Obama facing opposition to opening embassy in Cuba

While Cuba and the United States reached a deal at the end of June to reopen embassies, Obama is facing opposition to the move both from his own party and Republicans.

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Sen. Robert Menendez, a Democrat from New Jersey claimed the move is not in the U.S. national interest. On the Republican side, Sen. Tom Cotton of Arizona claimed the move to normalize relations with Cuba was "appeasement of dictators". The speaker of the House of Representatives, Republican John Boehner argues that U.S.-Cuba relations should not be revised at all, let alone normalized. Republican presidential candidate Sen. Lindsey Graham said he would make closing the embassy his top priority if elected president.

In order to normalize relations with Cuba, the White House needs Congress to agree to the move, approve an ambassador, lift the embargo on Cuba, and fund the embassy. Senator Cotton is planning, along with supporters in Senate, to try to block funding for the embassy, and also block approval of anyone nominated as ambassador. Cotton said he would continue to do so "until there is a real, fundamental change that gives hope to the oppressed people of Cuba." His Democratic ally Sen. Menendez said: “An already one-sided deal that benefits the Cuban regime is becoming all the more lopsided, The message is democracy and human rights take a back seat to a legacy initiative.”

Opposition to normalization is not new as the House already passed a motion to keep current travel restrictions on travel by Americans to Cuba, blocking Obama's attempt to ease the restrictions. The motion passed by a 247-176 vote. In another bill passed through the House, a bill funding the State Department at the same time prohibits the department from using the funds to build a new embassy in Cuba. The Obama administrations wants $6 million to upgrade a current building in Havana in order to turn it into a functioning embassy. A summary of the House bill said:“The bill includes a prohibition on funds for an embassy or other diplomatic facility in Cuba, beyond what was in existence prior to the President’s December announcement proposing changes to the U.S.-Cuba policy."

A senior State Dept. official criticized the opposition as being counterproductive: “It would be a shame if Congress impeded implementation of some of the very things that we think they – we all agree we want to do, such as better outreach to the Cuban people all over the island or additional..These are the kinds of things that we can do as we move forward in this relationship with a more robust embassy. And I would assume that most on the Hill agree those are a good thing to do.”

White House press secretary, Josh Earnest, told reporters that he thought that there was strong support for lifting the embargo on Cuba although he had not done a "whip count."

Obama has support on the Republican side even while many Republicans are critical of his policy. Senator Jeff Flake, a Republican from Arizona, said that changing policy towards Cuba was long overdue. Sen. Dean Heller of Nevada also praised Obama's moves as "a step in the right direction" although he said fundamental issues remained to be resolved. Senator Rand Paul, a Republican presidential candidate, has criticized the embargo in the past, pointing out that the U.S. trades with Vietnam and China, both nominally communist nations and noted that trade is better than war. If Paul supports Obama, he will be at odds with Sen. Lindsey Graham and Ted Cruz who both oppose Obama's Cuba policies. Cruz said: "The word's coming out of the president's mouth simply aren't true. It makes no sense to be strengthening a profoundly anti-American enemy, a tyrant 90 miles from the U.S. shore."

There are few details about the timeline for opening the new embassy. State Department adviser, Marie Harf, said:“We really just don’t have any more details about where the process goes from here. We’ve had productive conversations. There are still some issues that need to be worked out. We don’t have more details about how that will happen,” Last week the U.S. removed Cuba from the list of state sponsors of terrorism.

Defense industry becoming pessimistic about chance of avoiding fiscal cliff

The defense industry may be becoming more pessimistic about a deal to avoid the fiscal cliff before the end of this year. They are also annoyed that they are sidelined during talks.

The industry feels that they will be able to demand a deal that will see military spending hiked back up some time in 2013. An anonymous source said:

“I think people resigned to the fact that this needs to be addressed in January,”

At the Pentagon, Obama administration officials have given those who crunch the numbers in the Defense Department permission to start the process of cutting $500 billion from their budget in January of 2013. Top defense industry lobbyists had been trying to convince both parties that going over the fiscal cliff would be a complete disaster. While John Boehner tried to implement a Plan B to deal with the fiscal cliff, he was unable to pass it through the Republican-controlled House since it involved tax hikes for the very rich.

It is still possible that there will be a last minute deal that will be a stop-gap measure. Obama has cut short his vacation to continue negotiations. One defense industry source said that its message of doom if the fiscal cliff were not avoided fell on deaf ears.

Top defense analyst, Loren Thompson said:

"I think there's a creeping sense of pessimism in the defense sector … I don’t think most people in the industry really understand why their pleas have [been ignored]."

Thompson said that among lawmakers many felt there was no urgency about avoiding cuts to the Pentagon budget since even with the cuts US defense spending will still be many times higher than its nearest competitor. Thompson went on:

"They don’t want sequestration but they’re capable of dealing with it."

Some analysts think that the problems created by jumping over the cliff will be addressed early in January. If the stock market begins to fall, there will be more pressure for a deal to be worked out. Even in the New Year, Thompson was pessimistic about any grand deal in the near future.

