.comment-link {margin-left:.6em;}

Cracker Squire


My Photo
Location: Douglas, Coffee Co., The Other Georgia, United States

Sid in his law office where he sits when meeting with clients. Observant eyes will notice the statuette of one of Sid's favorite Democrats.

Sunday, July 31, 2011

Tell it all Peggy Noonan, tell it all: Out of the Way, Please, Mr. President - The Gang of Six puts forward some ideas worth pursuing.

This is from Peggy Noonan's July 23, 2011 column in The Wall Street Journal:

It's good, it represents progress, build from it. That would be a helpful approach to the Gang of Six proposal on the debt. Don't deep-six it because it's flawed. Flawless isn't going to happen. There will be a big election in 2012. A lot can be settled then, and after.

The Gang of Six—three Democrats and three Republicans in the Senate—this week put forward a plan aimed at reducing the national debt by almost $4 trillion over the next 10 years. It includes $500 billion in immediate cuts, and it repeals a costly provision of ObamaCare. It would lower the top individual tax rate to 29%, push corporate tax rates down to 29% from 35%, and abolish the Alternative Minimum tax. On long-term spending, the plan includes a legislative supermajority and sequester feature. In the words of a senator involved in the bargaining, "For the first time, we have some real teeth" in spending controls.

This is all pretty good. It moves the ball forward in the right ways.

The primary good of the plan is that it represents the work of three serious liberals and three serious conservatives who together are moving in the right direction, not the wrong one. They admit the spending crisis is a crisis; they appear to admit that we cannot, at least now, tax our way out of it. This seems small but isn't. Agreement on these essentials is an antidote to feelings of widespread public hopelessness: "Washington can't do anything." That hopelessness damages us more than we know, both at home and in the world. We have to look competent. We have to look like we can reform ourselves

Gang of Six member Kent Conrad said Thursday morning it could take six months to get it all done and through the appropriate committees. But President Obama signaled this week, for the first time, that he might back a temporary debt-ceiling increase to allow work to continue.

That's good. But a note on his efforts in the drama. It is time for the president to get out of the way.

For the longest time he wouldn't engage, and now he's engaged. For the longest time he didn't care about spending, and now he cares about spending. Good, both in terms of policy and for him. But his decision to become engaged has become a decision to dominate, to have his face in front of the television cameras with his news conferences, pronouncements, and what his communications people are probably calling his "ownership" of any final agreement. He's trying to come across as the boss, the indispensable man, the leader. And, of course, the reasonable one.

That's all very nice and part of Political Positioning 101, but at this point it's not helping. He's becoming box-office poison. His numbers are falling. The RealClearPolitics composite job approval poll rating has him down six points since June 2, when the debt-ceiling crisis began. That fall, from 52% to 46%, exactly tracks his heightened media presence and his increased attempts to be seen as dominant. Public Policy Polling, a Democratic firm, said that if he ran for president today he'd lose, that his job-approval numbers are "worse than they appear," and that he continues to have real trouble with undecided voters.

And if you've watched him lately, you know why. When he speaks on the debt negotiations, he is not only extremely boring, with airy and bromidic language—really they are soul-killing, his talking points—but he never seems to be playing it straight. He always seems to be finagling, playing the angles in some higher game that only he gets. In two and a half years he has reached the point that took George W. Bush five years to reach: People aren't listening anymore.

The other day he announced the Gang of Six agreement with words that enveloped the plan in his poisonous embrace: "I wanted to give folks a quick update on the progress that we're making." We're. He has "continued to urge both Democrats and Republicans to come together." What would those little devils do without Papa? "The good news is that today a group of senators . . . put forward a proposal that is broadly consistent with the approach that I've urged." I've urged. Me, me, me.

The Gang of Six members themselves should have been given the stage to make their own announcement, and their own best case.

The president, if he is seriously trying to avert a debt crisis, should stay in his office, meet with members, and work the phones, all with a new humility, which would be well received. It is odd how he patronizes those with more experience and depth in national affairs.

He should keep his face off TV. He should encourage, cajole, work things through, be serious, get a responsible deal, and then re-emerge with joy and the look of a winner as he jointly announces it to the nation. Then his people should leak that he got what he wanted, the best possible deal, and the left has no idea the ruin he averted and the thanks they owe him.

For now, for his sake and the sake of an ultimate plan, he should choose Strategic Silence. Really, recent presidents forget to shut up. They lose sight of how grating they are.

All work and no play . . . - A non-political post: It sure was good seeing Tom Crawford and finally meeting Walter Jones last week.

I had to be in Atlanta last week and got to once again see my friend and long acquaintance Tom Crawford. Tom is the editor of The Georgia Report, an Internet news service at gareport.com that covers government and politics in Georgia.

Tom introduced and promptly unleashed a correspondent from GPB-Radio on me for an interview with the introduction, "Sid, she's all right". Tom no doubt recognized that those of us from the Other Georgia are most suspicious of the elitist, liberal media as we continue to cling to our religion and guns.

Tom reported the day's events in his Tom Crawford's Georgia Report - The Leading Daily Source for Policical News - in his article entitled "State board handles cases against APS, Coffee County school boards."

You can also keep up with Tom's to the left of the Cracker Squire's moderate leanings in Tom's blog, a daily read for the Cracker Squire.

But the real highlight for the day came in finally getting to meet another heavy among journalism's elite in Georgia, Walter Jones, Director of Morris News Service.

Although Walter's reporting on the events of the day were in The Georgia Times-Union (a Georgia edition of The Florida Times-Union of Jacksonville), you will find Walter's articles in most of Georgia's major metropolitan newspapers just about every day.

Walter also interviewed me for his story captioned "State agrees to retain Coffee Board of Education." Being I have gotten behind on my posting as of late, I am going to ask for Walter's forgiveness rather than permission in sharing his comment that came after the interview: "I read the Cracker Squire often, so it's good to finally make the connection."

Walter, know that the pleasure was all mine, and I hope our paths cross sooner rather than later.

(Assuming -- in pig legalese -- I am the owe'ee rather than owe'or, I wish Galloway had been there. One of us owes the other a brew.)

Tom Friedman: The Grand Bargain & 'I wish President Obama had embraced the Bowles-Simpson deficit reduction plan when it was announced last November.'

Tom Friedman writes in The New York Times:

Despite having run on the promise of “Read my lips: No new taxes,” when the deficit started spiraling to dangerous levels under his presidency, [George H.W.] Bush agreed to a compromise with Democrats to raise several taxes, along with spending cuts, as part of a 1990 budget deal that helped to pave the way for the prosperity of that decade. It definitely hurt his re-election, but he did it anyway.

