering the tax rate for wealthy Americans to 28% and permanently extending all of the Bush tax cuts – was an overreach. Democrats wouldn’t even consider it. Further, the argument was rooted in the assumption that the Tea Party members in the House would agree to a tax increase in any sense, whatever the ground gained in cutting taxes. Take Democratic opposition to the plan in the confines of the committee and magnify it ten-fold to get a sense of what the scene would have been like on the GOP side of the House floor when that came to a vote.

So, what is next?

First, it was long assumed that any Super plan would take care of two big looming issues – the question of whether to extend the temporary reduction in the payroll tax that has been putting extra cash in middle class pockets and, second, what to do about the pending cessation of unemployment benefits for the long-term unemployed.  Left undone, Congress must now act before Christmas to address both before they are scheduled to expire at year’s end. Also on the agenda, the pesky question of continuing to fund the federal government, which has a self-imposed House deadline of December 16^th. On all three fronts expect more of the same rhetoric we’ve heard all year long. However, just the thought that some House members might be taking to the floor to explain why they will no longer fund the long-term unemployed in the middle of this economy and in the shadow of Christmas could offer a glimpse into some 2012 campaign ads in the making.

Second, and more important in terms of the big political picture, is what the failure of the Super Committee has set in motion – the coming across-the-board budget cuts for the federal government starting in January of 2013. The thought of this “trigger,” which has now been pulled, was supposed to have been so unbearable as to spur the committee on to finding its own set of spending cuts. Apparently nothing scares this Congress.

President Obama wasted no time in warning that the clock was now set in motion on the cuts and that he would veto any attempt to circumvent them. Republicans countered that the automatic cuts on the Defense Department are unacceptable and vowed to take action to avert them.

These two positions build on the existing framework of the 2012 campaign narrative. Here’s yet another opportunity for the administration to paint the GOP House as extreme and ineffective. The GOP counters that Democrats, once again, are weak on defense. Can Obama use the cuts as leverage to force the GOP back to the negotiating table to come up with a compromise that produces even more spending cuts? Unlikely given GOP opposition to letting this president win any hand. Also, the Achilles heel for the GOP is that a certain faction within its ranks wants as many spending cuts as possible, whatever their source. In the view of anti-tax king Grover Norquist, a federal budget cut is a spending cut, period. Can the GOP use the Defense cuts as a bat to pummel Democratic House and Senate members next November? Probably.

  Whether there’s an “upper hand” here for either side to gain is a big question but the search for leverage will dominate the months to come. Of course, someone, with enough money and talent, could conceivably use this umpteenth example of continued Washington gridlock to fuel a third party run for the presidency next year. 

One thing’s for sure. The Super Committee’s failure left no grand map for moving forward. It was more like a ransom note.

Washington Words:

“The expectations for the super committee were extremely low. But obviously not low enough.”

            Bruce Bittles, chief investment strategist at R.W. Baird

“We’ll run against their tax increase and we’ll crush them.”

            Grover Norquist, anti-tax activist, suggesting that he will turn next year’s scheduled end to the Bush tax cuts into a major campaign issue

“Anyone who thinks African Americans are not going to turn out and vote in numbers similar to 2008 are fooling themselves.”

Glen Bolger, veteran GOP pollster

“It is this partisan paralysis and political cowardice that I think is defining Washington, and we just cannot afford to have that continue.”

            New York City Mayor Michael Bloomberg, on the Super Committee failure

“The institution of Congress will take another hit, but its standing is already at rock bottom.”

            Thomas Mann, congressional scholar at the Brookings Institution

Washington Wonderland

By: John J. Kohut

 Slouching Towards Washington: The Inevitable Nomination of Mitt Romney

Thinking about the dynamics of the 2012 GOP presidential race an image comes to mind of an embattled World War I infantry squad pinned down under enemy fire. Knowing that their odds of survival are nil they pool their money into a tontine, an investment pact that yields all their combined riches to the last man standing. Then, one by one, over the top they go into the unforgiving onslaught.

Of course, the broken Republican contenders this year have all been done in by self-inflicted wounds. First to fall, Michelle Bachmann, who never fully understood that the Iowa Straw Poll really was a straw poll. Then, Rick Perry, who brought to life Churchill’s observation that in politics, as opposed to the battlefield, one could die many times. Next up, Herman Cain, whose overreliance on the oft repeated motto of his grandfather, “I does not care,” has proven to be a totally ineffective retort to the national press corps. And now Newt Gingrich, whose slowly unraveling hold on the imaginations of desperate primary voters is due primarily to the common knowledge that most “historians” do not shop at Tiffany’s.

