CQ WEEKLY – COVER STORY
Nov. 3, 2012 – 1:53 p.m.
The Challenges That Await the Next President
By Ben Weyl, CQ Staff
The man elected on Nov. 6 to serve as president for the next four years won’t face the kind of crisis that met
|
||
|
Nonetheless, enormous challenges will face the next president, with prospects for stronger economic growth uncertain, the country’s long-term fiscal policy on what many say is an unsustainable path that needs immediate attention, and no sign of a break in the capital’s political gridlock.
Whether it’s Obama who renews his lease on the White House or Mitt Romney who moves in Jan. 20, those challenges present high barriers to the next president’s ability to implement his agenda in a range of policy areas. To do that, either man will have to solve the seemingly unsolvable economic and political Rubik’s Cube that has confounded Washington the past four years.
Both parties so far have retreated to their respective corners, with lawmakers unable or unwilling to compromise — not only on the major tax and spending questions but on an array of smaller issues. Although some commentators suggested the November election might settle the conflict, that seems unlikely. Congress looks to remain divided on partisan lines, with the near-even split in the Senate sure to be a perpetual hurdle to overcome.
The pending fiscal cliff of expiring tax cuts and an automatic spending “sequester” may concentrate Washington’s collective mind on both short-term economic needs and long-term fiscal challenges, but the campaign showed that the country remains polarized with no clear consensus on the appropriate role of government.
In his address to the Democratic National Convention in September, former President Clinton lamented the “politics of constant conflict” and urged a different course.
“When times are tough and people are frustrated and angry and hurting and uncertain, the politics of constant conflict may be good,” Clinton said. “But what is good politics does not necessarily work in the real world. What works in the real world is cooperation.”
For the next president, however, constant conflict will undoubtedly be a feature of the real world and his legacy will be built on how he copes with that.
A Fragile Economy
|
||
|
Improving the economy was the dominant issue in the campaign, but neither candidate offered much relief in the short-term.
Obama promised to boost investment in education and manufacturing. Romney said he would increase global trade and energy independence. Those measures might help the economy in the long run but would do little for the millions of Americans struggling right now.
The Challenges That Await the Next President
In fact, Washington has no silver bullet to kick the economy into higher gear and quickly put millions who are jobless back to work. The U.S. economy grew at an annual rate of 2 percent in the third quarter, an improvement from the 1.3 percent growth rate in the second three months of the year. But that rise in gross domestic product isn’t generating more than a bare minimum of new jobs and nationally unemployment remains just barely below 8 percent.
Growth in coming months is expected to be only modestly stronger. The Federal Reserve has projected GDP growth between 2.5 percent and 3 percent by the end of 2013 — below the post-World War II average.
Constrained economic growth will in turn hold down tax receipts, if the tax code remains unchanged, limiting the next president’s ability to implement initiatives.
And meanwhile, the country is at risk of a new recession, depending on what Washington does in the next two months to avert the fiscal cliff. On Jan. 1, absent congressional action, taxes will increase by more than $500 billion, with nearly 90 percent of Americans facing a higher income tax levy. The bulk of the new taxes would come from the expiration of the 2001 and 2003 tax cuts, and the expiration of the Social Security payroll tax cut put in place the past two years as a source of economic stimulus. Unemployment assistance for millions of Americans also will lapse, and physicians treating Medicare patients will see their reimbursement rates sliced.
The other main element of the cliff comes in the form of more than $100 billion in automatic, across-the-board spending cuts, mandated by last summer’s deal to raise the debt ceiling. The law requires $1.2 trillion in cuts over nine years, divided equally between domestic and defense spending.
Both presidential candidates and lawmakers from both parties have said they oppose letting the across-the-board cuts take effect — particularly because of the consequences for the military — but there is no consensus on how to stop them. Similarly, Democrats and Republicans both want to preserve some of the tax cuts, but they differ on whether to let rates rise on the wealthy.
Also looming is the likelihood that the president will have to ask Congress to raise the debt ceiling again sometime during the first three months of 2013, potentially reigniting the partisan battle that almost led to a government shutdown in 2011.
Simply erasing the cliff issues isn’t an attractive option either. The Congressional Budget Office estimates that continuing all current policies would lead the federal debt held by the public to reach 93 percent of GDP by 2022, up from about 70 percent today. Many analysts say Washington needs to bring the debt down to 60 percent of GDP, and soon.
“We can borrow money at rock-bottom interest rates for now and possibly into the future for another who knows how long,” said Joseph J. Minarik, chief economist for the Office of Management and Budget under President Clinton, at a conference last month. “The problem, of course, is when do you get to the point where the rest of the world gets nervous? By the time they do, it’s too late.”
