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GOP differs on who lifted the economy


WASHINGTON » After years of finding the dark lining in every silver economic cloud, Republicans are facing a political quandary that is dividing their leadership even as it buoys the nation: The economy appears to be achieving liftoff.

The United States last year added the largest number of jobs since the go-go years of the late 1990s, the Labor Department said Friday, as employers created 2.95 million jobs over 12 months, an estimated 252,000 of them in December alone. The unemployment rate dropped to 5.6 percent, a 1.2-percentage-point decline over the year that was the largest since 1984. Rising exports, falling imports, plunging oil prices and growing business inventories had private-sector economists this week revising their economic growth estimates upward.

To some Republicans, a strategic shift is in the offing: President Barack Obama’s economy is still a failure, they argue, but welcome to the Sen. Mitch McConnell economy.

"We’re finally starting to see some economic data that can provide a glimmer of hope," McConnell of Kentucky, the new Senate majority leader, said this week. "The uptick appears to coincide with the biggest political change of the Obama administration’s long tenure in Washington: the expectation of a new Republican Congress."

Across the Capitol, however, John Boehner of Ohio, the House speaker, was sticking to the old script, which played off the fact that wages for ordinary workers continued to lag.

"While the economy is showing some signs of improvement, far too many middle-class families are struggling to bridge the gap between rising costs and stubbornly flat paychecks," he said.

The conservative columnist James Pethokoukis summed up the Republican challenge: "The GOP said Obamanomics would kill the economy. It didn’t. Now what?"

How both parties finesse an economic recovery that is clearly gathering steam will have major ramifications for the coming presidential election cycle. In 2012, 45 percent of voters said the economy was not doing well, according to exit polls. Democrats carried those voters by a 13-percentage-point margin. Two years later, those voters had had enough: 48 percent saw the economy negatively, and Republicans carried that group by 17 points.

In the next election, who gets credit if opinion shifts again will matter enormously, said David Winston, a Republican pollster who consults closely with House Republican leaders.

"There’s a positive story to tell since Republicans took over the House, 9.6 million jobs created, the deficit cut in half, 98 percent of the Bush tax cuts locked in place," he said. "These are policies that Republicans have been able to put into place that clearly helped move the economy in the right direction. The problem is for that to be articulated but with the understanding that it’s not enough."

Grover Norquist, the conservative anti-tax activist and a herald of Republican messaging, took to Twitter in late December to begin taking credit for quickening economic growth, attributing it to Republican-engineered automatic spending cuts, budget showdowns and the locking in of most of the Bush tax cuts in January 2013.

He did not mention the role of the Federal Reserve in keeping interest rates low or that overall spending continued to rise with the aging population and expansion of Social Security and Medicare. Or that the tax deal let tax rates jump on high-income families, whom Republicans see as the prime job creators.

"There have been good things done over the objection of the president and the Democrats," he said Thursday, before the job figures were released. "We ought to be able to point out that things are getting better compared to where they were but that they are not good compared to where they should be. That’s not in conflict."

Democrats called such credit claiming fantasy.

Most economists say the Republican budget brinkmanship of the past two years and the spending restraint promoted by GOP lawmakers hindered growth, not helped it. The surge in jobs and growth that began in spring 2014 started well before Republicans took over the Senate.

PolitiFact, the nonpartisan fact checker, rated McConnell’s claim to a connection between the Republican election sweep and the economic rebound as "false."

"Key statistics show that the economic recovery was underway well before September, which is our best estimate for when the ‘expectations’ of a GOP Senate solidified," PolitiFact wrote.

For now, the naysayers among Republicans might have the public on their side. Consumer confidence is improving greatly, but political opinion hasn’t shown much optimism, said Neil Newhouse, a Republican pollster at Public Opinion Strategies.

But that might not last. Republican predictions of catastrophe before the 2012 election are already looking silly, Pethokoukis said.

David Siegel, founder of the time-share company Westgate Resorts, emailed his employees before the election warning that if Obama were re-elected and raised taxes on the rich, as happened, he "will have no choice but to reduce the size of the company."

Instead, he gave them all raises.

"Rule No. 1, acknowledge reality," Pethokoukis advised.

The problem for Republicans, he said, is that the economy’s shortcomings — wage stagnation, growing income inequality and a squeezed middle-class — don’t lend themselves to the usual conservative response: deficit reduction and lowering the highest tax rates.

Democrats have ready answers: Obama’s new proposal to offer free community college tuition, his administration’s cut to mortgage insurance rates charged to struggling homebuyers, more construction jobs through expanded infrastructure projects, and tax increases on the rich to help pay for such programs. And they have long succeeded with many voters by painting the Republican party as the handmaiden of the rich and powerful business interests.

To counter that, Republicans will have to come up with their own responses aimed squarely at those left behind, Pethokoukis suggested, perhaps an expanded earned-income tax credit or requiring colleges to pay back a percentage of any loans on which their graduates default, giving schools more of a stake in their students’ futures.

Kevin Hassett, director of research at the center-right American Enterprise Institute, argued that cutting the corporate income tax — a policy long favored by Republicans that has also been embraced by Obama — would bring more business development to the United States. And aggressive use of tax-favored development zones in poor areas, along with a "massive" federal subsidy for the creation of charter schools to foster competition in education hold promise for those who are left behind in the improving economy, he said.

In announcing his super PAC, The Right To Rise, Jeb Bush and his allies avoided any mention of tax cuts or budget deficits, focusing instead on income inequality and struggling Americans.

Jonathan Weisman, New York Times

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