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Six Ways To Keep Working-Class Voters On Obama’s Side

March 6 (Bloomberg) — In 1980, I was working on the campaign of Senator Birch Bayh, the Indiana Democrat who was being challenged by an upstart conservative congressman from northwest Indiana named Dan Quayle.

One day, I traveled with Bayh to the Chrysler manufacturing plant in New Castle, Indiana. It was supposed to be fertile ground: Bayh had been the Senate sponsor of the previous year’s bailout bill for the carmaker, and Quayle had voted against the measure in the House.

Some workers at the plant were indeed enthusiastic to see Bayh, but some seemed diffident — and a few were outright hostile. The hostile ones formed a small group near the senator, and started yelling at him, “You sold out Taiwan, you sold out Taiwan” — a reference to his support for legislation to normalize relations with what was then known as mainland China.

Finally, the usually jovial Bayh pivoted on the hecklers, saying: “You (expletive)s wouldn’t have jobs if my opponent had gotten his way, and you’re yelling at me about an island that is 7,000 miles away!” On election night, Bayh’s vote from the working-class neighborhoods around the plant was far lower than expected, and he lost to Quayle.

This experience was very much on my mind last week when President Barack Obama gave a feisty, powerful speech at a United Auto Workers meeting in Washington. The union gave him a hero’s welcome, and why not? Thanks to the president’s smart and strategic action in rescuing the car industry, UAW members have jobs — and if the president’s opponents had their way, they probably wouldn’t. So isn’t it a no-brainer that auto workers — and for that matter, most working-class Americans — will vote their pocketbooks and support the president this fall?

In a word: maybe.

The impact of social issues — values issues — on the electorate is vastly underestimated by most observers and pundits. The effort to turn politics into statistical analysis has further exacerbated this lack of understanding, as analysts seek to find a strict correlation between economic data — voters’ income levels (or economic gains or losses) — and election results.

But consider this bottom-line political fact: In every election from 1988 through 2008, voters who said that economic issues were the most important factor in their decision-making chose the Democratic presidential nominee — six for six — yet the Republican candidate nonetheless won three of those six elections. The reason: the Republicans’ margin among voters who made their choice based on social issues was large enough to overcome the Democrats’ advantage on economic concerns.

When you look at two heartbreaking defeats for Democrats that cost them the presidency — Vice President Al Gore’s loss in Tennessee in 2000, and Senator John Kerry’s loss in Ohio in 2004 — soft support among working-class voters who rallied behind George W. Bush’s “values” message turned out to be the difference.

It is true that the impact of social issues in presidential politics isn’t a one-way street. From 1948 through 1988, Democrats had never carried California and New Jersey in the same presidential election (except for the landslide year of 1964). But concern about the reversal of Roe v. Wade by the Supreme Court in the late 1980s polarized moderate, pro-choice voters in those two states, and they have been solidly Democratic in every presidential election since 1992 — a stunning reversal.

Still, in the battleground states of 2012 — especially in the industrial Midwest, and the swingable states in the South — it is critical to keep an eye on the impact that social issues will have on undecided voters, and to not merely presume that improving economic news guarantees an Obama victory there.

In 2000, as the auto industry was enjoying relatively good times, auto workers defected to Bush in droves over (unfounded) fears that Gore would “take away” their hunting rifles. In 2004, the Washington Post’s David Finkel profiled Ohio voters with shrinking incomes, working two or three jobs, who nonetheless voted to re-elect Bush because he “shared their moral values.”

The Republican candidates’ botched handling of social issues so far in this cycle — from contraception to the need for higher education — shouldn’t give Democrats a false sense of security. The Republicans’ social-issue orchestra is just tuning up, and has historically found its pitch and melody as the election approaches.

What can Team Obama do to combat the onslaught that is coming? Here are six ideas:

— Lead with the life story: Republicans want to paint Obama as someone who was born at Harvard Law School and who has enjoyed the high-flying life of a best-selling author. While the president’s story was widely known to voters in 2008, it has since faded from consciousness; his campaign needs to return it to front and center. Obama was raised by loving grandparents and a determined single mother and learned values of hard work and achievement from his elders; a young man who gave up offers of high-paying jobs to help unemployed workers rebuild their community; a devoted father and husband who checks his kids’ homework and attends his daughters’ sporting events on the weekend — even as he shoulders the duties of the highest office in the land. This is the Obama who must be reintroduced to the American people in 2012.

— Root for Mitt Romney: Most observers believe that the former Massachusetts governor is by far the strongest Republican candidate. I disagree. It is hard to imagine an opponent less capable of leveraging social and values issues against the president. Any Republican needs so-called Nascar voters to beat a Democrat; Romney recently said that he knows more race-car owners than drivers. Any Republican will need disaffected, downscale, working-class social conservatives to beat Obama; Romney’s privileged upbringing, Wall Street career, and tone- deaf statements (like boasting that his wife owns multiple Cadillacs) will alienate these voters. Rick Santorum and Newt Gingrich have botched heavy-handed attempts to connect with this demographic thus far — but they at least have some sense of how to do it. Romney doesn’t.

— Eschew elitism and embrace the elderly: It’s great that the president is taking his fight for women’s health-care coverage to the Barnard College commencement; it would be better if he took it to graduations at community colleges and nursing schools. Obama’s challenge in 2012 isn’t with Ivy League women (and their families), but with working-class men and women who need to know he shares their values. Likewise, the president’s relative youth and “change” message are enormously appealing to younger voters with more progressive values, but the White House cannot forget that the 2012 presidential electorate will be the oldest in history — and that these voters are the most traditionalist in perspective. The president cannot — and should not — depart from his own values, but he must constantly show respect and understanding for voters (especially older ones) who see these questions differently.

— Unity with “the uniforms”: The president has an unmatched record of support for veterans, and for police officers and firefighters. Affiliation with these groups conveys a strong message to culturally and socially conservative voters about values and priorities. Every chance he gets, Obama should be seen with these critical constituencies, and align with them. The broader message he sends will be powerful.

— Principles, not just policies: As I have argued previously, it is critical that the president make his economic case around principles — fundamental values that he is trying to fight for — not just policies. In recent months, the White House has gotten much sharper on this point, but the discipline of this approach can’t be relaxed even as the economic news gets better. If the Republicans want to fight the election on the battlefield of values, the president must broaden that conversation to include a discussion of the values and morality of economic policies, as well.

— Value the Veep: Readers of this column know that Joe Biden was my boss and is my friend — so I am clearly biased. But even his critics acknowledge the vice president’s strong appeal to working-class voters — especially manufacturing workers and union members in states such as Ohio, Pennsylvania, Michigan, Iowa and Wisconsin. His rapport with these voters is unmatched, and their attachment to him is obvious. He is a linchpin of any administration strategy to appeal to these critical voters.

A few months ago, when some were saying that soft economic news made the president’s re-election unlikely, I wrote that by embracing a values-based economic message — making it clear which principles he was fighting for, and which values he wanted to see our economic recovery embrace — Obama could defy the data and win.

Now, the converse also must be kept in mind: Good economic news, in and of itself, doesn’t guarantee re-election. The president and his team must keep a sharp eye on values voters, and not let these hard-working men and women slip away if the Republicans recover from their recent fiascos, and launch concerted, sophisticated efforts to win their votes on non- economic issues, as they have in the past.

Ron Klain, a former chief of staff to Vice President Joe Biden and a senior adviser to President Barack Obama on the Recovery Act, is a Bloomberg View columnist. He is a senior executive with a private investment firm. The opinions expressed are his own.

How To Defuse Political Peril Of Surging Gas Prices

Feb. 21 (Bloomberg) — The White House’s economic achievement checklist looks better each day. Unemployment rate back in the low 8 percent range? Check. The Dow Jones Industrial Average back above 12,000? Check. Payroll-tax cut extended for the rest of this year, giving an extra boost to the economy? Check.

Yet a worrisome item casts a shadow over the good news. The political risk of rising gasoline prices is the emerging hot topic in Washington. The question is: Are gas prices and their impact on middle-class families like the weather, a phenomenon everyone complains about but no one can change? Or can President Barack Obama and his team defuse this danger before it grows harder to manage?

According to AAA, gas prices have climbed an average of 14 cents a gallon in the past month and about 30 cents a gallon since late November. In states such as Pennsylvania and Florida, prices are an additional 10 cents to 15 cents a gallon higher, and seem to go up each week.

