Romney vs. Obama heats up as Santorum fades away

(Justin Sullivan/Getty)

Former Pennsylvania Senator Rick Santorum verbally circled April 24 (the Pennsylvania primary, 71 delegates at stake) and May 29 (the Texas primary, 155 delegates at stake) on his nomination calendar Tuesday night in his speech to supporters. But those goals fail to reflect the reality that he has now slid into irrelevancy in the race.

Perhaps the most important words from the Santorum camp Tuesday night  came not from the candidate, but from his senior strategist. "We think regardless of results today, Pennsylvania becomes the make-or-break state for both candidates," John Brabender told the Washington Post's Chris Cillizza.

That certainly invites the Romney campaign and its Super PAC allies to unload a ton of cash to dominate the TV airwaves in the Keystone State in hopes of delivering a knockout punch on April 24. A Quinnipiac University poll out this week showed Santorum's lead in his home state has dwindled down to six points as he heads into a three week stretch without any debates or intervening primary nights to inject new momentum into his bid.

[Related: Wisconsin, Maryland voters still mixed on GOP nominee]

However, after Romney's clean sweep in Wisconsin, Maryland and Washington, D.C., on Tuesday, a Santorum knockout is not required for Romney to take on the role of presumptive Republican nominee. And both Romney and President Barack Obama have shifted their attention, and their rhetoric, to November.

For all the positive talk from Romney about his private sector experience and Obama's boastful ticking through his first-term accomplishments before adoring and financially generous Democrats at fundraisers around the country, it became clear this week that the beginning stages of the general election battle will be largely presented through the negative frames each side is building around the other.

Romney has put forth a three-pronged characterization of President Obama aimed at sowing serious doubt among Americans about his stewardship of the country.  In Romney's telling, President Obama is an enemy of business and free enterprise willing to pile on more debt to fund a larger federal government, a failed leader who constantly attempts to assign blame for the country's economic woes, and (in an act of political jujitsu) a man who has lost touch with most Americans.

[Related: Obama assails Ryan budget as 'thinly veiled social Darwinism']

"It's enough to make you think that years of flying around on Air Force One, surrounded by an adoring staff of True Believers telling you what a great job you are doing, well, that might be enough to make you a little out of touch," Romney said last night in Milwaukee.

Romney's personal wealth has been a major target for the Obama campaign and its allies, who paint him as a candidate unable to relate to middle class Americans. In his Tuesday victory speech, Romney made clear he had no plans of ceding that ground to the president.

For his part, President Obama used his speech before publishers and editors at the annual Associated Press conference in Washington, D.C., Tuesday to frame Romney as interested in protecting the privileged class with lower taxes at the expense of decimating government programs upon which the elderly and the low-income rely and investments in education, energy and infrastructure.

"So we tried this theory out. And you would think that after the results of this experiment in trickle-down economics, after the results were made painfully clear, that the proponents of this theory might show some humility, might moderate their views a bit," President Obama said. "But that's exactly the opposite of what they've done. Instead of moderating their views even slightly, the Republicans running Congress right now have doubled down, and proposed a budget so far to the right it makes the Contract with America look like the New Deal," he added, and then went on to tie Romney to the House Republican budget.

[Related: Palin's advice for Romney: Don't be afraid to go 'rogue' with VP choice]

The Obama team has made clear it has no intention in letting up on the caricature of Romney as a car-elevator-owning, offshore-account-possessing man so rich he couldn't possibly understand the economic plight facing most of his fellow citizens. And Romney made clear Tuesday he's just as willing to go negative on the president.

It is through those opposing negative narratives, far more than either candidate's prescriptive positive vision for the future, that the general election contest between Romney and Obama will take shape.

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Fed debate about more easing heats up (Reuters)

NEW YORK (Reuters) – Two top Federal Reserve officials are arguing the U.S. central bank should consider resuming controversial large-scale mortgage bond purchases to support a fragile economic recovery.

In his first speech explicitly on the economic outlook since joining the Fed in 2009, Fed Governor Tarullo on Thursday said there was "ample room" for policymakers to do more. Tarullo said mortgage bond purchases should be on the table, a sentiment echoed by Boston Fed President Eric Rosengren in an interview with the Wall Street Journal on Wednesday.