On the economy, the G.O.P. has gone from the magical thinking of Vice President Dick Cheney — who argued that “Reagan proved deficits don’t matter” and used this argument to help run up the deficit to its current astronomical levels with huge tax cuts — to an anti-tax cult that spurned a “Grand Bargain” with President Obama because it would have not only cut $3 trillion in spending over the next decade but also involved $1 trillion in tax increases. Somehow, the G.O.P. has forgotten that even Ronald Reagan didn’t believe deficits don’t matter and he raised taxes when our fiscal stability demanded it. As for prudence today, well, the willingness to risk a default on America’s financial obligations by refusing to raise the debt ceiling may be many things, but it is not prudent.

Where have all the adults in this party gone? Where is Dick Lugar, John McCain, Lindsey Graham, Colin Powell, Hank Paulson and Big Business? Are you telling me that they are ready to fall in line behind Michele Bachmann, Grover Norquist, Rush Limbaugh and Sarah Palin? Are these really the pacesetters of modern conservatism?

I wish President Obama had embraced the Bowles-Simpson deficit reduction plan when it was announced last November and then added his own long-term investment plans on top of it and then built a national mandate for this “Grand Bargain” — before we got to this point. But the president has now embraced such a deal, which is important and constructive, though he needs to spell out this Grand Bargain more emphatically, publicly, repeatedly and specifically.

Because it is the only long-term solution — and it is coming. Either the market will impose a Grand Bargain on us in a haphazard way or we can do it rationally by a Democratic and Republican consensus. The president says that he is ready and that his party is behind him. I hope so. But without a Republican Party that returns to the sane conservatism of the likes of George H.W. Bush — which accepts that both spending and tax increases are, reluctantly, needed to fix our budget and maintain social stability — we’re not going to get even a minibargain, let alone a grand one. It is time for a counterrevolution in the G.O.P.

Obama, as he did with (i) the stimulus bill, (ii) the health care law, & (iii) failing to endorse Bowles-Simpson, continues to lead from the rear.

From The New York Times:

No matter how the immediate issue is resolved, Mr. Obama, in his failed effort for greater deficit reduction, has put on the table far more in reductions for future years’ spending, including Medicare, Medicaid and Social Security, than he did in new revenue from the wealthy and corporations. He proposed fewer cuts in military spending and more in health care than a bipartisan Senate group [the Gang of Six] that includes one of the chamber’s most conservative Republicans.

In his budget proposal in January, Mr. Obama declined to suggest a plan along the lines proposed by a majority of his bipartisan fiscal commission [Bowles-Simpson], which in December recommended $4 trillion in savings over 10 years through cuts in military and domestic programs, including Medicare and Medicaid, and a tax code overhaul to lower rates while also raising more revenue.

Even though Mr. Obama was widely criticized, administration officials said at the time that to have embraced that approach then would have put him too far to the right — where he ultimately wanted to end up in any compromise with Republicans, not where he wanted to start.

But by this month, in ultimately unsuccessful talks with Speaker John A. Boehner, Mr. Obama tentatively agreed to a plan that was farther to the right than that of the majority of the fiscal commission and a bipartisan group of senators, the so-called Gang of Six. It also included a slow rise in the Medicare eligibility age to 67 from 65, and, after 2015, a change in the formula for Social Security cost-of-living adjustments long sought by economists.

Saturday, July 30, 2011

Debt Hamstrings Recovery - Inability of Nations, Consumers to Get Out of Hock Weighs on Global Economy

From The Wall Street Journal:

The Federal Reserve is just days away from ending one of the major steps to aid the U.S. economy—but the effort has done little to solve the original problem: The government and individuals alike are still heavily in debt.

Around the globe, the inability of governments and households to reduce their debt continues to cast a shadow over Western economies and the financial health of individuals. Today, U.S. consumers have more mortgage and credit-card debt than they did five years ago, and the U.S. budget deficit is worsening. At the same time, European governments are having to throw billions more euros at Greece to keep it afloat.

The repercussions are likely to play out for years to come in the form of patchy economic growth, further government market intervention—such as last week's decision by oil-consuming nations to release more oil onto the markets—and frequent financial-market swings.

The fundamental problem is that reversing the trend of piling on the debt requires some combination of cutting spending, growing income or the economy, and inflation. But wage growth is stagnant and home prices, which underpin much of the debt problem, are still falling.

Meanwhile, in a vicious circle, businesses aren't hiring or investing because they know consumers are tapped out. Banks, for their part, are hoarding cash, being stingy with new loans.

Unlike the aftermath of typical recessions, simply lowering interest rates hasn't been enough to get growth back on track, economists say. Central-bank efforts have boosted financial markets in the short term—raising stock prices and significantly lowering interest rates—but they have been unable to push people and governments to whittle down debt.

Quite the opposite has been the case. The lowered cost of borrowing has enabled individuals and governments to delay taking measures to change the way they spend and save.

Given the difficulties of paying down debt, "you have to get comfortable with the idea that it's going to take a long time for the markets to adjust and the economy to get back on solid footing," says Tom Luster, director of investment-grade-bond research at Eaton Vance Investment Managers.

Carmen Reinhart, a senior fellow at the Peterson Institute for International Economics, has said that the experience of past financial crises suggests the unwinding of debt on average takes seven years, with debt ratios not coming down significantly until three years after a crisis.

"The issue with debt is you can't get rid of it quickly and you can't get rid of it nicely," Ms. Reinhart says.

Ms. Reinhart looked at 15 post-World War II financial crises and found that seven involved a double-dip back into recession. She says the current economic weakness highlights a feature of the post-financial-crisis landscape that investors and businesses need to become accustomed to: "The ability to absorb shocks that you normally could withstand…is much more limited," she says.

"If your household is already feeling the weight of an underwater mortgage…you're going to feel differently about adding more debt to absorb the cost of gas," Ms. Reinhart says.

Since the autumn of 2008 there have been repeated attempts by central banks and governments to cushion the blow of the debt-cutting process. In the U.S., efforts included the Fed's first round of so-called quantitative easing, in which the Fed essentially printed money through purchases of more than $1 trillion of mortgage-backed securities. There have been multiple rounds of stimulus by the federal government. The European Central Bank, along with the Bank of England, also employed quantitative easing.

This week the Fed is set to end its second round of quantitative easing, known as "QE2," which pumped $600 billion into the financial markets since last autumn. All told, the Fed has flooded the markets with roughly $2 trillion since August 2008.

