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Summers Fight Signals Fractured Trust Between Obama, Senate Democrats

Alex Wong/Getty Images File Photo
Opposition to Summers taking over the Fed came from liberal Democrats, a sign that the relationship between the president and his party is strained.

If the failed candidacy of Larry H. Summers to head the Federal Reserve is any indication, the White House’s relationship with Senate Democrats needs a great deal of work at a crucial time for looming fiscal fights.

Operatives on both sides of the aisle say the small but successful rebellion from a group of Senate Democrats to the potential Summers nomination revealed broader distrust on policy issues between Democrats in Congress and the White House.

The unusually public battle over Summers, which ended when the former Treasury secretary and top economic adviser to President Barack Obama withdrew from consideration, came as the president prepares to confront Republicans over a possible government shutdown and the need to raise the federal debt ceiling. Clearly, however, the White House will need to step up its outreach to members of Obama’s own party.

The opposition to Summers came from liberal Democrats who already have signaled their concern that the president may be willing to sacrifice some of their priorities on entitlement programs or that he won’t do enough to end or replace the sequester cuts.

“If folks in this administration want to go for a grand bargain, how hard of a time will they have bringing Democratic votes along?” asked Dan Holler, a spokesman for the conservative group Heritage Action for America.

The Summers saga, he added, “was a rare instance where you saw the Democrat infighting come out.”

The Obama administration this summer indicated through anonymous sources in numerous news reports that Summers was the president’s preferred pick to replace Fed Chairman Ben S. Bernanke when Bernanke’s term expires in January. But progressives, including Senate Banking Committee members Sherrod Brown of Ohio and Jeff Merkley of Oregon, expressed their hostility to Summers and signed a letter to Obama in July saying they supported Fed Vice Chairwoman Janet Yellen for the job. Moderate Sen. Jon Tester, D-Mont., said on Sept. 13 that he would not support Summers.

Bart Naylor of the progressive group Public Citizen said the senators’ opposition indicated a problem with communication between Democrats and the president.

“If I’m a senator and I can’t get through to the White House other than a public letter, then we’ve got some work to do on improving communications,” he said.

In a Monday interview on MSNBC, Sen. Elizabeth Warren, D-Mass., who signed that letter, said Summers was not her first choice to run the Fed and offered a strong endorsement of Yellen.

Two current Senate aides said the White House didn’t do Summers any favors by floating his name in the press before discussing the matter directly with most senators or their aides. But both stressed that on the major fiscal fights, the party is committed to standing together now that Summers is off the table.

One senior GOP financial industry lobbyist called the backlash against Summers from Obama’s fellow Democrats “precedent setting” that should serve as a wake-up call to Senate Majority Leader Harry Reid and Banking Chairman Tim Johnson of South Dakota.

“This was not just people not liking Larry, but people openly strategizing to kill it,” said this industry lobbyist. “There needs to be some big-hug moment because the president is going to need his entire party on one song sheet for the government shutdown and debt ceiling. These are not small little things; these are giant humongous things.”

Jim Manley, a former aide to Reid who is now with QGA Public Affairs, said the Summers battle showed the White House needed to “do a better job of trying to read the mood on the Hill.”

“This thing was in trouble a long time ago,” Manley added. “It was an unnecessary proposal that should’ve died a quick and painful death a long time ago.”

Still, Manley said, when it comes to the upcoming fiscal fights, Democrats will stand together.

“I’m confident that when it comes to the fiscal and budget issues facing the Hill in the fall, the president and House and Senate Democrats are going be on the same page, if only because what the Republicans are proposing is so off the wall, no one’s going to break from the president.”

Yet some Democrats and progressive advocates have already criticized Obama for such proposals as one that would switch Social Security cost-of-living increases to a stingier method called the chained consumer price index.

Democrats, too, have said they will oppose GOP spending bills that would avoid a government shutdown by keeping in place current budget levels including the sequester cuts. House Democratic Whip Steny H. Hoyer of Maryland said last week he could not support any bills that keep the sequester cuts in place.

It’s not clear whether the president’s eventual nominee to replace Bernanke, who is presumed to be retiring, will take into account the larger fiscal debate.

Some argue that the president, not wishing to look weakened by his own party, will pass over Yellen in favor of another candidate such as former Fed vice chairmen Donald Kohn or Roger Ferguson. Others, however, say not going with Yellen would just further fracture relations with Democrats.

“It would be wholly irresponsible for him not to pick Yellen now,” said one activist who has been working on the anti-Summers, pro-Yellen effort.

This source said Democrats need to figure out a unified strategy if they are to successfully negotiate with Republicans.

“You hash this stuff within your family,” the activist said.

A former Republican Senate aide who is now a lobbyist said that Democrats are still united behind the president on the big issues of fiscal policy. “If the president makes some sort of deal [with Republicans] you could see some of the splintering on the left, the way you saw the split over Yellen and Summers,” this former aide said. “But smartly, they are sticking together, unlike the Republicans who are showing fracture.”

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