Obama Private Sector Stumble Shifts Debate Back to Stimulus

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Does Obama really believe the private sector is 'fine'?

Sen. Ron Johnson reacts to controversial comment

"I think the message is that, first of all, voters are seeing the fundamental unfairness of government becoming its own special interest group, sitting on both sides of the table."

-- Indiana Gov. Mitch Daniels on “FOX News Sunday with Chris Wallace” discussing the failure of a union-led effort to recall Wisconsin Gov. Scott Walker.

It has been said that President Obama on Friday “walked back” a statement earlier in the day that “the private sector is doing fine.”

But in truth, the president doubled down, explaining again his argument that the only real problem that the private sector really has is the decline in government hiring as federal stimulus funds have dried up.

The attempt at a do-over was more noteworthy to most because the president flubbed again in trying to undo his previous flub, saying “It is absolutely clear that the economy is not doing fine. That’s the reason I had the press conference.” (Imagine if George W. Bush had said that he held a press conference to fix the economy.)

But that was just a slip. Obama really meant that he held the press conference to try to spur Congress to act on his latest re-offering of a stimulus or at least to remind voters that he is offering a plan to keep the sputtery economy propped up. This is not surprising since for the past two years Obama has been calling for another round of domestic spending, partly financed with higher taxes on top earners.

Prior to losing control of Congress in 2010, the Obama Democrats extended stimulus payments to state and local governments to keep payrolls at the same levels to which they had risen after Obama’s first stimulus package in 2009.

The normal life cycle for a local or state government is that during a recession, payrolls shrink. Unable to print or borrow money for short-term expenditures, these governments have to respond to declining tax revenue by reducing costs. Obama Democrats argue that this cycle should be different and that the length and severity of the recession would be reduced by not having all these government workers laid off but instead out there spending their paychecks.

In 2010, there were about 14.8 million full-time state and local employees in the nation on top of about 2.6 million full-time civilian federal employees – about 400,000 more government workers in total than in 2007 before all the stimulating began.

Obama argues that raising taxes and borrowing to keep government employment at stimulus levels is a good economic solution since much of the money borrowed or taken makes its way back into the economy and helps spur private-sector hiring. A dogcatcher is hired with stimulus funds, he goes out to his local pub to celebrate his first schnauzer pinched, the proprietor has to buy more beer and corn nuts and, if there are enough new stimulus hires at the county government building around the way, maybe bring on some extra waitress shifts.

Even worse, Obama argues, is what would happen if all those dogcatchers and clerks and cops and social workers were let go: The economy, heaving under the weight of high long-term unemployment, might go from stalled to reverse.

This actually echoes a recent favorite talking point from Team Obama about government spending during his tenure, saying that the rate of increase has been low since 2009. It’s accurate, but depends on the idea that 2009 is somehow a normal year, not the moment of a worldwide economic panic and gut-twisting recession that resulted in a bipartisan rush to spend as much money as the Federal Reserve could conjure as quickly as possible.

But once the GOP stormed into control of the House at the start of last year, thanks in part to voter dissatisfaction with the Obama stimulus strategy, there was little chance of more borrowing for stimuli and no chance at all of any tax hikes.

The president, having suffered badly with voters because he was seen as diverting his attention from the economy for more than a year to push through a new health-insurance entitlement program, tried to fight back against the red tide by renewing his push for more stimulus spending, keeping particular attention on government workers.

Republicans, however, are mostly fans of the fact that recessions drive down government payrolls. Usually unable to do much to slow the growth of the federal government, they like the fact that on the state and local level tax shortfalls do the job for them.

There are also crass politics at work too. Government worker unions have become the bulwark of the Democratic Party. The president may believe that government jobs are the way out if the economic problem, but it certainly doesn’t hurt that the most influential part of his political base is government workers. Republicans, conversely, know that every AFSME job that goes unfilled means fewer dollars that go to Democratic coffers for the fall.

The danger here for Obama is that this fall actually does turn into a choice election in which the options relate to more public-sector stimulation or more freedom for the private sector.

Obama says he wants to give voters a choice between “forward” and “a return to the same failed polices.” But that’s not really a choice. That’s just a characterization.

The president’s encapsulation of his view of what is wrong with the economy, i.e. declining government payrolls, into such a bite-sized nugget -- “the private sector is doing fine” – suggests that the real choice may be about whether to sustain and expand stimulus measures or to let governments shrink back down.

Given the results in Wisconsin and the consistent opinions expressed in polls, that choice would not work out happily for the president.

The Day in Quotes

“The private sector -- we need to accelerate job creation in the private sector. One of the way that is we can do that is putting teachers and firefighters and police back to work.”

-- David Axelrod, senior political adviser to President Obama, on “State of the Union.”

“And by the way, people always talk about jobs and as I like to remind them there’s also incomes and people’s incomes are also down in the private sector over this period of time. So the 90 percent of Americans that have jobs have lower incomes on average… I’m saying it’s not fine.”

-- Former White House auto czar Steven Rattner on MSNBC talking about private-sector economic health.

“Some of the leaks -- and the public leaks are self-described aides, or people who were in the Situation Room, that's a pretty small but pretty important group of people.”

-- Rep. Mike Rogers, R-Mich., head of the House Intelligence Committee on “Face the Nation” calling for an independent investigation into national security leaks. 

“It's clear from the stories that this came right from the White House.”

-- Rep. Pete King, R-N.Y., chairman of the House Homeland Security Committee, on “America’s News HQ.”

“I want to make sure that we have strong, principled conservatives there who stood with me in our primary fight to go there and counterbalance the effect of the [Texas Rep. Ron Paul] folks.”

-- Former Pennsylvania Sen. Rick Santorum on “This Week” explaining what role he expected his delegates to play at the Republican National Convention in Tampa.

“10 points”

-- Decline in support for President Obama among Jewish voters since the fall of 2008, from 74 percent to 64 percent, according to Gallup.

Chris Stirewalt is digital politics editor for Fox News, and his POWER PLAY column appears Monday-Friday on FoxNews.com.