Yet U.S. consumers have 37% more credit-card, auto and other nonmortgage debt than a decade ago, before adjusting for inflation, according to the Fed. That is down 6% from its peak of $2.6 trillion hit in September 2008, but most of that decline took place within the first 12 months. Over the past year, consumer credit has been essentially flat at around $2.4 trillion.

The news is especially grim when it comes to mortgage debt. Nearly 23% of mortgages are underwater, according to data compiled by J.P. Morgan Chase. Meanwhile, there is still more mortgage debt outstanding than there was five years ago, roughly $9.9 trillion, according to the Fed. The result is consumers find it harder to tap home-equity credit lines or sell their houses.

Pumping money into the financial system "doesn't stop the need for the private sector to heal itself," says Dominic Wilson, chief global-markets economist at Goldman Sachs Group Inc. "We're still facing the headwinds of an economy that is struggling to get on its feet without stimulus."

On the fiscal front, the outlook is worsening. The U.S. government debt-to-GDP ratio will hit 100% this year, up from 62% in 2007, according to the IMF

The core of Europe is seeing fiscal balances worsening as well. Germany's debt-to-GDP ratio is expected to be 80% this year, up from 65% in 2008. France will reach 88%, up from 64%, according to the IMF.

The Congressional Budget Office last week forecast that the amount of government debt will reach its highest point relative to the size of the economy since just after World War II.

This environment is a stark contrast to the so-called "Great Moderation" of the late 1980s and 1990s when economic ups and downs were shallower. That economic resiliency "had a lot to do with increased ability to access the credit markets," says Jason DeSena Trennert, chief investment strategist at Strategas Research Partners. "Without the benefits of that cushion…the volatility of economic growth is going to be greater."

The uneven economic performance is translating into frequent sharp reversals of sentiment in markets. Goldman's Mr. Wilson says it is most evident in the short-term bond markets.

"It's definitely a start-and-stop flavor for the markets," says Mr. Wilson.

Another effect is that interest rates could stay exceptionally low for much longer than would usually be the case, says former World Bank official and author Liaquat Ahamed, whose book Lords of Finance examined monetary policy in the 1920s and 1930s. He notes rates have been essentially zero in Japan since 1995 and that during the Great Depression, the Federal Reserve cut the discount rate to below 2% in 1934 and it held at those levels until the mid-1950s.

History shows "that when people have borrowed too much, they stop borrowing and interest rates stay very low for a very long time," he says. "So you can forget about investing in bonds."

This sort of says it all; truthfully, not all, but a lot.

This is a must read article: Crop Prices Erode Farm Subsidy Program

(I was going to post this last earlier this week, but I got tied up on some local board of education matters. This article is a keeper on the history and current status farm subsidies and agricultural bills in Congress.)

From The Wall Street Journal:

Business is humming in this typical Midwestern farm town, with its bronze statue of Lincoln overlooking the courthouse square.

Land prices are way up and so are bank deposits, as high corn and soybean prices mean local farmers are making the most money in their lives. At Sloan Implement, which sells John Deere tractors, "This could be our best year ever," says chief executive Tom Sloan.

An exception to the boom is the local office of the U.S. Agriculture Department, the dispensary of federal payments to farmers from an array of arcane programs with names like "loan deficiency" and "milk income loss." On a recent afternoon, the parking lot in front of the squat brick building behind a Chinese restaurant was nearly empty.

The reason: Payments from America's primary farm-subsidy program, dating from the 1930s, have stopped here. Grain prices are far too high to trigger payouts under the program's "price support" formula. The market, in other words, has done what decades of political wrangling couldn't: slash farm subsidies.

Though the subsidy payments always ebbed and flowed with crop prices, many economists are convinced that what is happening now is different. A fundamental upward shift in crop prices is creating the real possibility that Midwestern farmers won't ever again qualify for the primary form of farm subsidy.

There remain other types of subsidies, which continue to pay out because they aren't linked to market prices. But high prices are undermining political support for those programs, especially as Congress and the White House get serious about restraining federal spending, amid trillion-dollar deficits and a political brouhaha over the federal debt ceiling.

Government checks to farmers have shrunk to about $11 billion annually—half what they were six years ago—and they could shrink by roughly half again if Washington goes through with calls to eliminate a second major type of farm aid that costs the government about $5 billion annually.

"Subsidies are just eroding away," said J. Mark Welch, an economist at Texas A&M University.

Critics have long attacked farm subsidies as wasteful and obsolete. Some $760 billion in federal spending ago, they were created to tackle rural poverty during the Depression era, when a quarter of Americans lived on farms. Today, less than 1% of the population is in farming. The typical farmer works many more acres than in years past, thanks partly to ever-more-powerful tractors and harvesting combines, the newest of which steer themselves.

The bulk of the federal subsidy money flows to farmers who are wealthier than the typical U.S. taxpayer. The Environmental Working Group, a Washington activist organization that wants subsidy dollars shifted to conservation programs, maintains a database that shows 10% of farms getting 74% of the federal money. Small farmers receive smaller payments simply because they work fewer acres.

The programs long were protected by one of the few bipartisan coalitions left in Washington—politicians of both parties from major farming states.

The recently elevated focus in Washington on federal spending has changed the calculus. The Senate has already voted to end ethanol tax credits. Farmer groups, resigned to deep cuts, are pitching alternative subsidy programs that they say would cost taxpayers less.

"The old days are through," says Agriculture Secretary Tom Vilsack, a former Democratic governor of Iowa. "There are no sacred cows. Everything is on the table."

That is a matter of concern to some. While the current crop prices mean subsidy checks aren't much missed by farmers, some agricultural economists worry about what will happen next time the historically volatile farm economy contracts. "The safety net for U.S. farmers in the past has been a story and half" below them, says economist Steve Elmore at DuPont Co., a producer of seeds and chemicals. "It is still there, but it's now eight stories away."

For decades, while crop prices languished but operating costs rose, many growers counted on these subsidies to survive. For most of their careers, farmers in Shelby County, 200 miles south of Chicago, depended on government payments for roughly half of their income. In some years, a line of farmers seeking federal loans stretched into the USDA office's parking lot.

The global grain markets shifted in 2006 when Washington began to require that the oil industry mix billions of gallons of corn-derived ethanol with gasoline annually. Around the same time, rising numbers of middle-class consumers in emerging economies such as China began seeking more grain-fed meat and milk, boosting demand for soybeans, pork and, most recently, corn from the U.S.