The political pinch that this can cause is often underappreciated. For some people, a few extra dollars at the pump each week is little more than an annoyance. But for hard- pressed middle-class families, and working families living paycheck to paycheck, the soaring numbers at the corner gas station are far more meaningful than the indexes at the New York Stock Exchange.

Consider this: The president just won a victory over congressional Republicans who couldn’t withstand the political consequences of a payroll-tax increase of $40 a month for the average working person. But for an average couple living in suburbia, driving about 1,500 miles per person each month, in two cars that get average gas mileage, a 50-cents-a-gallon increase will cost them about 20 percent more than the payroll- tax cut saves them. In their case, what the president and Congress gives, the gas man takes away.

The potential economic impact of such a hit to the middle class is obvious. Mass-market retailers have long correlated even modest increases in gas prices with falling sales, which, in turn, could damp the recovery. But even this understates the political effect of rising gas prices, which is magnified for three reasons.

First, working-class residents of suburbs and exurbs are hit hardest — and these are the families (and the areas) that disproportionately account for swing voters in presidential contests. Second, gas prices tend to surge sharply in states that happen to be critical electoral battlegrounds — especially in the industrial heartland and the upper Midwest. And third, big price increases almost always occur in the summer — after the primaries end and before the conventions — when little else is stirring the political conversation.

In each of the last three presidential elections, rising gas prices have posed a particular problem, especially for the Democratic presidential candidate. In 2008, the faltering campaign of the Republican nominee, Senator John McCain, was revived in the late summer — not just by Sarah Palin’s star appeal, but also by the power of her “drill, baby, drill” message as a purported response to rising gas prices.

This is a particularly difficult political problem for Democrats, because the two most popular responses — a cut in gas taxes or an expansion of oil drilling — are anathema to critical party constituencies. Lower gas-tax revenue dries up the funding source for building roads, bridges and transit projects. This affects the working-class voters who derive their livelihood from such projects. And expanding oil drilling — beyond the aggressive plans that the administration has already put forward — would alienate conservation-minded voters who are also important Obama supporters. Moreover, some environmentally oriented voters believe that higher gas prices are a good thing, as they provide an incentive for more conservation, less driving and the purchase of more fuel-efficient vehicles.

This dynamic creates three bad choices for Democratic presidential candidates: abandon principled positions on conservation and the environment, watch as working-class voters critical to the candidacy rally behind ill-advised Republican plans for gas-tax cuts and recklessly expanded oil production, or suffer the political consequences of taking no action at all.

In 2008, the political fallout from the gas-tax issue faded in the fall, as the price receded and the financial collapse in September dwarfed all other concerns. But waiting for fall to come, or hoping that other events will distract voters, isn’t a strategy for coping with the economic and political challenge of rising prices in 2012.

Instead, the White House should act boldly, and move immediately to cope with the problem before it becomes politically red hot.

One idea might be a “pocketbook protection” plan, which would work as follows: If the average price of gas exceeds $4 a gallon, an additional, automatic payroll tax cut of 1 percent would kick in, as much as $50 per month, per person. The cut would stay in place for at least 90 days; it would disappear when the price fell below $4.00 per gallon.

There are three advantages to this approach. First, because the plan is of limited duration and is capped at $50 a month, its cost is relatively modest — about $5 billion a month, or $20 billion total, assuming the usual four-month gas-price surge. Second, because it isn’t a reduction in gas taxes, it doesn’t weaken any incentives for fuel conservation or efficiency: All workers get $50 to soften the blow of higher gas prices, but the less fuel they use, the more money they save. And third, the relief provides the greatest relative help to lower-income workers who need gas to commute and feel the price pinch the hardest.

Admittedly, by decoupling the tax relief from gas-tax collections, the pocketbook protection plan does give some benefit to workers who don’t drive. But any such windfall is modest, and even these non-drivers will need help dealing with the ripple effect of rising gas prices on the costs of other goods and services that are transportation-dependent.

The plan could be almost entirely paid for with a modest, no-loopholes surcharge on corporate taxes on profit derived from the higher gas prices. The administration would be able to avoid pejorative terms such as “windfall” or “excess” profit tax, because the tax is neither confiscatory nor punitive. With higher gas prices, oil companies will make record profit — and a partial surcharge will still leave that profit at record high levels. In other words, the plan isn’t vulnerable to suggestions of creeping, soak-the-rich redistribution. It would leave in place all incentives for oil companies to increase production, do more research and development, and explore alternative fuels. But a modest surcharge would help fund at least a partial pocketbook protection program to make sure the cost of the oil companies’ gain isn’t excessive pain for the rest of us.

With gas prices now rising in the winter (when they are traditionally low), and increased anxiety about stability in the Middle East, all signs point to a surge this summer. By developing and announcing a plan now, the administration can avoid being unarmed when facing the horrible choice between enduring the anger from voters hurt by gas prices or backing Republican policies that are bad for conservation and the environment.

The administration should take this chance to fill its tank with political capital before the gauge says “E” — for economic peril.

(Ron Klain, a former chief of staff to Vice President Joe Biden and a senior adviser to President Barack Obama on the Recovery Act, is a Bloomberg View columnist. He is a senior executive with a private investment firm. The opinions expressed are his own.)

Will Republicans Cooperate With Obama Like It’s 1996?

Jan. 10 (Bloomberg) — Newt Gingrich’s return to prominence may not last, but it should stir memories of the last time he was a major figure on the national scene. Indeed, revisiting the events of 1996 allows us to imagine a different scenario for this election year than most observers expect.

Back in 1995, as in 2011, powerful Republican leaders (including Gingrich, then speaker of the House) faced a Democratic president who had been weakened by a stinging midterm defeat. They blocked the president’s initiatives, and tried to use their power in Congress to bring him down. By the end of 1995, gridlock had reached a new high with the government shutdown and the failure of budget talks between the White House and Congress. Sound familiar?

Most experts expected things to get even worse in 1996. Then, a few things happened to change that outcome. Bill Clinton, the Democratic president, regained his footing, sharpened his message for re-election and was buoyed by improving economic news. Congress grew less popular as voters became dissatisfied with the lack of progress and obstructionism. There were mounting signs of another tidal wave election, this one to sweep out the new Republican members who had been seated in the previous election. As 1996 unfolded, the party lost enthusiasm for its lackluster emerging nominee, Bob Dole.

The result: Gingrich and fellow Republican leaders in Congress decided to work with Clinton to pass a raft of important legislation. These included a balanced budget deal, an extension of health-care coverage (the Kennedy-Kassebaum Act) and sweeping welfare reform.

Congressional Republicans decided that working with the Democratic White House to improve the standing of Congress with the public was more important than continuing to obstruct the president’s agenda as a way to ensure he served only one term.

Could the 2012 election year shape up the same way? Could the most do-nothing, gridlocked Congress in memory change direction, and could its members decide to save their own political hides? Might congressional Republican leaders choose to produce results by cooperating with President Barack Obama, even if it undercuts the party’s front-runner for the presidential nomination, Mitt Romney?

The odds of this happening this year are long. Yet, in recent weeks, the first signs of a reversal have emerged.

The payroll-tax standoff that the president won before Christmas was the first indication that such a dynamic could take shape. Although Obama was applauded for his resolve and persuasion, that achievement was equally evidence that the laws of political gravity are finally taking hold: Congressional Republicans cannot defy the public’s demands for action on the economy indefinitely without suffering political costs.

The Republican lawmakers who were blocking the extension of the payroll-tax cut — in an extreme attempt to weaken Obama’s re-election by foiling his initiatives to strengthen the economy — couldn’t withstand the damage to their own prospects. In the end, they decided to do what was in their own political interests — and Obama’s — rather than what benefited Romney.

In the weeks that have followed, there have been further developments that could result in a turnaround in congressional attitudes toward working with the president. Obama’s approval rating has risen, strengthening his political hand, while the public’s perception of Congress remains at an all-time low.

Better economic news — such as the recent report of a reduction in unemployment — reinforces this dynamic.

Finally, the growing sense that Romney will be the tepidly accepted nominee by default — much as Dole was in 1996 — is forcing Republicans to reconsider what price they are prepared to pay to advance his political interests.