Buried under months of media coverage of all of the above is the sure and steady drumbeat of the Energizer Bunny that is the Mitt Romney for President Campaign. No matter what the other candidates have said about him, nothing has thrown Romney off stride. Despite warnings from television pundits that the old dynamic of modern GOP presidential nominating contests (that the prize goes to the candidate “next in line”) no longer applied, that’s exactly what is unfolding. Romney has been running for president full time since about 2005. Derailed by Sen. John McCain last time around? That’s okay. This is his turn. Now he’s patiently waiting to take possession of the GOP tontine.

The degree of cognitive dissonance among the core conservative social issue voters that is the GOP base is palpable. Not one vote has been cast. Romney still polls consistently at somewhere around 25% in a multi-candidate field. He’s been all over the place on basic issues like abortion and gun control. His “Christianity” is not their Christianity. And yet the “powers that be” continue to talk about him as the inevitable front runner.

That’s because the Washington establishment of both political parties knows that winning a presidential nomination always comes down to money, message and muscle. At the start of this election cycle the assumption was always that “cooler heads will prevail” and the Republican base would soon realize that Romney was the only one on the field capable of making his way to the White House. Now, after watching the base flirt with an unrealistic cast of characters, the assumption is simply that Romney is the only candidate with the skills to survive this war of attrition.

The arguments in favor of Romney as nominee are pretty basic. Money will not be an issue for him. His campaign is staffed by a skilled cadre of experienced hands. He has been able to reactivate much of the state by state campaign structure that supported his candidacy the last time around. And most importantly, he has stuck to one message with laser-like precision: the unacceptable state of the economy. The Romney campaign understands that this is the road to victory in the general election next year, not questions of Obama’s citizenship or debates about immigration, abortion, tax plans or balanced budget amendments. The question of whether or not to reelect this sitting president is only about the economy and the continued dire rate of national unemployment.

The Romney camp knows that there are still big bumps in the road ahead. Who wins the Iowa Caucus on January 3^rd is not as important as whether Romney at least finishes second. Likewise, the margin of a loss in the South Carolina primary should not be embarrassing. After that, his accumulation of the necessary delegates in a state by state mop-up operation should be clear sailing. But just racking up the delegates to the convention is not the central problem for his campaign.

The cons of Romney as his party’s nominee rest solely on the question of whether the Tea Party base will accept him or, failing that, the degree to which they will dissent.  A fractious national convention just weeks before the start of the general election will not be good. A move by late spring or early summer to rally around a third party candidate, such as Rep. Ron Paul, would be a disaster. Such a candidacy would not only pull GOP votes away from Romney but, more importantly, would narrow the “enthusiasm gap” that now exists between the parties.

 This is why the key turning point for the Romney campaign will be the selection of a vice presidential running mate. Between now and accepting the nomination next summer, it is his campaign’s greatest challenge. Pick the right running mate and put the right wing at ease. Pick the wrong one and alienate them. Is there a selection that can make the Tea Party happy and not disturb “the great middle” of independent general election voters? Not likely. So the selection must be one that does the least damage on either angle.  

The general election onslaught that awaits Romney, the last GOP man standing, has been telegraphed more than a year in advance. He knows what he’s marching into – he’s a multi-millionaire Wall Street businessman who got rich putting hard working stiffs out of work, has no core principles, is willing to be anything to anybody to get elected, and lacks soul. How that plays versus the economy is the only question.

But all that of course is still a lifetime away. As for next week, “Hey, Rick Santorum! You’re up!”

Washington Words: 

“It’s about as airtight as a gym membership. They expire. The milk in my refrigerator expires. The only thing that doesn’t expire is Grover Norquist and his pledge.”

            Rep. Steve LaTourette (R., Ohio) on the power of Norquist’s anti-tax pledge among Republican members of the Congress

“Republicans embrace this mess, because at that point Washington is a broken place that only gets fixed by getting rid of incumbent members [of Congress]. You can see it, feel it and hear it.”

            Anonymous Democratic House aide on how the GOP could spin the coming failure of the Super Committee

“It is an ‘Animal House.’ It’s a food fight. Honestly, the Republican debates have become a reality show. People have to be perceived as being capable of governing this country, of being the leader of the free world.”

Ken Duberstein, former chief of staff to President Reagan

“Short of pestilence, famine and the end of the world?”

            Rep. Michael Burgess (R., Texas), asked how he could be persuaded to sign on to a deficit reduction deal that includes tax increases

“It’s a pretty ugly moment. We’ve asked politicians who understand how to get reelected by cutting taxes and raising spending to raise taxes and cut spending. And they have no idea how to do that.”

            Douglas Holtz-Eakin, president of the American Action Forum 

Washington Wonderland

 By: John J. Kohut

Things You Just Know Will Happen

Politics is sports. It’s just that the games have really big consequences. Whether you’re talking about football, soccer, baseball, basketball or curling, at the core of every competition is the same dynamic: the power of the individual, paired with opportunity, circumstance and fate, to change an outcome. Thus, the mid-court shot with a second to go that wins the title. Or the bottom-of-the-ninth-inning hit that has the crowd rushing back to their seats. What keeps any game, including politics, interesting is the “what’s going to happen next?” question.