The way the main Depression-era subsidy program works is that Congress sets a "target price" for certain crops, and when market prices are below it, the government sends growers a check for the difference.

Today's target prices reflect the largely depressed crop markets that prevailed from the late 1970s until 2005—corn averaging roughly $2 a bushel year after year, and soybeans around $6.

But corn now sells for about $7 a bushel in Shelby County, far above the subsidy program's target price of $2.63. Soybeans fetch about $13 a bushel here, versus a $6 target price. So no price-support checks are going out.

While the current prices could easily retreat, if only because they spur farmers around the globe to produce more, many economists doubt that prices will fall all the way back down to levels that trigger federal checks, at least over the next decade. The Congressional Budget Office, as it prepares 10-year forecasts of government spending, sees very little in the way of price-support payments to Midwestern farmers.

"We don't envision farmers here ever seeing a price-support check again," said Darrel Good, a University of Illinois economist. "It's the end of an era."

The USDA still ships billions of dollars annually to farmers for various other programs, such as payments for keeping highly erodible land in grass rather than row crops. It subsidizes crop insurance. Still, federal payments to farmers are expected to fall to about $10.6 billion this year, compared with $24.4 billion in 2005.

In Shelby County, whose roughly 3,400 farmers typically used to share about $25 million a year from the government, the figure is down to about $8 million now.

A five-year federal law governing farm subsidies is up for renewal during 2012. Few see much chance that legislators would raise the price-support program's target prices high enough to start triggering payments under that subsidy program again.

The other major subsidy program, unrelated to market prices, is a remnant of a failed 1996 experiment by a Republican-led Congress to wean farmers off federal aid. Farmers were supposed to receive fixed, but declining, checks for seven years and then be left to the whims of the market. But in the seventh year, instead of letting the payments expire, Congress turned them into a program of set payments, based on the amount and type of crops that particular farms had historically produced. Legislators in both parties are gunning for the fixed-subsidy program, which costs the government about $5 billion annually.

Here in Shelby County, population 21,803, the dim outlook for future subsidies is rattling nerves. Few expect the current high crop prices to last, and farmers' costs for fuel, seed, equipment and agricultural chemicals have soared.

In Windsor, Ill., a $300,000 corn bin is under construction at a grain elevator managed by Matt Bennett, 36, who on a recent day was watching corn and soybean prices blink on his computer screen while trucks pulled alongside his office to dump their loads.

"I understand why the public is skeptical about subsidies to farmers," said Mr. Bennett, who also farms himself, with his father. "Times are good."

But, he added, "this will change. It always does."

Many here say they want the federal budget reined in, but worry that both farming and doing business with farmers will get more volatile. That includes extending them credit. "You feel more comfortable lending money to a farmer for 20 years when there is a price-based support system," said John Widdersheim, vice president of the 116-year-old Shelby County State Bank. "In some years in the past, price supports have had a huge impact for us."

Tim Lenz, a lanky 43-year-old farmer in Strasburg, Ill., said he was willing to forgo the $38,000 in fixed-price subsidies that annually flows to the 2,600 acres of farmland he works.

"It's pure profit to me, but I can't defend it when we're doing so well," Mr. Lenz said, sitting in the upstairs office of a cavernous white sheet-metal "machine shed" he built last year. The $200,000 building houses tractors, two grain combines and other equipment.

"It was a 20-year-long struggle to break even, and now we are making a decent return," said Mr. Lenz, whose annual gross revenue has climbed to about $1.4 million, roughly double what it was five years ago, thanks to rising prices and better crop yields.

A registered Republican, Mr. Lenz said he thinks subsidy spending should shrink even if it would mean that some farmers don't survive the next farm-economy downturn, thus speeding up the consolidation of family farming operations. "I hope I survive," he said. But like Mr. Bennett, Mr. Lenz said the government shouldn't completely end its programs, because of farming's notorious sudden swings in prices and weather.

"We don't think we should be paid when we don't need the money, but we do need a safety net," he said. "Farming is still a risky business."

Meanwhile, workers in the USDA's county offices, seeing the handwriting on the wall, are campaigning for new things to do, now that there aren't any price-support payments to dispense. One idea is to give them responsibility for federally subsidized crop insurance, currently handled by private companies. Because crop values are higher, the amount the federal government spends annually on crop insurance is forecast to climb above $7 billion by 2013, up 60% from last year.

"Sure, we worry about our jobs," said Roger West, who leads the USDA's branch in Shelbyville, one of 2,246 county offices around the country. "We've kept a lot of farmers going over the years. But it's not clear if the farm lobby has the political power to keep the programs anymore."

Top Generals Quit in Group, Stunning Turks - “This is the symbolic moment where the first Turkish republic ends and the second republic begins.”

The New York Times reports that in Turkey the commanders resigned en masse, a move that many analysts saw as a failed effort by a beleaguered institution to exert what is left of its political power.

Wednesday, July 27, 2011

The Tea Party, being against entitlement reform & tax increases, doesn't have a plan for sustaining our greatness & passing it on to next generation.

Tom Friedman writes in The New York Times:

There is only one thing worse than Republicans and Democrats failing to agree to lift the debt ceiling, and that is lifting the debt ceiling without a well-thought-out plan and with hasty cuts totaling trillions of dollars over a decade. What business do you know — that is still in business — that would operate this way: making massive long-term cuts, negotiated by exhausted executives, without any strategic plan? It certainly wouldn’t be a business you’d expect to thrive. Maybe you can grow without a plan. But if you cut without a plan, you will almost surely hit an artery or a bone that could really debilitate you. That, I fear, is where we are heading.

Stop for a minute and ask: What would it look like if we were approaching this problem properly?

For starters, two years ago Congress and the Obama administration would have collaborated on a series of hearings under the heading: “What world are we living in?” They would have included a broad range of business, education and technology leaders testifying about what are the major trends and opportunities that are expected to shape the job market for the next decade. Surely, the hyperconnecting of the world, the intensification of globalization and outsourcing, the challenges of energy and climate and the growing automation of the work space that is rapidly increasing productivity with fewer workers all would have figured prominently.

Then we would have put together “The National Commission for 21st Century America,” with this assignment: Given these big trends, what will America need to thrive in this world and how should we adapt our unique formula for success?

Yes, we have developed such a formula over the course of American history, and it is built on five basic pillars: educating the work force up to and beyond whatever technology demands; building the world’s best infrastructure of ports, roads and telecommunications; attracting the world’s most dynamic and high-I.Q. immigrants to enrich our universities and start new businesses; putting together the best regulations to incentivize risk-taking while curbing recklessness (not always perfectly); and funding research to push out the boundaries of science and then let American innovators and venture capitalists pluck off the most promising new ideas for new business.