True, the partnership of Clinton, Gingrich and Senate Majority Leader Trent Lott in 1996 had some features that are absent now: most prominently, the peculiar role of a top presidential adviser who provided counsel to both ends of Pennsylvania Avenue (Dick Morris, who served as an important go- between for Clinton and Lott); Gingrich’s ability to make his rank-and-file accept bipartisan bargains, a skill the current speaker, John Boehner, doesn’t possess; and the lack of an aggressive, far-right grass-roots movement like today’s Tea Party that threatens Republicans who want to work with the president.

In addition, the twin impacts of reapportionment and redistricting (and the breakdown of Senate seats up for election in 2012) mean that there are fewer Republicans at risk this year from a “sweep-the-bums-out” wave than there were in 1996. That may allow the party’s lawmakers to withstand more heat from the public as they keep their presidential nominee afloat.

Even so, Obama has some assets that Clinton lacked in 1996. First, the White House’s “We Can’t Wait” campaign has more effectively made congressional obstruction a central election issue than was the case in early 1996.

Second, Democrats have the majority in one of the two legislative chambers. As a result, they don’t need Senate Republican leaders to help achieve progress, they just need seven nervous Republican senators to line up with Majority Leader Harry Reid on a few crucial votes.

Third, congressional Republicans today have far less of a personal investment in the Romney candidacy than they did in that of their old friend and colleague, Dole, a Senate leader from Kansas.

The president’s recent rhetoric and actions — the crisper stump speech, the recess appointment of Richard Cordray to head the Consumer Financial Protection Bureau — don’t endanger bipartisan cooperation. In fact, they make progress more likely because they show Republicans that the president can score points without them, if need be. The Republicans’ political dilemma grows more acute each time Obama wins a confrontation.

Certainly, hard-core Republicans in the House and those with safe seats in the Senate are likely to block progress in 2012 and spend political capital to advance the Romney cause. But the president’s higher standing, his sharper election-year instincts, his communications strategy and signs of an improving economy will give his congressional opponents second thoughts about the slash-and-burn strategy they have followed for the past three years.

Just as they caved to Obama on the payroll-tax extension to save their own skins, they could find it useful to hand him wins in 2012 on energy policy, fiscal policy and job-creation initiatives as a way of enhancing their own standing with angry voters.

Think it can’t happen? Ask Gingrich.

(Ron Klain, a former chief of staff to Vice President Joe Biden and a senior adviser to President Barack Obama on the Recovery Act, is a Bloomberg View columnist. He is a senior executive with a private investment firm. The opinions expressed are his own.)

Copyright 2012 Bloomberg

Republicans May Be Trampled By Bull Moose Revival

Dec. 13 (Bloomberg) — Last week, President Barack Obama gave a speech whose location, tone and language consciously evoked an address by Theodore Roosevelt at the outset of the 1912 presidential campaign. The deliberate historical echo, however, raised an intriguing question: Will Obama’s 2012 effort bear a closer resemblance to the one waged by Woodrow Wilson, Roosevelt’s opponent, than to the race run by TR himself?

Observers have noted the many similarities between Obama and Wilson. Both were scholarly, brilliant, and accomplished authors before becoming president. Both drew political strength from their gifts as speakers, and relied far less on conventional political attributes, such as an aptitude for backslapping and schmoozing. Both came from the reformist wing of their party, with little support from the insiders.

But the most intriguing similarity has only begun to take shape in recent weeks: Like Wilson in 1912, Obama may face a Republican Party that is unable to unite behind a single choice and whose voters would have to choose between two candidates on the ballot in the fall.

In 1912, conservative Republicans refused to support the nomination of the party’s most popular figure — former President Teddy Roosevelt — and instead backed the preferred candidate of the right wing: incumbent President William Howard Taft. Roosevelt then ran as a third-party candidate, divided the Republican vote with Taft, and Wilson, the Democratic nominee, won an Electoral College landslide.

Could a similar scenario unfold next year?

Third-Party Legacy

Impactful — and even decisive — third-party campaigns are more common than we usually appreciate. In the last eight presidential elections, a significant outside candidate has been on the ballot four times (John Anderson in 1980; Ross Perot in 1992 and 1996; and Ralph Nader in 2000), and there is a serious argument that the outcomes of two of these four races (1992 and 2000) would have been different if that insurgent hadn’t run.

Recent developments in the Republican contest have substantially raised the likelihood of a noteworthy third-party candidacy in this election.

First, the collapse of the Rick Perry, Michele Bachmann, and Herman Cain boomlets, and the coalescence of conservatives behind Newt Gingrich, have created the architecture for an ideologically driven, one-on-one contest between the former House speaker and Mitt Romney that is likely to be especially divisive.

The 2008 Democratic primary provides a useful contrast. While the race between Hillary Clinton and Obama was long, close and hard fought, the differences between the two candidates were mostly of leadership style and generational tone. The choice for voters was between a “restoration” of the Clinton White House and a changing of the guard. Those aren’t the sort of differences that drive the supporters of the defeated primary candidate to bolt their party.

The sharply contrasting ideological divide between Gingrich and Romney may be another story. It could lead the loser’s backers to seek an alternative in the fall. On the conservative side, it’s clear that a substantial number of Republicans find Romney unacceptable because of his Massachusetts health-coverage plan that strongly resembled Obama’s law; his (at least previously) moderate positions on social issues; and the sense that he has flip-flopped on core conservative values. In addition, Romney’s Wall Street ties and establishment roots make him particularly unacceptable to an important subset of conservatives: the populists of the Tea Party.

‘Buyers’ Remorse’

Romney’s inability to crack 30 percent in polls of Republican primary voters isn’t merely the traditional “buyers’ remorse” that plagues all front-runners in the nominating process. He is facing an entrenched, hardening resistance by conservatives.

Conversely, the emergence of the highly polarizing, bombastic Gingrich as the leading conservative candidate makes it less likely that the party’s moderates will fall into line. These Republicans might be able to accept another conservative favorite — Perry, for example — as their choice, but not Gingrich.

Second, the new Republican nomination rules in place this year increase the chances of a protracted contest. In the 2008 race, John McCain was able to lock up the nomination early by sweeping large, winner-take-all primaries. But this time, the party has adopted a “proportional representation” system that Democrats have used in the past. These rules allow the losing candidates to continue to build delegate totals, which encourages them to stay in the race to the very end.

Put these two factors together, and you have the makings of a long, divisive, ideological primary that may result in a conflagration when the losing faction starts to ponder a third- party challenge to the winner.

This isn’t to say that either Gingrich or Romney would run as third-party candidates: Neither is likely to want to be saddled with the “sore loser” epithet that would accompany such a choice. But if Romney wins the Republican nomination, would Ron Paul — who expressly refused to rule out the third- party path on “Meet the Press” last week — run as a Tea Party alternative to the establishmentarian candidate? If Gingrich wins the nod, would Jon Huntsman — who broke with his party once to serve in the Obama administration — emerge as a moderate alternative? Neither possibility is far-fetched.

This is all the more plausible as the 2012 race will feature a path to national ballot access for a third-party candidate that hasn’t existed previously.

Historically, one of the major obstacles to such candidacies was the difficulty of gaining access to the ballot in enough states to mount a truly national campaign. Until now, there have been only two ways to overcome this formidable hurdle: the mobilization of many passionate, grassroots volunteers (John Anderson, Ralph Nader), or a personal fortune to underwrite an army of paid signature collectors (Ross Perot).

Americans Elect

In 2012, there also will be a third path: the online campaign known as Americans Elect, which has already collected more than 2 million signatures to put “Candidate TBD” on the ballot next year. The group is running an online nominating process — culminating in an online convention in June — that will hand a ballot slot in all (or at least most) of the 50 states to whoever can get his supporters to log the most clicks.

If Gingrich wins the Republican nomination, would Americans Elect become a vehicle for a moderate Republican to seek a third-party line in 2012? Almost certainly. If Romney wins, would the Tea Party forces put their manpower into winning the Americans Elect line for one of their own? No doubt.

Americans Elect, then, is the equivalent of Chekhov’s gun: We caught a glimpse of it on stage in the first act, so it almost certainly will go off — with story-changing consequences — before the end of the play.

With 11 months until Election Day, anything can happen, of course. But Gingrich’s rise as a consolidator of conservative resistance to Romney; the former House speaker’s lack of appeal among moderate voters; the rule changes that make a long primary (and hence a bitter one) more likely; and the presence of a ready-made launching pad for disgruntled Republicans to offer a candidate of their choosing all contribute to a particularly high probability of two Republicans on the ballot.

