Recent glimmers of hope that the economy is gaining strength are both helping and hindering the prospects for President Obama’s second-term agenda.
A strong April jobs report headed off fears of another “spring swoon.” Renewed optimism may help efforts to enact immigration reform, but it could also make it harder for Republicans and Democrats to strike a broad fiscal deal.
HillTube video: Economic uptick changes Obama's political picture
While policymakers note that the economy is still not strong, there has been a notable shift away from fiscal issues over the last several weeks, particularly in the Senate. With increased federal revenues reducing the deficit, pushing a debt-ceiling showdown beyond the summer and into the autumn, lawmakers have been debating gun control and immigration.
“There’s the chance that Congress may actually be able to look at things like energy, and immigration, and a lot of other things that they put off,” said Steve Bell, senior director at the Bipartisan Policy Center. “I think they have a chance to really show that they can do something other than disagree on fiscal policy.”
“Anytime things are going better … it sort of loosens up the landscape,” said Rep. Tom Cole (R-Okla.). “A good economy usually lubricates legislative achievement.”
Sen. Bob Casey (D-Pa.), who sits on the Joint Economic Committee, said the most recent jobs report, which showed continued growth and an upward revision of previous numbers, came as a relief. It could set the stage for some substantial work, he added.
“There’s going to be a major effort this year … to try to get more significant agreement. This calendar year is really a make-or-break year for a lot of things.”
But, in a glass-half-empty way, the brighter economy and reduced fiscal urgency may make it harder to strike a broad deal on entitlements, spending and taxes.
Some lawmakers say a deal is still possible, with the debt limit as a trigger. Cole said a rosier picture “makes it a bit easier ... It takes a little bit of poison out of politics. There’s a little bit less pressure on incumbents to be strident and extreme when the economy gets better.”
Casey said, “The conventional wisdom is that it makes it more difficult, but I think in some ways it’s a temporary lull. The drivers of our fiscal problems aren’t evaporating.”
Members are also careful to avoid declaring the economy an issue that has been solved. They point to various ways in which there still is plenty of pain.
Wages are stagnant, many jobs in April’s report were part-time and the brunt of the sequester has yet to be felt. Additionally, the Federal Reserve cannot endlessly prime the economic pump by buying $85 billion worth of Treasury bonds each month, as it is now.
“While things have improved, you can talk to people around the country who aren’t doing any better,” said Rep. Chris Van Hollen (D-Md.), ranking member on the House Budget Committee. “It’s way too early to take our eye off the economy.”
Focusing on the need for growth and blasting Obama’s economic record has been the House GOP’s main theme since it took power in 2011, and there are few signs of change.
“We are not in bright economic times and this is something the administration has been pushing since the day they came in. We are in economic decline and demise,” Rep. Pete Sessions (R-Texas) said.
A House leadership aide said the improved economic numbers would bring no change at all to the House’s agenda this summer.
“You won’t see the House taking its eye off the ball of the economy and job creation,” the aide said.
A steadier economy and the fiscal perks that come with it pose challenges along with opportunities. For example, it may undermine the calculations of congressional appropriators. Because fiscal compromise is unlikely other than in the context of a debt-ceiling deal, and because the fight over the ceiling looks likely to be pushed back into the fall, it means Congress will have to pass its spending package first.
This in turn would dash appropriators’ hopes of doing their work amid a broader fiscal accord that could replace the sequester. So they are likely to have to do their appropriating within the straitjacket of the sequester law. What’s more, economic improvement may mask any damage done by the sequester and make it harder for appropriators to undo those much-maligned indiscriminate cuts.
As it stands, the House and Senate need to bridge a $90 billion gap in their respective spending levels. This is a huge gulf and lawmakers are even more uncomfortable than usual about simply passing a continuing resolution stopgap, since that would keep sequester cuts in place.
“The good news is we are getting more revenue, but it puts off the debt ceiling debate until maybe October. I was hoping we would get to it in May or June because ultimately we have to get a big deal,” said Rep. Mike Simpson (R-Idaho), who chairs a House Appropriations subcommittee.
He added that the last jobs report is creating a sense that the $80 billion sequester is not already causing harm, and House Armed Services Committee Chairman Buck McKeon (R-Calif.) agreed.
“Sequester is still a major problem,” he said, adding that linking sequester replacement to the debt ceiling is worth exploring.
There is similar angst on the left, as worries about an improving economy could slam the door on a sequester replacement, not to mention new stimulus to pep up the recovery.
“I don’t expect this Congress to do anything particularly good for the economy. I’ve given up on that. But I’d like to think they could do no harm,” said Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities. “But as long as things are kind of slogging along and the deficit’s coming down, I suspect there won’t be much motivation to even stop doing things that are creating headwinds.”