Only after we had done all that would we then sit down with a blank sheet of paper and say, “O.K., given our current fiscal predicament, where should we cut spending and where must we raise new tax revenues so that we can bring our government back to solvency and, at the same time, reinvigorate our formula for growth and success.”

After all, “we don’t just need a plan for regaining American solvency. We need a plan for maintaining American greatness and sustaining the American dream for another generation,” argues Michael Mandelbaum, the Johns Hopkins University foreign policy expert (and co-author with me of a forthcoming book). “Such a plan requires cutting, taxing and spending. It requires cutting because we have made promises to ourselves on Social Security, Medicare and Medicaid that we cannot keep without reforming each of them.”

But we cannot possibly generate the savings — or the new investments we need in our formula for success — by just taking funds from these social programs and shredding the social safety nets, adds Mandelbaum. “That would trigger a backlash against free-market capitalism. And free-market capitalism is the engine of our growth, and growth is the best way to reduce the deficit.”

That is why we need to raise new tax revenues as well — so we can simultaneously shrink the entitlements programs, but still keep them viable, and generate the funds needed to strengthen all five parts of our growth formula. Anyone who says that either entitlement reform or tax increases are off the table does not have a plan for sustaining American greatness and passing on the American dream to the next generation.

Alas, that is the Tea Party. It is so lacking in any aspiration for American greatness, so dominated by the narrowest visions for our country and so ignorant of the fact that it was not tax cuts that made America great but our unique public-private partnerships across the generations. If sane Republicans do not stand up to this Hezbollah faction in their midst, the Tea Party will take the G.O.P. on a suicide mission. No American politician was more allergic to debt or taxes than Thomas Jefferson, but he also appreciated the need to have the resources to make the Louisiana Purchase and insisted that on his tombstone it be written that he founded the University of Virginia.

Personally, I’ll support anyone with a real plan to cut spending, raise revenues and boost investment in the five pillars of our success — be they Democrats or Republicans. But if neither Republicans nor Democrats can see that we need a hybrid politics today — one that requires cutting, taxing and investing as part of a single nation-building strategy (phased in over time) — then I’ll hope for a third party that does get it and can take us where we need to go.

Sunday, July 17, 2011

There are Eric Cantors everywhere — reckless baby boomer politicians for whom no crisis is too serious to set aside political ambition and ideology.

Tom Friedman writes in The New York Times:

Greece to observe the off-Broadway version. There are a lot of things about this global debt tragedy that you can see better from here, in miniature, starting with the raw plot, which no one has described better than the Carnegie Endowment scholar David Rothkopf: “When the cold war ended, we thought we were going to have a clash of civilizations. It turns out we’re having a clash of generations.”

Indeed, if there is one sentiment that unites the crises in Europe and America it is a powerful sense of “baby boomers behaving badly” — a powerful sense that the generation that came of age in the last 50 years, my generation, will be remembered most for the incredible bounty and freedom it received from its parents and the incredible debt burden and constraints it left on its kids.

It is no wonder that young Greeks reacted so harshly when their deputy prime minister, Theodoros Pangalos, referring to all the European Union loans and subsidies that propelled the Greek credit binge after 1981, said, “We ate it together” — meaning the people and the politicians. That was true of the baby boomer generation of Greeks, now in their 50s and 60s, and the baby boomer politicians. But those just coming of age today will never get a bite. They will just get a bill. And they know it.

You can see that when you walk around Athens’s central Syntagma Square, where young people now gather every evening to debate the crisis and register their protests at the future being imposed on them. The facades of banks around the square have been defaced, and flapping in the wind are two large banners. One says “IMF Employee of the Year” and has a picture of Prime Minister George Papandreou, and the other says “Goldman Sachs Employee of the Year” and pictures George Papaconstantinou, the former finance minister. (And these are the good guys, trying to fix the problem.) Nearby is a picture of a baby, saying: “Father, whose side were you on when they were selling our country?” And the more blunt: “Yield to rage,” “Class war, not national war,” and, finally, “Life — not just survival” — a message that seemed filled with foreboding about what the next decade is going to be like for young Greeks.

I was struck by one big similarity between what I heard in Tahrir Square in Cairo in February and what one hears in Syntagma Square today. It’s the word “justice.” You hear it more than “freedom.” That is because there is a deep sense of theft in both countries, a sense that the way capitalism played out in Egypt and Greece in the last decade was in its most crony-esque, rigged and corrupt deformation, letting some people get fantastically rich simply because of their proximity to power. So there is a hunger not just for freedom, but for justice. Or, as Rothkopf puts it, “not just for accounting, but for accountability.”

“There are no jokes about this crisis,” the Greek novelist Christos Chomenidis told me. “Everyone is in a bad temper. It feels like nearly everyone is against everyone. If the economic situation gets worse and worse, I am afraid for what can happen.”

The other day striking Greek cabdrivers tried to muscle their way into the minister of infrastructure’s office — only to discover that it was already full of his own ministry’s striking employees. Take a number, please.

That brings up another similarity between Greece and America: that the necessary may be impossible, that baby boomer politicians in the age of Twitter may not be up to addressing problems this big. The hole is too deep and power too fragmented. The only way out is by collective action — where ruling and opposition parties unite, share the pain and take the necessary steps. But that is not happening here or in Washington. There are Eric Cantors everywhere — reckless baby boomer politicians for whom no crisis is too serious to set aside political ambition and ideology.

But there is an adult lurking. China has been buying Spanish, Portuguese and Greek bonds to help stabilize these Chinese export markets. “These are delicate times, and we take a positive role,” Yi Gang, deputy governor of the People’s Bank of China, told the British newspaper The Guardian in January.

This is a role America used to play, but can no longer afford. Anyone who thinks that this economic crisis, if prolonged, won’t also hasten a global power shift has never heard of the Golden Rule: He who has the gold, sets the rules. “We are so used to the Americans providing the solutions for Europe and leading,” said Vassilis T. Karatzas, a Greek money manager. “But what happens when we are both in the same boat?”

What happens is that both the American and European dreams hang in the balance. Either we both put our nations on more sustainable growth paths — which requires cutting, taxing and investing for the future — or we’re looking at a world in which democracies are going to turn on themselves and fight over shrinking pies, with China having a growing say over how big the slices will be.