This state of affairs may be as helpful to Obama as it was to Wilson in 1912, when he rode Republican discord all the way to victory.

(Ron Klain, a former chief of staff to Vice President Joe Biden and a senior adviser to President Barack Obama on the Recovery Act, is a Bloomberg View columnist. He is a senior executive with a private investment firm. The opinions expressed are his own.)

Copyright 2011 Bloomberg

All Americans Lose If Payroll-Tax Cut Isn’t Renewed

Nov. 29 (Bloomberg) — Suppose you are an unmarried doctor, making $175,000 a year. Or a store manager married to a Realtor, earning a combined $160,000. Or a journalist married to a lawyer, each making $90,000. Or the owner of a small business who takes home $120,000.

If you are lucky enough to be one of these higher-earning, working taxpayers, the chances are that you believe President Barack Obama wants to raise your taxes. You have probably read a lot about his plan to increase the burden on individuals making more than $200,000 and joint-filers bringing in more than $250,000, and you probably think you will take a hit, too.

You would be wrong.

In fact, the president’s proposal would lower taxes by $2,200 for that single doctor; by $3,200 for the manager and the Realtor; by $3,600 for the journalist-lawyer couple; and by $2,000 for the small-business owner. And for those who bring home a more typical paycheck — a teacher making $40,000 a year; a technician married to a police officer, each making $45,000; or two married office administrators bringing in $50,000 each — the president also wants to preserve their tax cuts ($800, $1,800 and $2,000, respectively).

That is what is at stake in the current standoff in Congress over Obama’s plan to extend the payroll-tax cut for all these people, and everyone else who brings home a paycheck. In perhaps the most significant economic-policy debate now under way, the president is confronting Republican opposition to his plan to keep in place a 2 percent tax cut scheduled to expire in a little more than a month.

Tax-Cutter Obama

It’s the season for the White House to trumpet Obama, tax cutter. At a time when so much of the national debate is about the 1 percent versus the 99 percent, Obama’s message should be simple: 2 percent for the 100 percent. That’s because the president is fighting for a 2 percent payroll-tax cut for all Americans who work for a living: blue-collar and white-collar; poor, middle-class, and rich; service-sector, manufacturing- sector, or professional. If you bring home a paycheck, Obama wants Congress to keep your taxes down.

Incredibly, Republicans have rejected this proposal, so far. It may be because they agree with Senator John Cornyn of Texas, who said this month that the payroll-tax cut has a “detrimental” effect on the economy. Or maybe they agree with former Massachusetts Governor Mitt Romney, a candidate for the party’s presidential nomination who also opposes extending the tax cuts, which he has called a “temporary little Band-Aid.”

Fittingly, tomorrow, the president will take the fight to Scranton, Pennsylvania, the birthplace of my former boss, Vice President Joe Biden. The payroll-tax cut that Obama wants to extend was put in place in negotiations led by Biden in 2010, and the battle to preserve it is an opportunity for the Obama- Biden ticket to line up squarely with the views and needs of middle-class voters who will decide the 2012 election.

The Scranton stop is just part of what the White House should be doing. The president needs to press this fight, not just this week, but every day until it is won. He shouldn’t stop talking about the issue until every American knows what he is fighting for, no matter how repetitive and “boring” he risks becoming. Obama should be shouting this message from the White House steps; he should have had it stamped on the side of the Thanksgiving turkeys he pardoned last week; and he should have it printed on the ornaments on the National Christmas Tree he will light this week. He can’t press too hard, or too much, or too often.

Why? First and foremost, because American families need help, and the economy needs the boost. With the recovery still sluggish, and improvement on the jobs front only gradual, maintaining this growth-spurring, wallet-widening tax cut is just plain common sense.

Political Stakes

Unfortunately, common sense often isn’t enough to make something happen in Washington. So let’s look at the three reasons why, politically, there is more at stake in this fight than appears at first glance.

First, while the extension of the payroll-tax cut will inject “only” about $100 billion into the economy — shaving less than half a percentage point from the unemployment rate — it is probably the single achievable policy change that will have the greatest impact on employment and economic growth between now and Election Day.

That is, while other pending job-creating policy proposals — from major infrastructure investments, to immigration-law changes, to plans to increase entrepreneurship — will have greater impact in the long run, these ideas remain months away from enactment, and even if passed, would take time to affect the unemployment rate.

Hence, in terms of actually “moving the needle” on economic conditions and the jobs picture in the few months left before voters’ perception of the economy locks in for 2012, no single policy decision may be more significant.

Second, there seems little doubt that the Republicans intend to run their classic playbook in the election. That starts with labeling the Democratic candidate as a “tax raiser.” The president’s responsible insistence on a balanced approach to deficit reduction — including increasing revenue from those at the top end of the earning spectrum — adds to the risk that Republicans can stir fears that Obama intends to press for widespread tax increases.

The single-best political inoculation against this risk is to have the president visibly and successfully wage a hard- fought battle to cut taxes for every American who earns a paycheck. Obama as a tax-cutter is the strongest possible antidote to the image that Republicans are trying to paint of him.

Congress Negotiations

Finally, winning on the payroll-tax cut extension would refute one of the most unfair criticisms of the president: that he has done poorly in negotiations with congressional Republicans. Agreeing to make the tax cut expire in December 2011 was a calculated risk that Obama took in dealings with Republicans a year earlier, when he swapped the extension of about $130 billion of the Bush-era tax cuts for the wealthiest taxpayers, including a new estate-tax break, for almost $270 billion in new breaks for working families, unemployment benefits, and child-care and college credits and deductions for lower-income workers.

It was a good deal at the time; it will be a better deal still if the payroll tax cut is extended for a second year. This was the win the president hoped for when he accepted the package last December, and collecting on this gamble would further validate his savvy approach.

Our economy — and everyone who brings home a paycheck — has a lot at stake in the battle over whether the payroll-tax cut is extended. From dawn to dusk, from now until Congress acts, the White House shouldn’t stop this mantra: 2 percent for the 100 percent.

(Ron Klain, a former chief of staff to Vice President Joe Biden and a senior adviser to President Barack Obama on the Recovery Act, is a Bloomberg View columnist. He is a senior executive with a private investment firm. The opinions expressed are his own.)

Copyright 2011 Bloomberg.

Americans Want A Government That Ties Rewards To Work

Nov. 1 (Bloomberg) — American politics are at a watershed, and trying to understand this moment in conventional terms misses the point.

It is likely — though far from certain — that the transformation will advantage Democrats, but whichever party best aligns with the forces of change will have a huge edge in 2012 and beyond.

Before identifying the shift, we need to look at the dynamic that has dominated American politics since the 1930s: The debate over big government versus smaller government, where the Democrats stand for the former and the Republicans stand for the latter.

This prevailing architecture has delivered wins for the Democrats when the public wanted a more activist government (1932, 1948, 1960 and 2008) and wins for the Republicans when voters resented the size of government (1952, 1968 and 1980). Each party also has scored some victories when it was able to obscure the difference and stand in the muddled middle (1996, 2004).

David Brooks of the New York Times recently applied this classic model to the 2012 election, arguing that President Barack Obama’s new “fighter” posture puts him on the “big government” side of the divide, and at risk of defeat.

‘The Right Thing’

Yet Brooks’ analysis — like most conventional thinking about 2012 — fails to grasp the seismic political change under way. Yes, as Brooks emphasizes, there has been a collapse of confidence in the government’s ability to “do the right thing”; poll after poll has shown mistrust of Washington at historic levels.

Critically, however, this isn’t resulting in a traditional pendulum swing toward a laissez-faire mindset about the private sector. Instead, there has been a similarly deep erosion of the public’s belief that corporations and big businesses are any more likely than government to “do the right thing.”

This is a paradigm shift. Dwight Eisenhower, Richard Nixon and Ronald Reagan were propelled to the White House because the public feared that government was doing too much for the poor or welfare recipients, which created a backlash for the sort of small government policies that favor conservatives.

Today, however, the public has a sense that an unduly close relationship has developed between government and the corporate sector, as evidenced by “bailouts,” special interest provisions in legislation, and a tax code full of loopholes and special breaks.

