LETTER FROM WASHINGTON

To Democrats Abroad

21 June 2010

Tom Fina

Executive Director Emeritus

The White House and Congressional Democratic leadership goal of enacting financial reform, confirming Kagan to the
Court, adding a second package of stimulus spending and approving an energy
package with a price on emissions before the November elections is in trouble.

The problem is not the Republicans alone. Their opposition to almost any Obama proposal is a given.

The problem is conservative Democrats and those elected from conservative districts. They fear that they are
vulnerable to Republican attacks for their support for bailing out the financial
and auto industries, for deficit spending to restart the economy, for health care
reform and for continued high levels of unemployment.

All of this is overlaid by the deus ex gusher that has dominated the news for more than two months. The
President is attacked by the Republicans as well as other political leaders and
the public in the Gulf states for not stopping the gusher. There were calls
to "federalize" the control and clean up operation. Many of the same critics attacked him before the gusher for federal over-reach. The same
critics charge on the one hand that he is not doing enough and that when he
declared a moratorium on further deep water drilling in the Gulf, that he was
killing jobs by doing too much.

Obama has walked a very fine line on assuming responsibility. He has refused to take over the job of plugging
the gusher which he is powerless to do. That would make him responsible and
get BP off the hook. But, he has tried to show that the federal government is
in charge by having Coast Guard and other agencies supervising BP’s
efforts. Meanwhile, the press and political commentators complained that his administration was failing to do what could be done and that he did not
show sufficient personal commitment to stopping the gusher and protecting the coastline.

Finally, on June 15, he delivered a much anticipated speech designed to show the leadership that his critics on
right and left claimed that he was failing to provide. The punditocracy called
for something between Churchill’s speech after Dunkirk and the Gettysburg
Address. It was an excellent speech with the right tone and the right content.

But, it was universally dismissed as inadequate. The left, in particular, erupted that Obama had failed to
commit to ending further offshore drilling and forcing the Congress to enact a
carbon tax.

So far, it appears that the speech neither lowered nor raised his approval ratings with the public which runs
slightly below 50%. Approval for his handling of the spill has risen from 40% to
44% since early June.

The next day, in a 4 ½ hour negotiation with BP, Obama extracted a commitment for an initial $20 billion escrow
fund and suspension of BP’s dividend. He immediately named Kenneth R.
Feinberg to be its independent administrator. Feinberg successfully handled the 9/11
claims and has been the "czar" for executive compensation in companies bailed out by the federal government.

That was a concrete achievement within the power of a president. It relieved some of the worry that BP would not be
able to pay the full cost of clean up and that it was too slow in
compensating those already hurting. That is the up side. The down side is that Obama is now responsible for satisfying claimants whose appetite for instant
compensation is probably insatiable.

The reaction of the senior Republican member of the House Energy Committee tells something of the powerful and conflicting interests seething just below the political surface. Texas Republican Congressman Joe Barton, a big recipient of oil industry contributions, apologized to BP’s CEO for the White House "shakedown" of $20 billion. The day before the 115 member House Republican Study
Committee had called it "Chicago style shakedown politics" and the leader of the Tea Party Nation called it "extortion". That was all consistent with the charge by Rand Paul that Obama should not blame private
business like BP for an accident.

The Republican congressional leadership
instantly repudiated Barton and forced him to apologize for his apology.
But, the anti-government venom of the Republican Party as it becomes
increasingly beholden to Tea Party Libertarians foretells the impact that a
Republican victory in November would have on national policy.

Democrats are also struggling against public alarm whipped up by the Republicans and deficit hawks over
further stimulus spending to speed job recovery. Although the only way to add
jobs is by further deficit pump priming, Democratic members at risk in November
are afraid to vote for added relief to state governments and the unemployed.

Yet, failure to do so guarantees that employment recovery and recovery of tax revenues will continue to lag -
for which these same Democrats will be blamed. That is alarming in itself.
But, the decision by the European Union to begin to rein in its deficits
multiplies the danger that our recovery from recession will be reversed.

Ironically, the political beneficiaries of a stalled recovery will be the very political leaders who most oppose
the spending needed to create more jobs and those most opposed to the
government regulation needed to reduce the chances of new financial and
environmental debacles.

Right now the White House scenario is for the Senate to take up an energy bill the week of July 12, after the July
4 break (and after the scheduled final passage of Wall Street reform).
Kagan confirmation will follow, ahead of the summer break, scheduled to begin
Aug. 9. The Senate energy bill would be merged with the already-passed House
bill in a lame duck session after the election so House members don't have to take another tough vote before election day.

If Obama succeeds in getting tough
financial reform and an energy bill with the kind of carbon tax that he
wants in addition to the already enacted health care legislation, he will have
set a record for transformational change unmatched since Franklin Roosevelt.
There isno question about his objectives. There is a question about the support
that he will have from the Democratic majority.

Those attacking Obama for not pursuing his liberal campaign agenda with greater vigor are laying the ground work
for a return to power of the very political and economic forces that have
gotten us into our present mess at home and abroad. 30

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