Saturday, July 16, 2011

You got right Brother: Obama’s communications gap

David Ignatius writes in The Washington Post:

A prominent Bush administration official was talking privately about Barack Obama last week: He’s probably going to win in 2012, this Republican said. He deserves credit for “going big” in the budget talks and capturing the center of the debate. But why isn’t he projecting his goals and philosophy more clearly to the country? Why does he so often seem to react rather than lead?

Given Obama’s strengths, this Republican observer continued, his White House advisers should already be thinking about what Obama can achieve in a second term. They should begin drafting plans and policies, but even more, they should be communicating the president’s vision. Instead, every day at this White House seems like “The Perils of Pauline,” with one cliffhanger after another.

Obama’s news conference Friday was a snapshot of a president with the right instincts but unable to close a deal. If congressional Republicans offer him “a serious plan” on the deficit, he said, “I’m ready to move.” That sounded custodial, rather than presidential.

The debt-limit crisis is a scary example of this tendency to follow, rather than lead. Through 2010, the Obama White House kept its distance from deficit-reduction proposals, and, when it finally entered the fray, it was in the person of Vice President Biden. One official told me bluntly last year that floating proposals too early was a loser, politically.

So Obama waited. His policy ideas, now that they’re public, look pretty solid. But rather than uniting the country behind a vision for reforming entitlements and taxes, he looks like a man being dragged into church by a firebrand preacher named Eric Cantor. The Republicans look bad, but so does Obama.

This communications gap is apparent in foreign policy, too. Obama may have a vision for why American troops should remain in Afghanistan until 2014, but he doesn’t convey it forcefully. This is his war, but he embraces it reluctantly and without clear definition. He places equal emphasis on withdrawing troops and staying the course, which confuses people.

The same is true for the Arab Spring. Obama has had it about right, in policy terms. U.S. strategy is a sensible mix of pragmatism and principle. America supports the movements for democratic change in the autocratic republics, such as Tunisia, Egypt, Yemen and Syria. It respects the more conservative traditions of the pro-Western monarchies and sheikdoms, such as Jordan, Saudi Arabia, the United Arab Emirates, Bahrain, Morocco and Kuwait. This distinction isn’t complicated, it just needs to be explained.

The administration’s caution on Syria makes sense, too. The goal is a transition to a new, democratic Syria without a sectarian war that would be worse than Iraq’s. The administration raised the pressure by sending Ambassador Robert Ford to Hama, scene of the horrific 1982 massacre. The message: This time, the world is watching.

Arguments that Ford should be recalled, or that Obama should throw some fiery rhetoric at the Syrian dynamite keg, strike me as very wrong. That said, Obama needs to explain his vision of democratic transition and work with the Syrian opposition to achieve it, peacefully.

The world looks to America in times like this. Governments and business leaders want a basic framework so they can make decisions. What they get from the Obama White House, too often, is silence.

“Just tell us what you want,” an influential foreign visitor said last week of the Obama administration. It’s a comment you would hear in most capitals of Europe and Asia. Global leaders are accustomed, after Reagan, Clinton and the two Bushes, to U.S. presidents who have a few basic themes and repeat them, several times a week. From this White House they get a big speech every six months.

I had a chance last week to watch two world-class communicators, television megastar Oprah Winfrey and New Jersey Gov. Chris Christie. It’s hard to think of two more different people, but they share a common ability to connect with an audience. Their comments at an Allen & Co. conference in Sun Valley, Idaho, were off the record. But both express an up-by-your-bootstraps philosophy and an optimism about America that’s infectious.

Christie is an especially intriguing figure. He’s the anti-Obama: overweight and seemingly unworried about it, where the president is lean and fastidious; disarmingly frank, where Obama is cautious. Christie is a favorite of Tea Party Republicans, but I heard enthusiastic comments about him from a half-dozen Democrats. Christie will be a formidable candidate if he runs for president one day.

The Obama White House is blessed, if that’s the right word, in having such an irresponsible Republican opposition in Congress. As the debt-limit day of reckoning approaches, the GOP will pay for its reckless, roundhouse swings. But the president needs to start acting like a fighter and a leader, rather than a punching bag.

Tuesday, July 12, 2011

Debt Talks Reflect Tensions Between GOP Leaders

From The Wall Street Journal:

Recent twists in negotiations over the federal debt ceiling have brought new attention to a long-running bit of intrigue among Republican leaders: The presumed rivalry between House Speaker John Boehner and his top deputy, Majority Leader Eric Cantor.

Messrs. Boehner and Cantor have taken contrasting roles in the public sparring, with Mr. Boehner at times advocating a sweeping deal and Mr. Cantor pushing a more limited package of trade-offs.

Republicans, who control the House, refuse to raise the government's borrowing limit without adopting spending cuts that could help trim the deficit. Democrats, wary of cuts to entitlement and other programs, want a deal that includes more tax revenue.

At a White House meeting Thursday, Mr. Boehner spoke in favor of a broad deal while Mr. Cantor opposed it. At a session with Democrats and Mr. Obama on Sunday, Mr. Cantor spoke at length about why a larger package, which would include many tax increases, was unacceptable, as Mr. Boehner, while agreeing, said little, according to people briefed on the meeting.

Their differences have affected the course of deficit talks, with Mr. Cantor's reluctance to embrace tax increases diminishing Mr. Boehner's leeway to negotiate with the White House. They also figure to remain important in the effort to get a deficit deal through Congress, because Mr. Cantor's attitude will help determine whether any compromise can win enough support among GOP troops in the House to assure passage.

The differences have also fueled long-running talk about Mr. Cantor's ambition to be the next House speaker—something even Mr. Boehner has joked about in public.

Mr. Boehner, 61 years old, has long been known as a deal-maker who can work with Democrats. Mr. Cantor, 48, is a rising star, seen by colleagues as hard-charging and ambitious, closely attuned to the anti-tax passions of the Republican rank-and-file.

After Mr. Boehner held an undisclosed meeting with President Barack Obama last month, Mr. Cantor walked out of talks led by Vice President Joe Biden, saying he couldn't accept Democrats' tax demands. Many Republicans believe Mr. Cantor was angered by the Boehner-Obama meeting, though his office denies that.

Relations between the two have sometimes seemed distant: Mr. Boehner rated only passing references in the manifesto published last year by Mr. Cantor and two young GOP colleagues. During talks to avoid a government shutdown earlier this year, Mr. Cantor, whose post makes him the No. 2 House Republican, at one point appeared to be out of the loop on details of the talks.

The differing approaches haven't been lost on Republicans, though some say it works to the party's benefit to have one leader adopting a more flexible posture in negotiations and a second enforcing the party line.

