Here are my initial reactions to important economic policy elements of the President’s press conference.

The President argued the electoral losses were the result of a continued weak economy and his inability to convince voters that he had made things better quickly enough. He repeatedly ducked the question of whether his policies contributed to the Democrats’ devastating losses. Two conclusions are consistent with ducking this question: (1) he thinks his policies did not hurt Democrats on Election Day; or (2) he knows they hurt Democrats but doesn’t want to admit it because doing so would further risk the policy gains he has achieved. I find it very hard to imagine (1), but I misjudged him last January and as a result I incorrectly concluded he would stop pushing for health care reform, so I lack confidence in my ability to discern between the two.

He did not acknowledge learning anything from the election or that he was in any way surprised by the result. In contrast he surprised me with the word “confirmed”:

And yesterday’s vote confirmed what I’ve heard from folks all across America: People are frustrated — they’re deeply frustrated — with the pace of our economic recovery and the opportunities that they hope for their children and their grandchildren.

Given this answer, I’d like to ask him “Were you surprised by Tuesday’s results?”

The initial press reaction was that the President “took responsibility for the losses.” The precise words in his prepared statement were, however, artfully phrase:

Over the last two years, we’ve made progress. But, clearly, too many Americans haven’t felt that progress yet, and they told us that yesterday. And as President, I take responsibility for that.

The President took responsibility only for “too many Americans

[not feeling] progress yet.” That’s a minor concession, along the lines of “We didn’t communicate our policies well.” He conceded nothing about the effectiveness (or lack thereof) of his economic policies, nor about the unpopularity of stimulus, health care, or cap-and-trade.

In a prepared statement as important as this one, no language is accidental. These sentences foreshadow his upcoming economic priorities and themes for next year’s budget and State of the Union address:

But what I think the American people are expecting, and what we owe them, is to focus on those issues that affect their jobs, their security, and their future: reducing our deficit, promoting a clean energy economy, making sure that our children are the best educated in the world, making sure that we’re making the investments in technology that will allow us to keep our competitive edge in the global economy.

and

In this century, the most important competition we face is between America and our economic competitors around the world. To win that competition, and to continue our economic leadership, we’re going to need to be strong and we’re going to need to be united.

He also tends to connect economic competitiveness with domestic infrastructure, R&D, and education spending. This linkage is not accidental.

He tried to erect a firewall around the health care laws:

And with so much at stake, what the American people don’t want from us, especially here in Washington, is to spend the next two years refighting the political battles of the last two.

Yet for several months he has been refighting (is that a word?) the tax rate battle of ten years earlier, and his entire economic message has been a backward-looking complaint and a relitigation of the policies and conditions he “inherited.”

He floated a few areas of potential bipartisan agreement:

  • the looming tax increases;
  • energy:
    • expanding domestic natural gas supply;
    • energy efficiency;
    • “how we build electric cars”;
    • expanding nuclear power;
  • education;
  • limiting appropriations earmarks;
  • fixing one tax provision in the health care laws that hurts small businesses;
  • infrastructure spending; and
  • immediate (and temporary) expensing of business investment.

He acknowledged that legislation pricing carbon is dead for the foreseeable future. In doing so he acknowledged a well-established conventional wisdom, but it’s still significant when the President says it. His “this year” language should kill silly speculation about a lame duck Congress trying to enact cap-and-trade in 2010, and his “… or the year after” language takes cap-and-trade off the table through the remainder of this Presidential term.

I think there are a lot of Republicans that ran against the energy bill that passed in the House last year. And so it’s doubtful that you could get the votes to pass that through the House this year or next year or the year after.

He also signaled a willingness to trade legislative action on “clean energy” with dialing back (or prohibiting?) EPA from regulating greenhouse gases:

So I think it’s too early to say whether or not we can make some progress on that front. I think we can. Cap and trade was just one way of skinning the cat; it was not the only way. It was a means, not an end.” And I’m going to be looking for other means to address this problem.

And I think EPA wants help from the legislature on this. I don’t think that the desire is to somehow be protective of their powers here. I think what they want to do is make sure that the issue is being dealt with.

Finally, on the question of looming tax increases he signaled that “This is something that has to be done during the lame duck session,” and he made no negative statements about extending all the rates. When asked directly “So you’re willing to negotiate?” he replied “Absolutely.” In upcoming days I’ll write about potential paths to a tax deal.

(photo credit: The White House)