Tuesday, October 23, 2012

Going on Offense About Defense


Rosslyn, Va.
The view from here, the 12th-floor conference room of a defense contractor, offers a stunning vista of Washington, D.C. But the dozen or so members of the defense industry sitting around the table aren't taking in the scenery. They're listening to George Allen talk "sequester."
Sequester is an eye-glazing word, yet Mr. Allen, a former Republican governor of Virginia, has made it a household term and the center of his campaign to win a Senate seat. The sequester refers to the $1 trillion, across-the-board cuts to defense and domestic spending that will begin to hit on Jan. 2—the result of the congressional super-committee's failure last year to cut the deficit.
Mr. Allen has used the sequester to narrow the gap between himself and his opponent, Democrat Tim Kaine. He has done so, in part, by wrapping the looming cuts into a larger and more powerful argument about spending, growth and taxes.
imageAssociated Press
Virginia Republican Senate candidate George Allen on the campaign trail.
The Democrats' solution to defense cuts is "to raise taxes," Mr. Allen tells the group. That's not only using "military men and women" as a "bargaining chip" for the president's tax hikes, he argues, it's doubling down on Washington's mistakes. Democrats are offering the choice of defense-job losses from sequester, or defense-job losses from taxes. The real way forward, Mr. Allen says, is a better economy, which will in turn help with deficits.

The audience at this defense roundtable, and others across the state, are ready for his message. The sequester threatens to hollow out the military, a huge concern for hundreds of thousands of retired, active-duty military and civilian personnel in the Hampton Roads area in the southern part of the state.
Virginia's northern suburbs will meanwhile bear the brunt of the expected 200,000 cuts in defense-contractor and government jobs. Polls show Virginia voters are well aware of the sequester and consider it of major concern.
Nationally, Republicans are working to pin the blame for this on Mr. Obama. But that has been a tough sell, given that many congressional Republicans voted for the debt-limit deal that included the sequester. Mr. Allen is blessed in that regard; he holds no office and last year quickly branded the debt deal a failure of Washington. By contrast, Mr. Kaine, also a former Virginia governor, said in a debate in July that the debt deal had been "the right thing to do."
Still, Mr. Allen's real traction has not come from affixing blame or his earlier warnings. Instead, he has been gaining ground by reminding voters that the Democrats' refusal to prioritize or cut any real spending is what led to the sequester in the first place. He tells voters that they are kidding themselves if they think that higher taxes now will be used to cut the deficit.
There's a better, smarter way, Mr. Allen tells audiences. "I'm for a balanced approach," he says, impishly alluding to the familiar Obama line. "We need to cut spending and increase revenues—through economic growth."
It has helped that Mr. Kaine is helping make the Allen point. Like Mr. Obama, Mr. Kaine wants this election to be about anything but his past or the country's future. So he has focused on tarring Mr. Allen as too extreme on social issues—a message particularly targeted to the purple Northern Virginia suburbs. Yet the strength of the sequester issue has forced him, and liberal outside groups, to respond to it.
Mr. Kaine has done so by calling for tax hikes to avoid "devastating cuts" to defense. In a tacit acknowledgment that President Obama's $250,000-and-up tax-hike proposal doesn't sit well in many affluent Northern Virginia households, Mr. Kaine proposes raising tax rates on incomes above $500,000. He tells audiences that this is a "middle ground" and the "fiscally responsible" thing to do. Yet it has allowed the Allen campaign to run ads with a tag noting "Tim Kaine's solution to every fiscal problem is raise taxes"—reminding voters of the $4 billion in taxes Mr. Kaine proposed as governor, including a $2 billion income-tax increase that hit everyone making more than $17,000 a year.
The sequester is also growing as an issue in the Virginia presidential race. The Obama administration made a highly political decision to advise defense contractors not to issue legally required layoff notices for now—in other words, wait until after the election.
But Wendy Maurer, a board member of the Stafford Economic Development Authority who works in the defense community, told me that the sequester was already having a "devastating" effect in her Virginia county near Washington. Contractors, uncertain of what will come, are pulling back, she says. Commercial real estate is sitting empty. Companies aren't hiring. Employees are putting off buying a house or a car. "If you don't know whether you'll have a job, you hoard money," Ms. Maurer said.
Whether it is fear of the cuts, or the economic pain, or the tax argument—the broad Allen sequester point is resonating. The Republican's growing focus on it (combined with a pro-energy message for Virginia's coal country) has coincided with his steady climb in polls that had firmly favored Mr. Kaine for much of the fall. Of the latest two surveys, Rasmussen had Mr. Kaine up by one point and WeAskAmerica had him up by five.
Regardless of the outcome in Virginia's Senate race, Republicans might ruminate on Mr. Allen's approach. If Mr. Obama wins re-election, he's going to hold the Defense Department hostage to his tax hikes. The more holistic an argument the GOP makes about the sequester, taxes, jobs and growth, the better prepared Republicans will likely be to resist the Obama pressure when it comes.

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