For awhile it appeared Democrats had finally found an edge in the 2012 congressional elections.  Democrats in recent weeks relentlessly attacked the GOP on stalling passage of an extension of federal unemployment benefits and the payroll tax cut.  When Democrats proposed paying for it with a 3.5% surtax on income over $1 million Republicans balked.  Democrats pounced and accused the GOP of protecting millionaires at the expense of almost every American who is employed.  For awhile the attacks seemed to be working.  Republicans in the Senate and House were divided on the issue.

But in the last week two things have happened that have changed the dynamic heading into the end of the year.  First, the payroll tax extension.  Attacked by Democrats on the payroll tax cut extension Republicans struck back and added a provision tailor-made to appeal to white working class voters.  This provision called for the WH to immediately allow for the Keystone XL Pipeline to continue to be constructed and also added language allowing for this to more easily happen.  Of course the White House and Senate rejected the provision but Republicans in the House have pushed ahead.  It also now appears that Democrats are starting to sweat just as Republicans were a week ago.  Senate Democrats have backed away from paying for the plan with the millionaires surtax and now even appear to be willing to discuss having the Keystone language in the final legislation.  This comes after Senate Democrats made a blunder and threatened to tie the payroll tax cut extension to a massive government funding bill that if not passed could lead to another government shutdown.

Second is news on entitlement reform.  A new plan unveiled by House Budget Committee Chairman Paul Ryan (R-WI) and Senator Ron Wyden (D-OR) would significantly reform Medicare.  Remember earlier in the year Republicans voted on the Ryan Budget Plan which would essentially phase out Medicare for anybody OVER 55.  Democrats attacked the plan nonstop and succeeded in capturing an open Republican seat in NY-26.  Democrats had hoped they could use the arguments that “Republicans want to destroy Medicare” and “Throw grandmother over the cliff” in the 2012 elections.  That plan just took a serious hit.

The new Ryan-Wyden plan would allow for traditional Government Medicare to remain.  The main change to traditional Medicare is that its cost would be capped in ways acceptable to both Republicans and Democrats.  But the bigger change would be allowing seniors to shop around for alternatives to Medicare and receive cash vouchers to subsidize their purchases. 

Wyden has had a history of breaking with his party, as has Ryan.  In 2009 when Healthcare Reform was being debated Wyden unveiled a plan with Senator Orrin Hatch (R-UT) that would have allowed for the creation of state and regional health exchanges.  His work on state health exchanges was included in the final language of Healthcare Reform.  Ryan has also broken with Republican leadership on several matters, especially entitlements, and argued for deep and structural reform, especially of Medicare.  His initial plan, the Ryan Budget, went farther than the Wyden-Ryan plan but was panned by almost every Democrat.  This plan is bipartisan and appeals more to many members.

Combined, these two new factors are likely to give Congressional and Senate Democrats headaches before the year is over.  Just as Democrats thought they had the upper-hand they seem to have lost it.  And the White House is not helping.  As soon as the plan was unveiled the White House panned it.  The White House used the typical lines of not doing enough to protect seniors and endangering the program.  In recent weeks the White House has had to back off on several statements, such as opposition to a defense authorization spending bill Congress supports as well as a veto of an overall spending bill.  A White House that is seemingly out of sorts is not helping Congressional Democrats.

It once looked like Democrats had the advantage.  But now the dynamic has shifted in the GOP’s favor.  If Democratic leadership absolutely oppose any plan to reform entitlements and practice fiscal discipline they are leading their party into deep trouble.

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