Of course, on the flip side, once you know the teams, the players, and their records, too often you can see the endgame coming a mile away. That is, if you’re paying attention.

Is Wall Street ready for its close-up?

Every presidential election cycle reporters drag out the statistics and rehash the question of whether a Democratic or Republican president would be better for the performance of the stock market. USA Today did it last week and interviewed an array of Wall Street players who opined on how the outcome of the 2012 presidential race would (or would not) lead to private sector growth. One, Jim Paulsen, chief investment strategist at Wells Capital Management, offered that either a Republican president or a stronger GOP Congress would slow the “pace of change” and give the markets the “stability” they need. Others suggested the markets were looking for “regulatory relief” and that voters really wanted leaders that “understood the nuts and bolts of what makes an economy and company grow.”

All debatable points, yet what’s missing in this and every other media piece these days that lets “the Street” rail against Washington gridlock, is any sense on the part of Wall Street players themselves that they are about to become big time characters in the 2012 election narrative.

The latest Wall Street Journal/NBC News poll finds that more than 75% of respondents believe that the country’s economic structure is out of whack and favors the wealthy. This plays in to a slew of other recent polls that suggest that the core of the Occupy Wall Street message of income disparity is hitting a deep vein of public opinion. Before you say, “But the OWS has no message,” that’s not the point. It’s that their protest plays into the national mood on a visceral level.

The Wall Street that most Americans (who are not investors) came to know in the wake of the 2008/2009 TARP bailout (i.e. reckless betting in the cause of unquenchable profit), is going to be cannon fodder for Congressional races where Democrats are poised to paint their GOP counterparts as “in the tank” for the rich. The betting among some consultants is that shots of limousines will have become the iconic symbol for greed by this time next year. And those old photos of Mitt Romney with his Bain Capital staffers all clutching wads of cash will be very well known once Democratic Super PACs go to work. What should be more worrying to Wall Street, at least on a public relations level, is that no one on the GOP side is going to come to their defense. GOP office holders may all oppose Dodd-Frank but the crowds at the GOP debates hiss at the mention of the words “bail out.”

GOP Presidential Race: The drama just left the building.

That noise you heard Wednesday night amidst the unbearable 53-second silence emanating from a Michigan debate stage was the sound of thousands of GOP donors dropping their pens and closing their check books.

The implosion of Texas Gov. Rick Perry just took all the air out of the GOP presidential nominating contest. Perry was alone among the “not Romney” candidates who had the money to compete in the conservative bastions of Iowa and South Carolina where Romney is still not trusted. Before the Perry media machine can tear down Romney they now have to spend even more time and money making the case for their own candidate.

Now the party must learn to love Mitt once and for all. Sure, Newt Gingrich will probably have his week in the sun but a candidacy that is built on the message “I’m smarter than you are” and consumed with endless lectures on Chilean retirement plans was never going to go the distance.

Things that will happen when the Super Committee fails

Just 14 days to go until their November 23rd deadline and already all the talk in Washington has shifted to “who gets the blame for this?”

The GOP line is that the Democrats never wanted to succeed anyway so as to preserve the gridlock dynamic that will allow the president to continue his campaign against a “do nothing” Congress. The Democratic response will zero in on GOP opposition to raising taxes on the wealthy.

Of course public opinion will blame “our broken government” and disapproval of Congress will hit another all time high. Expect much commentary about the cynicism rampant on Capitol Hill and much talk about a further ratings downgrade for the U.S. government. It will set an ugly mood going into the holiday season.

In politics, as in sports, sometimes you just know.

Washington Words:

“A really, really, really narrow sliver of people in a really small group of states are going to decide who’s the next president of the United States.”

Democratic strategist Steve McMahon on the 2012 battleground states

“It will be an intensely negative and bitter election. And that will complicate things enormously for the winner in 2013, just as it did for [George W.] Bush in his second term.”

Rep. Tom Cole (R., Oklahoma)

“Frankly, the race to become the chief alternative to Romney reminds me of “Musical Chairs: GOP Edition.’ The next round is about to begin, but nobody knows who will get the seat when the music finally stops.”

GOP consultant Phil Musser

“The notion that the scales have been tipped out of balance is incredibly strong.”

GOP pollster Bill McInturff whose latest polling for The Wall Street Journal/NBC News finds more than 75% of those polled agreeing that the economic structure favors the wealthy.

“Bad news is not like fine wine. It doesn’t improve with age.”

Mississippi Gov. Haley Barbour, on the Cain campaign’s response to the sexual harassment stories