Tarullo and Rosengren's comments mark the first public discussion of the possibility of more mortgage bond purchases, which were a controversial part of the first round of quantitative easing in 2009.

Other Fed officials said on Thursday the Fed's current policy stance is appropriate.

For his part, St. Louis Fed President James Bullard told reporters that with recent economic data looking better, "monetary policy is appropriately calibrated for this situation." Cleveland Fed President Sandra Pianalto also said Fed policy actions were "appropriate."

The remarks suggest a growing debate among Fed officials about how aggressively to support an economy that is not growing quickly enough to make a significant dent in an unemployment rate hovering around 9 percent.

Pianalto described the economic recovery as "painfully" slow and unlikely to gather pace soon, while Tarullo likened it to a "slogging through the mud and occasionally hitting stretches of dry pavement."

"There is need, and ample room, for additional measures to increase aggregate demand in the near to medium term, particularly in light of the limited upside risks to inflation over the medium term," said Tarullo, who as a Fed Governor has a permanent vote on monetary policy.

ONGOING HOUSING PROBLEMS

Because the ongoing housing problems are so central to the recession and the anemic nature of the subsequent expansion, the Fed should refocus its efforts on housing, Tarullo said.

"I believe we should move back up toward the top of the list of options the large-scale purchase of additional mortgage-backed securities," he added. The Fed bought $1.25 trillion worth of mortgage-related debt, starting in 2009.

Given the controversial nature of mortgage bond purchases -- some Fed officials criticize them as propping up a specific sector of the economy. JPMorgan economist Michael Feroli said he did not expect the Fed's policy-setting Federal Open Market Committee to adopt this option anytime soon.

"Nonetheless, Tarullo's speech does show that there is a relatively-silent faction on the FOMC that favors continued action to get the economy to grow faster," he wrote in a note to clients.

"A faltering in growth or a decline in inflation could further embolden this faction."

Tarullo said the effectiveness of an MBS purchase program could be improved by further action to help borrowers whose mortgages are worth more than their homes.

He suggested a government program that helps borrowers whose loans are backed by Fannie Mae and Freddie Mac which could be adjusted, but also said steps could be taken to help underwater borrowers whose loans are not guaranteed by the two government-controlled firms.

"Policy changes directed at this last, larger group of homeowners would have to be carefully designed so as not to transfer credit risk from private investors to the government, and could well require legislation," he said.

The Obama administration and the regulator for Fannie Mae and Freddie Mac are expected to unveil new steps to help distressed homeowners in the next week or two, a senior congressional aide said on Thursday.

WAIT AND SEE

Bullard, who like Pianalto, does not have a vote on monetary policy this year, said the Fed should wait and see how policies it has put in place, including a recent decision to replace shorter-term securities it holds with longer-term ones, affect the economy before taking any further actions.

"Given that the tone of the data has been better in the last six weeks ... then I think you probably want to get into next year before you start thinking about what you do on top of Operation Twist," he said.

The Fed at its September meeting said it will replace $400 billion of short-term securities on its portfolio with longer term ones to push longer-term interest rates lower -- which is known as Operation Twist. It will also replenish its holdings of mortgage-related debt to support the depressed housing market. Tarullo said Operation Twist, while helpful, was "by definition limited".

Operation Twist was the latest in a long series of extraordinary steps to boost growth through a financial panic and deep contraction. The Fed cut rates to near zero almost three years ago and announced in August rates would likely stay that low through the middle of 2013. The central bank has also bought $2.3 trillion in securities to encourage borrowing.

Another Fed official, Minneapolis Fed President Narayana Kocherlakota said unemployment, which he described as "disturbingly high" now, would have been higher without the actions the Fed has taken.

(Additional reporting by Mark Felsenthal in St. Louis, Pedro da Costa in Washington, Larry Vellequette in Toledo, Ohio, David Bailey in Minneapolis and Ann Saphir in Chicago; editing by Bob Burgdorfer, Bernard Orr)

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