"Boehner doesn't want to be speaker for 100 years, and Cantor wants to be speaker as soon as he can," said Rich Galen, a former GOP House leadership aide. "Cantor may be a little more forceful than what he thinks is necessary to get a deal done. He provides protection to Boehner's right, so Boehner can negotiate with the White House."

In part, the differences are generational. Mr. Boehner was elected in 1990, and has cooperated with Democrats, for example on the No Child Left Behind education law. Mr. Cantor has sought to align himself in many ways with the GOP freshmen who came to Congress last November.

The two leaders say their positions are identical.

"I think we are on the same page," Mr. Cantor said. "I know you all love to write the soap opera here. And it is just that. It is something that I think belittles the real question here, and that is the difference between the sides and the fact that Barack Obama wants to raise taxes and Republicans don't."

When similar questions arose during last spring's debate over a potential government shutdown, Mr. Boehner also stressed the two men's compatibility.

"There's a lot of people who want to write things about Eric and I and the jostling for power," Mr. Boehner told Fox News. "It's nonsense. Eric and I have a wonderful relationship. We understand each other."

Mr. Obama has gone out of his way to praise Mr. Boehner as a negotiating partner. That itself might generate suspicion in some quarters of the GOP, especially since the president has contrasted Mr. Boehner's approach with the anti-tax sentiments that brought the Republicans to power.

"He's a good man who wants to do right by the country," Mr. Obama said. "The politics that swept him into the speakership were good for a midterm election; they're tough for governing."

Sunday, July 10, 2011

Thanks my friend and congressman Jack Kingston, I am proud of you for demonstrating statesmanship.

From the AJC's Political Insider:

For now, the only House Republican from Georgia who might cast a vote for a debt-ceiling deal is Jack Kingston, who as a House Appropriations subcommittee chairman qualifies as a member of Boehner’s leadership team.

“If the president is willing to support some entitlement reforms, and if for every dollar of debt increase, there’s more than a dollar cut — or at least a dollar-for-dollar match — that will be very helpful,” Kingston said in a telephone interview.

Large, unpleasant pills will have to be swallowed — by both sides — the Savannah congressman said.

Some House Republicans are demanding passage of a constitutional amendment to require a balanced federal budget. But the president doesn’t control the U.S. Senate, so that’s not going to happen, Kingston said.

House Republicans will have to be content to pursue that separately.

Military spending will probably have to be included in spending cuts House Republicans are insisting on, he said. Kingston said he would like to see federal spending reduced from 24 percent of the gross domestic product to something approaching 18 percent.

On the revenue side, Kingston said House Republicans are willing to take some suggestions from U.S. Sen. Saxby Chambliss when it comes to the elimination of some tax subsidies in order to boost revenue that can be applied to the federal debt.

“If it’s a tax loophole that helps one industry to the detriment of others, I think we’d certainly want to close it,” Kingston said. “If it’s a wealthy individual and they’re skating on their taxes, nobody’s in favor of that.”

Chambliss, in particular, has raised the possibility of eliminating tax deductions for the interest on mortgages on second homes.

“I think you could argue that. You could also even say flood insurance on a second home. National flood insurance is subsidized heavily,” Kingston said. “It’s consistent with the Republican philosophy of both tax simplification and tax fairness to look at things that only a select few industries or portions of the population can take advantage of.

“I’m not convinced that there’s real revenue in it, but for the sake of good faith, I don’t think we should run from that,” Kingston said.

Never-cut-entitlements liberals would hurt the poor by not giving ground; Pelosi is irresponsible.

From the liberal editorial page of The Washington Post:

“WE ARE NOT going to reduce the deficit or subsidize tax cuts for the rich on the backs of America’s seniors and working families,” House Minority Leader Nancy Pelosi (D-Calif.) decreed Friday. “No benefit cuts in Medicare and Social Security.”

The first part of that vow is reasonable. The second is irresponsible. Of course, any grand bargain on the debt must be balanced. As we have said innumerable times, it cannot be accomplished through spending cuts alone, either in discretionary programs or entitlements. Tax revenue — not simply loopholes closed but new money, and lots of it, about $1 trillion worth — is required. Much of that should come from those who have prospered most as income inequality has widened. To the extent that the liberal Democratic position is not whittling away a widow’s Social Security check to pay for a millionaire’s tax break, sign us up. But a vocal segment of the party, particularly among Ms. Pelosi’s fellow House members, is drawing a different line in the sand: no benefit changes whatsoever. That is not a tenable position.

When it comes to Social Security, the no-benefit-cuts caucus argues that the program is not the major driver of current deficits. This is correct but irrelevant. The program is on a course to run out of enough money to pay promised benefits in 2036. The longer policymakers wait to make adjustments the more painful these adjustments will be — and the more risk they pose to the most vulnerable beneficiaries that Democrats assert they want to protect. Fixing Social Security is important for its own sake; it is going to have to happen sooner or later. If the debt ceiling debate presents a sensible occasion for getting that done, at least in part, so much the better.

The question then becomes whether scheduled benefits are off-limits, as liberal Democrats insist, and therefore any necessary adjustments must take the form of higher payroll taxes or other means of injecting more revenue into the system. Here, again, balance is called for. Insisting that every future Social Security recipient must be paid every cent of benefits now promised is unnecessary and unfair. Indeed, talking about cutting benefits is fundamentally misleading. Because of the generous way that payments are calculated, future retirees are set to receive far larger checks than current ones — even after accounting for inflation. The only question is how much more they will get. This is a particularly reasonable question since Social Security, as Eugene Steuerle of the Urban Institute points out, “has morphed into a middle-age retirement system,” with typical beneficiaries spending one-third of their adult years collecting benefits.

The specific benefit changes under discussion, such as changing to a more accurate measure of inflation, can be debated. Would the new inflation measure take into account higher health costs for seniors? Should it be adopted in conjunction with extra protections for the poorest and oldest seniors? Fair questions, but the no-cut response is not a fair answer.

Insisting on no change to scheduled benefits for any retiree, no matter how affluent, ignores the twin imperatives of protecting less affluent seniors and ensuring that society retains enough resources for programs for the non-elderly. It is not a responsible position — nor, at bottom, a progressive one. is irr

Sounds like a plan to me: U.S. Is Deferring Millions in Pakistani Military Aid

From The New York Times:

The Obama administration is suspending and, in some cases, canceling hundreds of millions of dollars of aid to the Pakistani military, in a move to chasten Pakistan for expelling American military trainers and to press its army to fight militants more effectively.

