In Obama's Phase Two, look for exits from the White House

WASHINGTON — Nov. 2 is likely to be marked as the official start of Phase Two of the Obama presidency, but in some respects, the turn to the right that will mark his tenure became visible in this first week in September.

The signs were there in the polls signaling the likelihood of large Republican gains in the midterm election, in the word that the White House may have to find a new chief of staff, and in the policy announcements about Obama's new economic fixes.

All the major media completed their first rounds of post-Labor Day reporting and polling this week and pronounced, with one voice, that voters are ready to strip the Democrats of one, if not both, of their congressional majorities. The failure of the economy to generate any momentum for significant growth during the summer months has deepened national pessimism. And little is likely to jolt it into a climb before November.

Voters have pocketed the formal ending of combat in Iraq without rewarding the commander in chief. Now, congressional Democrats are scattering in search of individual salvation, rather than forming a solid phalanx to defend their leader.

That Chicago Mayor Richard Daley chose this particular moment to announce his plans to retire next year is pure coincidence, but it signaled to everyone that Rahm Emanuel, Obama's chief of staff, may leave after the election to seek the hometown job he always has wanted.


Emanuel is not the hard-liner partisan he was reckoned to be by those who remember him best by the tactics he used as the architect of the drive that broke the GOP grip on the House halfway through George W. Bush's second term. He has often been a voice for moderation within the administration and he was personally responsible for recruiting a Republican colleague, Transportation Secretary Ray LaHood, for the Cabinet.

Nonetheless, with Emanuel likely to lead the procession of post-election exits from the White House, Obama will have the freedom he needs to recast the administration for the last half of the term. As he prepares to deal with a more Republican Congress and begin his own race for re-election, the changeover will become more and more important.

You can begin to see the outlines of the president's new approach in the pair of speeches he gave this week in Milwaukee and Cleveland. His settings were traditional — the urban centers that anchor Democratic hopes in two of the classic Midwest battlegrounds.

But the economic message had changed from Phase One of the Obama presidency, when the instinct was to turn to government for the answer to whatever ailed the economy. In Phase One, it was stimulate demand by expanding government spending, directly by the feds and indirectly through subsidies to states and local communities. Then rescue the auto industry by making it a ward of government.

Obama's economists, and those at the neutral Congressional Budget Office, can show evidence that Phase One succeeded at least in saving a significant number of jobs. But that game has been ended by public reaction to mushrooming deficits, and Obama is not going to fight the voters.

What he said this week is that he is now prepared to adopt business' own favorite remedy, and subsidize private firms in hopes they will invest and hire more rapidly.

The centerpiece is a classic bit of pro-business tax manipulation, allowing immediate expensing of equipment purchases and making permanent the research and development tax credit.

This is the kind of tax reform Republicans can love, and it's now been placed on offer by a Democratic president, even before the election results are weighed.


All this suggests that Phase Two may not be as painful a transition for Obama himself as it is for liberals in his party. And Rahm Emanuel won't have to explain it to Nancy Pelosi.

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