Obama to cut short Xmas vacation to deal with fiscal cliff negotiations

President Obama is planning to cut short his Xmas vacation and return to Washington. He will make a final attempt to reach a deal with the Republicans, even though a compromise looks to be quite difficult to achieve.

Even if Boehner were to compromise on the tax issue, the Republican-controlled House would not likely agree. The House already rejected Boehner's Plan B that would have raised taxes only on those earning a million or more a year.

Both chambers of the US Congress will return from holidays on Thursday and start work again. Hopes for any grand bargain have faded. President Obama is pressing for a plan that would be a stop-gap measure. Obama wants to extend the Bush tax cuts for all those earning less than $250,000 a year and extend unemployment benefits. He would also cancel the scheduled automatic spending cuts.

At the very least, Obama will need to raise the income level to which he wants to extend tax cuts. Boehner failed to pass a bill that extended the line to those earning a million a year. However, a New York Times article reports that there are growing signs that some members of both parties are prepared to accept a deal that raises taxes on people at the highest income levels. No evidence is given for this or that even if it is true, that there are enough votes to pass a deal through both houses.

The government has been seeking a resolution through discussion with Senate Democrats who control the house and also may have the support of some Republican senators. However, the Republican Senate leader, Mitch McConnell, has given no sign that he would not try to block any deal that has tax increases. The situation in the House is much worse.

The House is controlled by Republicans and has already blocked a Republican bill that tried to increase taxes on the very wealthy. Today could be the last day of Obama's holidays, as he may fly back to Washington as early as Wednesday. This would give him a bit more time for talks.

Lawmakers have expressed little but pessimism for the prospect of an agreement coming before Jan. 1. On Sunday, Sen. Kay Hutchison, a Republican from Texas, said if there is any deal it will be "a patch because in four days we can't solve everything."

Julia Coronado, an economist for BNP Paribas said that markets have up to now been remarkably complacent, thinking that a deal will definitely be reached. She predicted that if no deal is reached, markets will react with a steep downfall. This will no doubt put a great deal of pressure on politicians to reach a deal of some kind and fast.

Obama would drive over fiscal cliff is no tax hike on wealthy: Republicans blink?

According to Treasury Secretary Timothy Geithner Obama is definitely prepared to let the economy go over the fiscal cliff unless he achieves a budget deal that has higher rates for top income earners.

In an interview with CNBC on Wednesday December 5th, Geithner said:

"There's no prospect in an agreement that doesn't involve those rates going up on the top two per cent of the wealthiest Americans."

Republican Orrin Hatch responded angrily:

"This is one of the most stunning and irresponsible statements I've heard in some time. Going over the fiscal cliff will put our economy, jobs, people's paychecks and retirement at risk, but that is what the White House wants, according to Secretary Geithner, if they don't get their way."

Going over the fiscal cliff would ensure very large spending cuts, something that the Republicans strongly favor. Taxes would simply revert to what they were before Bush cut them and this would increase revenue. Both Republicans and Democrats worry that the cuts and tax increases would send the U.S. economy back into recession. A concern not mentioned is that there would be large cuts in the defense budget. Obama and Boehner talked by phone on Wednesday but there were no compromises offered in public. There was no talk of a meeting between the two either, a move requested by Republican House leader Eric Cantor. I find it surprising that the Republicans are still maintaining that they will not agree to tax hikes on the rich. Their stand is not politically popular and it should be clear that Obama will not deal unless they give in on the issue. Perhaps, they think, that because in the past Obama has caved that he will do so again. This time around, however, Obama has nothing to lose by sticking to his position. Not only is his position popular but if a deal is not reached and the U.S. goes over the fiscal cliff, most people will blame the Republicans. As it is, the Republicans can probably get quite significant cuts to entitlement programs if they agree to the tax rate hike for the rich. Obama told The Business Roundtable in Washington:

"If we can get the leadership on the Republican side to take that framework, to acknowledge that reality, then the numbers actually aren't that far apart.Another way of putting this is we can probably solve this in about a week. It's not that tough, but we need that conceptual breakthrough.".

If the tax rate hike was all that the Democrats were demanding, perhaps a deal might be made already but they are demanding also an increase in the borrowing limit. The Democrats want to avoid another confrontation on this issue early next year. Geithner said:

"We are not prepared to have the American economy held hostage to periodic threats that Republicans will force the country to default on our obligations.That would be a terrible thing for the financial security of the average American, for businesses, for confidence around the world and the United States."

In spite of the intransigence of both sides Geithner was still optimistic that a deal could be made and the outlines of a deal were becoming clearer. Geithner said that both sides were making progress in agreeing to a deal to avoid the cliff. The real issue, I expect, is how much the Republicans think that they can get in spending cuts, especially to entitlement programs, in return for finally giving in on the tax issue. The Democrats may need to leave the debt ceiling solution until later. UPDATE: A leading Republican hawk has caved on the tax rate hike. Boehner surely will now also:

Republican Sen. Tom Coburn, a leading deficit hawk, said Wednesday he would support higher tax rates on wealthier Americans as part of a broader deal with President Barack Obama and congressional Democrats to avoid the crisis.