Most fundamentally, what protest groups on the left and the right share with less activist middle-class Americans — the apolitical voters who often decide elections — is an abiding sense that the bond between work and reward has been broken. Huge financial rewards are given to executives who fail miserably and get fired. Debt relief programs help not only those who have fallen behind through no fault of their own, but also the profligate who lived beyond their means.

The list goes on: What’s inflaming voters isn’t so much inequality per se, though that’s certainly a symptom of the problem. It’s the fact that the rewards in our economic system seem increasingly divorced from American values of hard work, risk taking and innovation. Instead, these benefits are more and more likely to be awarded on the basis of connections and political power.

The anxiety and resentment about this perceived change color the public perception of the policy prescriptions both parties offer. That’s why voters are leery of the Keynesian policies of Democrats, tired of the trickle-down policies of Republicans, and enraged by the bailouts that both parties supported in the most recent crisis.

Unearned Rewards

In voters’ minds, all of these decisions evoke a general sense that rewards are going to people who haven’t earned them. Voters also see a breakdown when people who have done everything right — 20-year-olds who worked their way through college; 40- year-olds who took extra shifts and second jobs; 60-year-olds who have saved their whole working lives and can’t imagine how they will afford to retire — find themselves unemployed and facing an uncertain future.

Where the Occupy Wall Street protesters are striking a chord with less activist middle-class Americans isn’t in an assault on capitalism. What is resonating is the complaint that the American brand of capitalism — the moral and economic linkage between work and reward, risk and reward, innovation and reward — has been replaced by a bailout economy.

Voters see both parties in Washington being complicit in this approach. The president’s recent plan to provide mortgage- and student-loan relief to struggling borrowers — the right thing to do from an economic policy perspective — inflames voters who pay their bills each month and are getting no relief.

Worse still in voters’ minds are Republican policies that rescued banks and financial institutions, and spared the wealthiest from paying any more to get us out of this mess.

At this moment of change, the president has the political advantage, but no guarantee of success. That many voters believe (wrongly and unfairly, in my view) that the administration’s policies over the past three years have favored the “insiders” is a challenge for the incumbent. But the odds are low that the public’s reaction to this unhappiness would be to elect a president even more aligned with these forces, such as former Massachusetts Governor Mitt Romney.

Obama’s recent populist rhetoric is a necessary step to try to erase the unfair perception that his policies have favored the powerful. But that positioning won’t be enough: The president must align himself with the voters’ demands for real change in how, and for whom, business is done in Washington; and he certainly needs to “own” this turf before his Republican rivals claim it.

Course Corrections

The high political ground at this critical moment will go to the first party to make two changes of direction in policy and rhetoric.

First, voters are looking for political reform that lessens the influence of money in politics and government. This has become a front-burner issue. Anyone who tackles this issue will face charges of hypocrisy, because all campaigns raise large sums from the well-heeled. Yet it is time to cut through that static and amp up the fight for real changes in the way that campaigns are paid for and influence is had in Washington. (And no, the president and other Democrats shouldn’t unilaterally disarm before such changes are made across the board.)

Public cynicism about how Washington works discolors perceptions of real achievements, such as the Dodd-Frank financial reform bill, or health care reform. The widespread feeling that things get done only because the special interests allowed them to has devalued some hard-worn achievements. Fighting for reform is critical then, not only for its own sake, but also because it can open the door to public acceptance of other policy changes.

Second, and more important, every economic policy must be evaluated to determine whether it strengthens or weakens the bonds between work and reward, and whether those who are helped are asked for something in return.

Measures to restrict huge severance packages for executives who fail at their jobs should be considered, as should other curbs on rewards for failure instead of success. Future assistance to businesses should come with strings such as requirements that they buy American and hire workers in the U.S. Even programs that help individuals, such as home-mortgage and student-loan relief, should come with conditions. (Homeowners who eventually see upside could be required to return some of these gains; students might be asked to perform community service.)

Voters believe that their government, whatever its size, is aligned with special interests, and has created an economic system where hard work no longer can yield upward mobility, and vast gains can be had without merit. The party that best speaks to this stirring in the electorate will have a commanding position next year.

(Ron Klain, a former chief of staff to Vice President Joe Biden and a senior adviser to President Barack Obama on the Recovery Act, is a Bloomberg View columnist. He is a senior executive with a private investment firm. The opinions expressed are his own.)

How Democrats Can Make Their Case For Raising Revenue

(Bloomberg) — Social Security may be known as the “third rail” of American politics, but it is the debate over taxes that has been the “kryptonite” of the Democratic Party in recent decades.

President Barack Obama has put the question of revenue increases on the front burner as part of his fiscal-policy agenda, and the discussion will grow in visibility and intensity as the early December deadline for a report from the congressional supercommittee approaches.

Although almost every expert, economist and open-minded leader in both parties (excluding, of course, the hard-line Republican leadership) agrees that we need more revenue to bring future deficits under control, the political danger for Democrats in the debate remains severe.

Indeed, one Democrat with a proven ear for politics, Bill Clinton, has expressed doubts about the administration’s decision to wade into the revenue controversy, saying, “I personally don’t believe we ought to be raising taxes or cutting spending until we get this economy off the ground.” (More recently, though, Clinton acknowledged that deficit reduction requires “adequate revenues,” scooting a bit closer to the administration’s line.)

How can Democrats tackle the tax question without courting political disaster?

Obama has tried two approaches. Last spring, when he was pressing for revenue increases during the debt-ceiling talks, his emphasis was on a “balanced approach”: If spending was to be cut, then revenue should be increased, too.

Not Balanced

The “balanced” argument was perhaps too effective. When the president reached a debt-limit deal with the Republicans that was all spending cuts and no revenue increases, he was excoriated for accepting a package that didn’t meet his own standards.

In the end, though, the argument for a balanced approach has limitations, because it requires only a mix of spending cuts and tax increases, without specifying how much of each — or both — is needed. That’s a bit like saying, “If you are going to serve liver, you should also serve Brussels sprouts” — perhaps correct, maybe even candid, but hardly compelling.

More recently, Obama has emphasized “fairness,” in particular in pushing for his proposed Buffett rule, which would raise taxes on incomes of $1 million a year or more, and with his plan to require private jets to pay a landing fee. The president has rallied his base with these populist appeals, and polls show that most Americans agree that those in the upmost tax brackets pay too little in taxes.

Fairer Package

In addition, because the bulk of the pain from spending cuts falls disproportionately on those at the bottom, tilting the revenue increases toward higher-end taxpayers would make any overall package fairer.

But the limitation of the fairness argument is that it frames the revenue increases as a penalty that should be imposed on the wealthy for paying too little. It is more of a jab at the rich than an appeal for raising needed revenue.

The argument that billionaire investor Warren Buffett should pay at least the same tax rate as his secretary fails to explain why either is paying what they are paying, or why anyone should be paying more. Even if middle-class voters are stirred by the populist sentiment behind such rhetoric, they may be unnerved by its implicit zeal to raise taxes, and the tone of the debate leaves the administration vulnerable to the usual caricatures of Democrats as overenthusiastic tax hikers.

Making the Argument

So what is a better way to make the case for much needed revenue increases?

First, the administration needs to reiterate, time and again, that tax increases — on anyone — are a last resort. This may seem like a tweak, but it is an important one. Even when voters favor mixed approaches to our ballooning deficit, more of them believe that our fiscal problems are caused by too much government spending, not too little taxation.

To avoid being burned by the tax debate, Democrats need to begin the conversation by reiterating that they support revenue increases — not because there are people who can afford to pay more, but because there is no other way to get our fiscal house in order.

Second, the administration needs to understand that this debate is playing out against a backdrop of unprecedented public doubt about the effectiveness of government spending. For political purposes, it matters little if Americans believe the government actually spent too little trying to reverse the Great Recession — as progressives such as Paul Krugman argue — or if they think government spent too much, as Republicans contend. Either way, the necessity for more revenue is being weighed in an environment that is highly skeptical of government’s ability to use that revenue wisely.

Mythical Muffins

The strong reaction to the report that the Justice Department bought $16 muffins — a story that, as should have been immediately obvious, was wrong — illustrates the depth of the public’s cynicism. The president and the Democrats must engage the tax debate with that skepticism in mind.