The Business of Governing
Concern about rising deficits also limits the president’s ability to address other issues as part of the broader business of governing.
“You can make very, very sound arguments about the real investments we need to make, in part through the public sector, on research, infrastructure, education,” says William A. Galston, a former policy adviser to Clinton. “But when you start asking how are we going to be able to do that, you’re led straight back to the fiscal conundrum.”
Health care, for example, will occupy a large part of the political discussion next year. Whether the president is working to implement or dismantle the 2010 health care overhaul, it’s a major contributor to federal spending. The rising costs of Medicare and Medicaid are the biggest drivers of the country’s long-term debt, and changes to the programs are likely to be a part of any major deficit reduction program.
The Challenges That Await the Next President
The next president also will confront a host of foreign policy decisions, including the broader question of the United States’ role in the world. As Romney said in the final presidential debate, “For us to be able to promote those principles of peace requires us to be strong. And that begins with a strong economy here at home.”
As the president considers whether to intervene in Syria’s bloody civil war or how to prevent Iran from building a nuclear weapon, the price tag of action, as well as the foreign policy concern, will surely weigh on him.
Beyond the subjects that routinely dominate the national debate, a broad range of issues will also confront the president though the issues and their solutions don’t all fall easily into any ideological camp.
These range from such foreign concerns as how to adjust U.S. policy toward Arab Spring countries in the Middle East to the pullback in troops in Afghanistan. And they include major domestic issues such as immigration, housing, and how monetary policy will be developed as
These aren’t necessarily the “bumper sticker” issues that define campaigns, but they are the building blocks of the next administration’s policies that will define the shape of government over the next four years. Giving them their due will mean bridging the divides in larger issues.
Obama told MSNBC last month that successfully acting to stabilize the federal debt would clear out “a lot of the ideological underbrush,” allowing Congress and the White House to make progress on issues that have historically found bipartisan backing. He mentioned infrastructure and education in particular.
“If we get that piece done, and we kind of settle on the big question, ‘How much government are we going to have and how are we going to pay for it?’ then a lot of the other stuff falls into place,” Obama said.
Breaking the Gridlock
Yet there’s no indication Democrats and Republicans are ready to settle the big question, suggesting the very dysfunction that voters decry will persist. Righting the country’s fiscal ship will require both parties to make compromises they’ve so far been loath to make.
“The fundamental thing that I think is missing these days, is the certain knowledge that our Constitution requires compromise,” said long-time Washington hand Alice Rivlin at the conference with Minarik. “You can’t get there if you think we live in a parliamentary system and we’re beginning to sound like we think we do,” said Rivlin, whose resume includes stints at the Fed, the Office of Management and Budget, and the Congressional Budget Office.
Sen.
Government dysfunction reached its apogee last summer when the federal government came perilously close to breaching the ceiling on Treasury borrowing, and risking a default. Even as that danger was avoided, the rating company Standard & Poor’s downgraded U.S. debt, noting “the effectiveness, stability and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges.”
In September, Moody’s Investors Service warned it would lower the Treasury’s credit rating a notch if budget negotiations during the 2013 legislative session don’t result in specific policies that stabilize and reduce the debt.
The Challenges That Await the Next President
In an interview with the Des Moines Register last month, Obama said the fiscal cliff would act as “a forcing mechanism” to address the country’s long-term fiscal issues.
“I believe in the first six months we are going to solve that big piece of business,” he said. “It will probably be messy. It won’t be pleasant. But I am absolutely confident that we can get what is the equivalent of the grand bargain.” The grand bargain refers to efforts to reduce deficits, through a combination of spending cuts and tax increases, by perhaps $4 trillion over a decade, an amount generally considered necessary to stabilize the debt.
Obama didn’t explain, however, how he would reach a deal, after having been unable to do so with House Speaker
Romney, too, promised to win bipartisan support for his fiscal plans. But like Obama, he would face a political environment that has grown toxic.
In fact, the parties may be still more polarized after the election, says Sarah Binder, a congressional scholar at George Washington University. Each party seems likely to shed its vulnerable seats, Binder says, leaving fewer conservative Southern Democrats and fewer moderate Northeast Republicans in the next Congress.
“Whichever president meets with divided government, many of those problems aren’t going away,” says Binder. “It doesn’t leave me very hopeful that the way forward on controversial issues will be easy, for Obama or Romney.”
What follows is a look at just 12 of the many issues that are likely to require the attention of the president, and Congress, over the next four years.