Coupled with a statement from the top American military officer last week linking Pakistan’s military spy agency to the recent murder of a Pakistani journalist, the halting or withdrawal of military equipment and other aid to Pakistan illustrates the depth of the debate inside the Obama administration over how to change the behavior of one of its key counterterrorism partners.

Tuesday, July 05, 2011

GOP being offered the deal of the century: trillions of dollars in spending cuts in exchange for a few hundred million dollars of revenue increases.

David Brooks writes in The New York Times:

The Republicans have changed American politics since they took control of the House of Representatives. They have put spending restraint and debt reduction at the top of the national agenda. They have sparked a discussion on entitlement reform. They have turned a bill to raise the debt limit into an opportunity to put the U.S. on a stable fiscal course.

Republican leaders have also proved to be effective negotiators. They have been tough and inflexible and forced the Democrats to come to them. The Democrats have agreed to tie budget cuts to the debt ceiling bill. They have agreed not to raise tax rates. They have agreed to a roughly 3-to-1 rate of spending cuts to revenue increases, an astonishing concession.

Moreover, many important Democrats are open to a truly large budget deal. President Obama has a strong incentive to reach a deal so he can campaign in 2012 as a moderate. The Senate majority leader, Harry Reid, has talked about supporting a debt reduction measure of $3 trillion or even $4 trillion if the Republicans meet him part way. There are Democrats in the White House and elsewhere who would be willing to accept Medicare cuts if the Republicans would be willing to increase revenues.

If the Republican Party were a normal party, it would take advantage of this amazing moment. It is being offered the deal of the century: trillions of dollars in spending cuts in exchange for a few hundred million dollars of revenue increases.

A normal Republican Party would seize the opportunity to put a long-term limit on the growth of government. It would seize the opportunity to put the country on a sound fiscal footing. It would seize the opportunity to do these things without putting any real crimp in economic growth.

The party is not being asked to raise marginal tax rates in a way that might pervert incentives. On the contrary, Republicans are merely being asked to close loopholes and eliminate tax expenditures that are themselves distortionary.

This, as I say, is the mother of all no-brainers.

But we can have no confidence that the Republicans will seize this opportunity. That’s because the Republican Party may no longer be a normal party. Over the past few years, it has been infected by a faction that is more of a psychological protest than a practical, governing alternative.

The members of this movement do not accept the logic of compromise, no matter how sweet the terms. If you ask them to raise taxes by an inch in order to cut government by a foot, they will say no. If you ask them to raise taxes by an inch to cut government by a yard, they will still say no.

The members of this movement do not accept the legitimacy of scholars and intellectual authorities. A thousand impartial experts may tell them that a default on the debt would have calamitous effects, far worse than raising tax revenues a bit. But the members of this movement refuse to believe it.

The members of this movement have no sense of moral decency. A nation makes a sacred pledge to pay the money back when it borrows money. But the members of this movement talk blandly of default and are willing to stain their nation’s honor.

The members of this movement have no economic theory worthy of the name. Economists have identified many factors that contribute to economic growth, ranging from the productivity of the work force to the share of private savings that is available for private investment. Tax levels matter, but they are far from the only or even the most important factor.

But to members of this movement, tax levels are everything. Members of this tendency have taken a small piece of economic policy and turned it into a sacred fixation. They are willing to cut education and research to preserve tax expenditures. Manufacturing employment is cratering even as output rises, but members of this movement somehow believe such problems can be addressed so long as they continue to worship their idol.

Over the past week, Democrats have stopped making concessions. They are coming to the conclusion that if the Republicans are fanatics then they better be fanatics, too.

The struggles of the next few weeks are about what sort of party the G.O.P. is — a normal conservative party or an odd protest movement that has separated itself from normal governance, the normal rules of evidence and the ancient habits of our nation.

If the debt ceiling talks fail, independents voters will see that Democrats were willing to compromise but Republicans were not. If responsible Republicans don’t take control, independents will conclude that Republican fanaticism caused this default. They will conclude that Republicans are not fit to govern.

And they will be right.

Monday, July 04, 2011

I want us out of Iraq, Afghanistan & Libya. I might need to just quit even worrying about Obama & his 3 wars. I will concentrate on the deficit here.

On Monday, June 27, 2011, this appeared in The Wall Street Journal:

The U.S. is . . . committed to withdrawing all of its remaining 45,000 troops from Iraq by year-end; some U.S. military officials want some troops to stay to serve as a check on Iran, but Iraqi hostility to the U.S. presence has been an obstacle.

On Sunday, July 3, 2011, this appeared in The Washington Post:

The United States remains open to keeping thousands of troops in Iraq beyond the end of the year if asked, but will require Iraqi forces to provide them with greater security, the U.S. envoy to Iraq said Saturday.

Ambassador James F. Jeffrey told reporters at a roundtable in the capital that the Obama administration would consider a request to keep some of the roughly 46,000 U.S. troops here, but added, “We do need the Iraqi forces to help us secure our troops and, frankly, to secure themselves.”

Saturday, July 02, 2011

Teachers Could Defer Obama Support

From The Wall Street Journal:

Widespread unhappiness among teachers about President Barack Obama's education policies is threatening to derail a National Education Association proposal to give him an early endorsement for re-election.

The political action committee of the NEA, the nation's largest union, adopted a resolution in May to endorse Mr. Obama. The proposal will come before the NEA's 9,000-member representative assembly on Monday at the union's annual convention here.

Whether the rancor over the early endorsement will have long-term consequences is unclear. At some point, the NEA is likely to endorse Mr. Obama, as the union has never endorsed a Republican.

The NEA convention comes after teachers unions spent the last few months fighting nationwide efforts to scale back their power. In several Republican-controlled states, including Idaho, Ohio and Wisconsin, lawmakers severely restricted union collective-bargaining rights.

Organized labor, a power base for Democrats, could be crucial to Mr. Obama's re-election bid, especially in swing states such as Ohio, Pennsylvania and Indiana.

Mr. Obama and Education Secretary Arne Duncan have had a testy relationship with teachers unions. The unions don't like the administration's embrace of charter schools—public schools run by non-government entities—or its support for the dismissal of ineffective teachers in low-performing schools.

NEA members have been particularly hostile to Race to the Top, Mr. Obama's initiative that awarded grants to states that embraced education overhauls such as linking teacher evaluations to student test scores. At last year's convention, NEA delegates gave the initiative a "no confidence" vote. One speaker was Diane Ravitch, an education historian critical of Obama's education policies.