One approach that addresses this challenge is tying specific revenue increases to specific uses. For example, revenue from the so-called Buffett rule could be used to endow a trust fund dedicated to education reform and rebuilding our schools, popular investments in our nation’s future that are starved for resources. Revenue generated from new fees on private plane flights could be set aside to fund improvements at airports. This would neutralize arguments about “class warfare,” and remind the public of our vital shared needs.

Bush Cuts

The single largest revenue item — allowing the Bush-era tax cuts for the highest-income taxpayers to expire as scheduled at the end of next year — could be devoted to several purposes. For example, a large portion could be applied directly to paying down the debt. In other words, easing the future burden on our children, not expanded government spending.

Another dedicated use could be funding an infrastructure bank to rebuild roads and bridges, with projects selected by an independent board of governors, not elected officials.

Alternatively, a portion of the funds could be set aside for loans to small businesses to help spur economic growth; in the past, Small Business Administration loans have helped launch or grow some of the most innovative and successful U.S. companies, including Apple Inc., FedEx Corp., Nike Inc. and Under Armour Inc.

Here’s the bottom line: Tying tax increases to dedicated and popular uses insulates proposals for much-need revenue from attacks of “class warfare” or general anti-tax sentiment, and can help rebuild faith that marginal dollars collected by the government will be put to a clear and important public purpose.

Advocates of revenue increases need to develop an effective way of defending their side if they are to prevail in the contentious debate that will soon start in Congress, and in the critical election just 13 months from now.

(Ron Klain, a former chief of staff to Vice President Joe Biden and a senior adviser to President Barack Obama on the Recovery Act, is a Bloomberg View columnist. He is a senior executive with a private investment firm. The opinions expressed are his own.)

Copyright 2011 Bloomberg.

Middle-Class Americans Suffer In Silence, For Now

Sept. 20 (Bloomberg) — President Barack Obama’s proposed tax on millionaires has restored the issue of “class warfare” to the forefront of politics.

The new tax plan follows a week of intense campaigning by the president for his jobs bill, and of considerable attention devoted to a Census Bureau finding that poverty rose to a 17-year high.

Asking the wealthiest among us to pay more, and taking new steps to help the least well-off — the jobless and the poor — are good policy. But politically, and perhaps even economically, the president can’t lose focus on a group often left on the sidelines of the political conflict over rich and poor: the long-suffering middle class.

Recent developments have driven home how urgently middle-class families need to be put front and center in Washington.

First, there was bad news for middle-class households in the Census Bureau’s study of poverty for 2010. The news reports focused on the finding that the average annual income of households at the bottom — those in 10th and 20th percentiles – – had fallen by $1,000 and $1,500 a year, respectively, since 1998. At the opposite end of the spectrum, households in the top 10 percent of the income distribution saw their annual income rise by $3,600, and those in the top 5 percent had a $4,200 increase, over the same period. (All these figures are adjusted to be constant for inflation.)

Rich Get Richer

But ignored in this story of the poor getting poorer and the rich getting richer was the less publicized — but equally important — finding of what happened to the household income of those in the middle of the economic distribution, the 50th percentile of national income. In actual dollars, these middle- class families suffered an even bigger drop in annual income than the poor did over the past 12 years: a decline of more than $2,500.

Put another way, American households in the middle of the income spread, those making about $50,000 a year, have lost more than $200 in monthly income since 1998.

The dwindling of middle-class incomes represents a sharp reversal of our tradition. The earnings of families in the 50th percentile rose more than $5,000 over the 12-year period from 1967 to 1979; it then edged up only slightly, by $650, during the tough 1979-to-1992 period; then saw another jump of $5,000 from 1992 to 1998. Thus, looking over the 31-year period from 1967 to 1998, the middle class had periods of strong increases in annual income, and some periods of lesser increases, but the trend moved in one direction: upward. One might even say the fundamental characteristic of middle-class life in America was steadily increasing income.

Decline in Savings

All that changed over these past 12 years, as the incomes of those in the middle fell. Moreover, this loss of annual income is compounded because these families have suffered — more than those above them or below them — a steep decline in savings due to the collapse of housing prices.

While the richest households have their wealth in diverse holdings (including stocks, which recovered after 2008), and the poor have no savings at all, middle-class families have their net worth concentrated in a single asset: accumulated equity in their homes.

Many of these families saw this “nest egg,” which they planned to tap to pay for a child’s college or their own retirement, wiped out when housing prices plummeted in 2008.

Second Blow

If the news on incomes wasn’t bad enough, the middle class was dealt a second blow last week when a report by the Washington research organization Third Way showed that schools serving this segment of the population have vastly under-delivered for their students. (Disclosure: I am a member of the board of trustees of Third Way, though I didn’t participate in preparing the report.)

No one should be surprised by Third Way’s finding that, compared with schools in the wealthiest districts, those serving middle-class families spend about $1,600 less per student, have three more students per teacher, and pay teachers $6,000 less per year.

Sadly, we have come to accept that wealthier districts get better public schools than middle-class areas. What was surprising in the Third Way report, however, was that, compared with middle-class districts, schools that serve the poorest students also spend more per pupil (about $1,400 more), also have fewer students per teacher (about one fewer), and also pay teachers more (about $1,600 a year more).

Behind the Wealthy

The bottom line: On all three of these critical metrics, middle-class school districts are behind both the wealthiest school districts (which use their bigger tax bases to fund their programs) and the poorest school districts (which benefit from more state and federal aid programs).

Is it any wonder, then, that these middle-class schools — which educate more children than the wealthiest and poorest districts combined, and serve a majority of our white, black and Hispanic children — are producing results below our national expectations? Indeed, Third Way found that only about one out of four graduates of high schools in these middle-class districts will finish college before they turn 26.

Falling incomes and floundering schools, that is what our great middle class faces today.

Workers of Tomorrow

Economically, addressing the prosperity of this vast majority of our citizens is essential, because it is impossible to build a prosperous America without a strong middle class. They are the workforce of today and their children are our workers of tomorrow; they are the consumers who power demand; they are the small-business people who create jobs and innovations. They make the cars, build the homes and grow the food that make up a huge share of our national output. They also buy the cars, the homes and the groceries that make up a huge share of our national consumption.

No economic recovery plan can work unless it lifts up the middle class.

Politically, middle-class voters perennially believe that Democrats care too much about the poor, and Republicans care too much about the rich, leaving their hearts and minds up for grabs. As we approach the 2012 election, these voters are alienated from both parties, seeing little benefit for themselves in policies such as the bank bailout; state and local fiscal relief; and extended unemployment insurance; all of which have consumed so much of Washington’s time and money.

Policy Doubts

Over the past few years, these Americans have developed doubts about whether Obama-administration initiatives such as the Patient Protection and Affordable Care Act really help them, or mostly help the disadvantaged. At the same time, they are deeply skeptical about Republican economic policies. Those misgivings are certain to be reinforced as Republicans race to protect the wealthiest Americans from paying the same share of their income in taxes as the middle class pays.

The president should continue to press for his new “Buffett Rule” to raise taxes on the wealthy, and his jobs bill to help the unemployed. But he also needs to speak directly to the millions of middle-class families that have jobs, but are reeling under the unprecedented income squeeze of the past decade, and are worried that their children may be part of the first generation of Americans that didn’t do better than the preceding one.

Demanding that the wealthiest shoulder the same tax burden as the middle class is only fair, but by itself, doesn’t address middle-class anxieties; likewise, pressing policies that provide jobs and health care to those who lack them is the right thing to do, but may not lift incomes and reduce costs for those who are employed and who have health coverage.

Best Opportunities

Education initiatives need to focus not only on fixing the most broken schools and drawing the best teachers to the most troubled districts, but also on lifting up middle-class schools, so that those students can compete for the very best opportunities in the years ahead.

It is often said that U.S. elections are “won in the middle,” a statement about ideology that reflects the centrist leanings of swing voters. But in 2012, that is more likely to be a true description of the economic profile of the voters who are up for grabs.

The party that can best address the needs and concerns of middle-class voters who have jobs, but are enduring flat incomes, underperforming schools, and shrunken savings, is the one most likely to win next year.

(Ron Klain, a former chief of staff to Vice President Joe Biden and a senior adviser to President Barack Obama on the Recovery Act, is a Bloomberg View columnist. He is a senior executive with a private investment firm. The opinions expressed are his own.)

