Obama’s Win in Debt Fight Won’t Secure Success for Agenda

U.S. President Barack Obama speaks while visiting furloughed federal workers volunteering at Martha's Table in Washington, D.C., U.S., on Monday, Oct. 14, 2013. Photograph: T.J. Kirkpatrick/Bloomberg Close

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U.S. President Barack Obama speaks while visiting furloughed federal workers volunteering at Martha's Table in Washington, D.C., U.S., on Monday, Oct. 14, 2013. Photograph: T.J. Kirkpatrick/Bloomberg

President Barack Obama’s victory in the fiscal standoff with Republicans won’t guarantee success in future talks with Republicans over his spending priorities and immigration proposals.

At the end of a weeks-long stalemate, Obama managed to stave off a direct assault on his health-care law by House Republicans and force them to allow an increase in the U.S. debt ceiling without conditions.

“It’s clearly a win for the president,” said Patrick Griffin, a congressional lobbyist in the administration of President Bill Clinton, who faced two government shutdowns and a combative Republican Congress. “Whether it’s a battle win or a war win for the president, we don’t know.”

The last-minute agreement doesn’t eliminate the core conflict in Congress over fiscal policy, and the temporary funding extension for the government expires on Jan. 15. Republicans still say they will refuse to raise taxes, while Democrats say they won’t cut entitlements such as Social Security and Medicare without more tax revenue.

House Republicans vowed to keep chipping away at the Affordable Care Act, the president’s signature achievement of his first term.

“We haven’t really resolved any of the big issues,” said Dan Meyer, who was chief of staff to former House Speaker Newt Gingrich when he was confronting Clinton. “He didn’t get more revenue. He didn’t get the sequester caps lifted. All those decisions were punted.”

Photographer: Mark Wilson/Getty Images

U.S. President Barack Obama walks into the Brady Press Briefing room at the White House to speak after the Senate voted to end government shutdown and raise the dept limit on October 16, 2013 in Washington. Close

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Photographer: Mark Wilson/Getty Images

U.S. President Barack Obama walks into the Brady Press Briefing room at the White House to speak after the Senate voted to end government shutdown and raise the dept limit on October 16, 2013 in Washington.

Obama’s Agenda

The Senate voted yesterday 81-18 to approve the compromise to end the government shutdown and raise debt ceiling, followed by the House, 285 to 144.

Obama said he would sign the legislation immediately, and he next wanted Congress to pass a new immigration law, a farm bill and to work on a “sensible budget.”

“There is a lot of work ahead of us, including our need to earn back the trust of the American people that has been lost over the last few weeks,” Obama said at the White House after the Senate vote. He said he hoped that lessons of the stalemate “will be internalized” by lawmakers.

The partial government shutdown that resulted from the deadlock has taken at least $24 billion out of the U.S. economy so far, reducing fourth-quarter growth by at least 0.6 percentage points, according Standard & Poor’s.

Markets Steady

Investors were unfazed, though. Daily swings in the Standard & Poor’s 500 Index averaged less than 1 percent since the shutdown began on Oct. 1. After a deal was announced by Senate leaders, the benchmark climbed 1.4 percent to 1,721.54 at 4 p.m. in New York, rising to within 0.3 percent of its last closing record.

The political costs are less clear.

A Pew Research Center poll showed that the longer the shutdown went on, the more Americans blamed Republicans over Obama and other Democrats. Seventy-two percent of Americans surveyed Oct. 9-13 disapproved of the job Republican leaders in Congress were doing, while 51 percent disapproved of Obama’s performance.

Lawmakers have more than a year before they face voters again in midterm elections.

“I lived through it last time,” Meyer said of the shutdowns in 1995 and 1996, after which Republican maintained their congressional majorities. “There’s little historical evidence that standing a year before an election has much of an impact.”

Negotiating Partner

Obama still is without a Republican negotiating partner who can reliably make a deal and deliver opposition party support.

House Speaker John Boehner of Ohio has been unwilling to hold votes on measures opposed by Republicans in the Tea Party caucus. While Senator Republican Leader Mitch McConnell of Kentucky stepped in to steer the bipartisan resolution to avoid a debt default, he may be less inclined to take such a political risk other policy issues that could hurt his prospects in a primary election next year.

Understanding the Debt Ceiling

White House press secretary Jay Carney declined to say if Obama can use the Republican defeat to his advantage in budget negotiations early next year or as he tries again to win passage of a new immigration law.

“There are no winners here,” Carney said. “I can’t really say that we’re either encouraged or discouraged. We will just have to see.”

Debt Debates

David Plouffe, a former senior adviser to Obama, said the president is likely to emerge with a stronger hand in any case. The Tea Party faction in the House overplayed its hand, he said, and that probably enhances the position of the Senate, where Democrats have a majority, and of House Republicans who are willing to compromise with the administration.

The outcome of this standoff makes future confrontations over the debt limit less likely, Plouffe said.

“Hopefully, we have broken forever using the debt ceiling as a political weapon,” Plouffe said. “I’m not naïve but I think it’s unlikely the Republicans in Congress want to go through this anytime again soon.”

The biggest victory for the president was in cutting off the Republican attempt to scuttle the health-care law, Plouffe said. By the time the next round of fiscal negotiations occurs in January, coverage will have begun for Americans who signed up through the health insurance exchanges. That means Republicans who attack the law in the next budget fight would have to try to take away existing coverage from constituents.

Earlier Compromises

Whether Obama gets from Congress a new immigration law or changes he’s seeking in taxes and entitlement programs depends on how Republicans read the outcome of this fight, Plouffe said.

He recalled that following their political loss in the 1996 shutdown, House Republicans under Gingrich reached deals with Clinton on welfare reform and the minimum wage.

“There was a strategic necessity for them post-shutdown to show they could govern,” Plouffe said. Immigration law “would be the natural place” for Republicans to act, he said.

“But I don’t think we know the answer yet,” he said. “They may say, ’We don’t feel the need to do what Gingrich did.’”

Judd Gregg, chief executive officer of the Securities Industry and Financial Markets Association and a former Republican senator from New Hampshire, said both sides suffered by going through the shutdown.

“Clearly there’s significant damage to the Republican brand relative to our willingness to be a party of constructive governance committed to fiscal responsibility and reducing the deficit and the debt,” Gregg said. “The president’s done himself considerable harm by not negotiating on this.”

“I think that everybody has a fair amount of egg on their face,” he said.

To contact the reporters on this story: Margaret Talev in Washington at mtalev@bloomberg.net; Mike Dorning in Washington at mdorning@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net

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