Tips For Surviving The Republican Candidate Debate

Sept. 6 (Bloomberg) — Having avoided preemption by a presidential address, the debate of hopefuls for the Republican presidential nomination looms Wednesday night as a critical event on the party’s primary calendar.

All eight candidates are under pressure to perform, yet that pressure isn’t evenly distributed, and the participants don’t all have the same burdens and opportunities on debate night. So who has to do what to be a winner at the Ronald Reagan Presidential Library in Simi Valley, California?

Although many have suggested that Texas Governor Rick Perry — participating in his first debate of the race — has the most work to do, in fact, just the opposite is true. Perry does have a long way to go before his front-runner status is cemented, but in this debate, he needs to establish only one thing: sure-footedness.

No candidate since Wesley Clark in the Democratic primaries in September 2003 has leapt so quickly from entering the race to the front of the polls. As the debate-preparation coordinator for the Clark campaign, I remember those heady and anxious days. Like Clark in the fall of 2003, Perry in 2011 is drawing support from many voters who have never heard him utter more than a sound bite or two — a tenuous position.

Perry’s mission tomorrow night, then, is to do nothing that unnerves these newly acquired supporters in their first extended exposure to him. He must sound sharp on economic matters and reassuring on national-security concerns. Having come so far, so fast, Perry probably cannot — and almost certainly need not — gain ground in the debate; his focus needs to be on making sure he doesn’t make major gaffes that imperil his status.

Practice, Practice, Practice

If I were advising Perry, I would have him off the campaign trail, preparing, resting, and practicing, practicing, practicing.

By contrast, the performance burden falls most heavily on the previous front-runner, former Massachusetts Governor Mitt Romney. In the months before Perry got in the contest, the Romney campaign lost its edge by adopting the political equivalent of a prevent defense in the first quarter of a football game. Unprepared for what hit them, the Romney camp has floundered since Perry came on the scene.

Romney has lurched to the right, in a doomed effort to compete with Perry and Representative Michele Bachmann of Minnesota on their turf. As a result, he is losing the “strength” primary to Perry, as the Texan appears comfortable with his more natural positioning, while Romney seems uncertain and weak in his newfound conservatism. Romney needs to use the debate to reclaim the middle ground, showing that he can stand up to Perry and Bachmann instead of trying to emulate them.

Outrageous Statements

Perry has made outrageous statements, even by the standards of the Republican primary electorate. In his 2010 book, “Fed Up,” he suggests that Social Security is a program “violently tossing aside any respect for our founding principles,” and that Medicare is unconstitutional. This should be fodder for Romney at the debate for a much-needed move to unapologetically reassert a centrist position for his candidacy.

Only by taking on Perry’s extremism can Romney arrest his opponent’s momentum. Will Romney be the 2012 version of Arizona Senator John McCain — the 2008 front-runner who stumbled early but regained his footing — or will he more closely resemble former New York Mayor Rudy Giuliani, the early leader in 2008 who saw that position slip away, never to be reclaimed? That question starts to be answered tomorrow night.

Establishing Competence

Bachmann, too, finds herself under pressure, albeit for a very different reason. She has raised the bar for herself with her success in earlier debates: Mere competence (what Perry must demonstrate in his first outing) won’t be enough to ensure a successful night for Bachmann. Unlike Romney, who needs to aim his fire upward at Perry, Bachmann needs to take her shots at two candidates who are nipping at her from behind: former executive Herman Cain and Texas Representative Ron Paul.

For while Bachmann will ultimately have to counter Perry’s gains among establishment conservatives, her most immediate concern should be the fracturing of grass roots, Tea Party support among herself, Cain and Paul.

She should use the debate to appeal to these voters directly, telling activists that their failure to unite behind a single candidate means the inevitable nomination of either Perry or Romney. She needs to make the case for why she — and not Cain or Paul — is the right wing’s best chance at having one of their own as the Republican candidate.

Breakthrough Moment

Former House Speaker Newt Gingrich and former Utah Governor Jon Huntsman are rarely lumped together, but they share a common task tomorrow: avoiding irrelevance. Thus, the preparation that most candidates engage in for debates — polishing expertise, crafting answers, preparing for oddball questions — is of no importance to them.

A good overall performance does little for them; what each of them needs is a single, exceptional, breakthrough moment. With Perry, Romney and Bachmann hogging the spotlight (on the one hand), and Cain and Paul sustained by hard-core followers (on the other), Gingrich and Huntsman need to use the debate to avoid a Tim Pawlenty-like fade into oblivion. Their goal is to claim an attack, a new slogan, a memorable idea that cuts through the clutter and earns them precious post-debate sound bite coverage that will otherwise go entirely to the big three.

They won’t get many chances, and they can’t wait until the setup is just right: They need to force their moment as soon as they get the microphone.

Core Supporters

Cain and Paul, by contrast, need to do only what they do best: energize their core supporters. Unlike Gingrich and Huntsman, who are failing to find an audience, Cain and Paul have devoted followers who seek out what their candidates are saying even when the mainstream media gives them little airtime. Yes, they need to guard against any effort by Bachmann to snatch their supporters, but their best counter to such an effort is to stick with the messages that have won them a devoted following.

If all the other candidates need to stretch in some way on debate night, Cain and Paul just need to keep firing up their supporters with uncompromising, hard-line positions that lack broad appeal, but resonate with true believers. And what about former Pennsylvania Senator Rick Santorum? He should just enjoy his time in the limelight, which is probably coming to an end soon.

Perry, Romney, and Bachmann enter the debate like stock cars on the track, running three abreast down the straightaway, speeding toward a corner.

Will Perry spin out? Will Romney reclaim the middle of the road? Can Bachmann put distance between herself and Cain and Paul?

Something — someone — is going to have to give ground in Simi Valley.

(Ron Klain, a former chief of staff to Vice President Joe Biden and senior adviser to President Barack Obama on the Recovery Act, is a Bloomberg View columnist. He is a senior executive with a private investment firm. The opinions expressed are his own.)

Copyright 2011 Bloomberg

Tea Party Gas Tax Fix Is Bad Economics, Worse History

Aug. 23 (Bloomberg) — If the debt-ceiling showdown made your blood boil, if the shutdown of air-traffic-control work related to the airline-ticket tax drove you crazy, then you should unplug your TV and power down your computer in late September, as the deadline for extension of the federal gasoline tax draws near.

Because while President Barack Obama and most experts are pushing for a greater federal investment in roads and infrastructure to create jobs and strengthen our economy, a growing minority in Washington wants to end the federal gas tax and phase out funding for new construction under the federal roads program. That’s right: A sizable chunk of Republicans, led by Senator Tom Coburn of Oklahoma and Representative Jeff Flake of Arizona, want to abolish the tax that pays for the federal highway program and replace the whole system with one overseen by individual states.

This insurgency, inspired by the Tea Party, reflects flawed thinking on economics, transportation policy and even American history.

Like many other excise taxes, the federal highway tax comes up for periodic renewal, which is usually noncontroversial. But not this time. If Congress doesn’t act to renew the tax by Sept. 30, gas stations all over the country have to stop collecting it; the highway trust fund will never get the money; and new work on federal highway projects will come screeching to a halt.

Costs and Layoffs

A delay of just 10 days in renewing the tax would mean the permanent loss of $1 billion in highway funding (and layoffs for thousands of workers). Longer delays would measurably increase the national unemployment rate.

Although the gravest threat to renewal of the tax was removed last week, when anti-tax czar Grover Norquist ended weeks of uncertainty and dropped his opposition to a short-term extension, Tea Partiers and their allies on this issue haven’t given up the fight over ending the tax; if they can’t abolish it outright just yet, they’ll push to allow states to opt out.

Incredibly, the system of highway financing championed by Republican President Dwight D. Eisenhower six decades ago is a target for today’s Tea Party-influenced Republicans.

The economic impact of this radical position would be disastrous. Although it’s true, as I’ve written, that federal road programs create fewer jobs-per-dollar than they did generations ago (due to better equipment and technology), hundreds of thousands of Americans still draw paychecks working on such projects — and their paychecks help keep countless sandwich shops, dry cleaners, barbers and grocers in business. Cutting off this vital source of employment now, or at any time when unemployment is elevated, would be a grave self-inflicted wound.

Misguided Policy

As transportation policy, the notion of the states taking over federal highway work is even more misguided. We have a national road system because we have national transportation needs — to move people and goods from state to state, region to region.

States with many miles of highways and few people are likely to have less revenue to keep up these national roads and less interest in doing so, because many of the goods and visitors are just passing through on their way to someplace else. Trucks carrying goods from Chicago to Seattle, Atlanta to San Francisco and Philadelphia to Los Angeles travel through large, lightly populated Mountain West states that may be unable to finance a world-class highway system for such long-distance needs.

Just “letting the states do it” puts our national transportation system at risk. The idea is so misguided that calling it a Third World transportation system is unfair to the Third World: Developing countries are virtually all striving to build the sort of national infrastructure that the Tea Party wants to unwind in the U.S.

Misreading History

Which brings us to the historical misunderstanding behind this anti-national crusade. Highway funding is one issue among many where the Tea Party movement has its historical perspective upside down. Our Founders were not opponents of a national road system; they were its very creators.

The survey work for the first proposed national road was done by none other than George Washington. The early Congress funded a national road that traced a path similar to today’s Interstate 70, from Maryland to Indiana. Many veterans of the Revolutionary War, then serving in Congress, voted in favor of it. Even the anti-Federalist administration of Thomas Jefferson pushed the project; Albert Gallatin, Jefferson’s Treasury secretary, told the Senate: “No other single operation within the power of the government can more effectually tend to strengthen and perpetuate the Union.”

The highway-tax fight is a good moment for progressives to challenge the Tea Party — not just over economics and transportation policy, but also over what vision of America truly reflects the legacy of our Founders. Let’s not forget that the idea that brought those amazing men to Philadelphia in 1787 was to create a system of robust federal government and form a “more perfect union” — not just to leave the states to handle their needs on their own.

(Ron Klain, a former chief of staff to Vice President Joe Biden and senior adviser to President Barack Obama on the Recovery Act, is a Bloomberg View columnist. He is a senior executive with a private investment firm. The opinions expressed are his own.)

Copyright 2011 Bloomberg

Obama Shows His Gambling Streak in Debt-Ceiling Deal

Among the many misconceptions about Barack Obama is that he is cautious. In fact, it is hard to think of a modern president in recent times who has been more willing to take big risks, not because he is reckless, but because he is willing to suffer potential short-term setbacks to achieve a desired long-term result. It is in that context that the much-maligned debt-ceiling compromise must be understood.

This sort of risk-taking goes beyond making policy choices, whose success or failure will always be debated, and can’t be known for years. What I am talking about are presidential decisions that can be demonstrably shown to be right or wrong in a relatively short window, with serious repercussions. That sort of risk-taking by presidents is fairly rare, and yet Obama hasn’t hesitated to take such gambles.

One example early in his administration was his choice to “bail out” the automobile industry. There were many ways in which that could have gone wrong: Chrysler Group LLC and General Motors Co. (GM) could have failed; management changes and bankruptcy filings that the administration insisted upon could have exacerbated problems; good money could have been thrown after bad.

The safe course was the one that President George W. Bush followed: pumping in just enough money to be able to say he had made an effort, and letting the chips fall where they may. But Obama took action by investing substantial funds, demanding important management and strategic changes, requiring bankruptcy filings, and painfully shrinking auto-dealer networks. All were risky steps that could have quickly unraveled.

Two years later, that choice is paying off: Car sales have risen, auto-industry employment is up, taxpayers are getting their money back, and U.S. cars are getting higher consumer ratings than ever.

Health-Care Overhaul

A second gamble came in early 2010, after Scott Brown won a Massachusetts Senate seat in an unexpected victory for Republicans, and vastly complicated the path for Obama’s health- care reform bill. With the loss of the 60th Senate vote for the measure, many of the president’s advisers urged him to abandon the push for a comprehensive bill, and pursue a far more limited approach. But Obama wouldn’t bend, and took a gigantic risk: He pressed for a House vote on a bill that was passed by the Senate the previous year and was unpopular with many House Democrats.

Obama could have easily, and visibly, lost. Yet, once again, his gamble paid off, achieving a victory that had escaped his predecessors.

Bin Laden Raid

And earlier this year, the president once again rejected the play-it-safe advice of many advisers, and ordered SEAL Team 6 to carry out its heroic raid to kill Osama bin Laden. The safer alternative — a drone strike — would have minimized the fallout if the al-Qaeda leader wasn’t at the target, or if the assault went awry. But the president believed that bin Laden’s death could only be verified with a manned raid; once again, the risky decision was the right choice.

So now we come to the recent debt-ceiling deal, in which the president took a gigantic political risk: publicly pressing for a “Grand Bargain” to tackle long-term budgetary challenges that would reverse years of unwillingness in Washington to consider revenue as part of the fiscal solution.

This time, he came up short. We’ll never know how close we came to a “Grand Bargain,” but Obama didn’t get the revenue increases that he wanted.

Yet instead of folding his hand, he decided to double down in the fiscal card game, an appropriate way to understand the debt-ceiling compromise.

Long View

In accepting a deal that swapped an increase of more than $2 trillion in the debt ceiling for discretionary spending cuts that Republicans wanted — without balanced, revenue-increasing measures — the president didn’t give up on his goal, as some progressive critics have alleged. Instead, he gambled that he would be able to reach his objective later.

The key to this wager is the package of contingent cuts that will be triggered if Congress fails to pass additional deficit reduction after a so-called super-committee makes recommendations in November.

The current betting in Washington is that the committee won’t yield much, and that Obama will come up short again. Republicans remain under huge pressure from the Tea Party, from anti-tax activists, and their base, not to yield on the revenue question.

Rating Downgrade

But Standard & Poor’s Aug. 5 downgrade of U.S. debt, due in large part to the Republicans’ refusal to consider revenue measures, is a sign that the odds are shifting in the president’s favor. And there are three other reasons why in December Obama might get the victory he couldn’t get in August.

First, there are the cuts that the president agreed to in the first phase of the debt-ceiling deal. These undermine one objection to revenue increases: the idea that the deficit can be addressed through spending reductions alone, and that lowering expenditures should precede any new revenue. Obama has given the “cuts-first” crowd its day, and can now move on to the business at hand: balancing cuts with revenue.

Second, there is the progress he has made in winning over the public to the idea of a balanced solution to the deficit (and in discrediting the Tea Party’s extremism). The political shellacking that the Republican House majority and the Tea Party have taken in recent surveys helps the president’s cause. The S&P downgrade adds to the pressure he can bring.

Trigger Cuts

Third, there is the pain that would be imposed if the super-committee fails and the contingent “trigger” is pulled. The cuts required are so unpalatable that they would create a strong momentum toward responsible congressional action.

The last of these may be the most important in maximizing Obama’s chances of winning this latest — and maybe largest — gamble. In the weeks ahead, the White House should do everything possible to convince the widest spectrum of voters that the consequences of activation of the trigger would be unacceptable.

The administration took a step in that direction Aug. 4, when Defense Secretary Leon Panetta said that the trigger’s cuts to defense spending would cause “real damage” to national security. Panetta’s comments need to be followed by specific detail of the reductions that would ensue if the trigger is pulled. Such an accounting will make plain who will suffer if Congress doesn’t act in a more balanced fashion.

A similar case must be made for the trigger’s impact on Medicare and other non-defense programs.

Showing the Pain

Again, generalities can get the administration only so far. It must set forth the potential reductions in detail, and show just how they will devastate senior citizens and our health-care system. While these cuts are in the package to pressure Democrats to come to the table, the political reality is that, if they occur, their sting will hurt Republicans as much (or perhaps even more) than they would the president’s party.

Ultimately, the only way that Republicans will accept what they consider unacceptable — revenue increases — is if the alternative is even less acceptable: horrific defense and Medicare cuts.

If the White House can drive that message home in the next three months, continue to advance its political case against the extreme anti-revenue elements of the Republican Party, highlight the consequences of the S&P downgrade, and raise the cost of failure by the super-committee and the Congress so high that it can’t be borne, the president may get his way.

Obama’s willingness to mark his time and double down may be vindicated, and the critics who are betting against him now may be proven wrong once again.

(Ron Klain, a former chief of staff to Vice President Joe Biden and senior adviser to President Barack Obama on the Recovery Act, is a Bloomberg View columnist. He is a senior executive with a private investment firm. The opinions expressed are his own.)

To contact the writer of this article: Ron Klain at rklain@bloomberg.net