It seems we’re getting closer to August 2nd without getting closer to a deal. Each day brings new developments on the negotiations which, invariably, go nowhere. The President has addressed the nation, Harry Reid and John Boehner have held press conferences, the gang of six blitzed the TV and radio talk-shows, and an endless number of Congressional members make appearances on the news. Adding to the excitement is the fact that we are in an election season. There is no question that this debacle over the debt ceiling will affect the Presidential race come 2012. The question is how?
It’s widely understood that the economy has a tremendous impact on Presidential elections. That might seem worrisome for the Democrats as President Obama launches his re-election campaign with unemployment teetering around 10%. However, anticipating what effects the economy has on an incumbent are more dynamic than simply associating the state of the economy with the party in power. Voters also want to know if the opposition can do a better job. If the voters are just as apprehensive, if not more, about handing power over the Republicans, then Obama enjoys another four years in office. However, if voters are more confident in the Republican’s abilities to turn the economy around, then they take over.
This was the case in the 2010 elections. That election cycle, popularly characterized as an anti-incumbent year, was largely won by the Republican Party who seized control of the House of Representatives. The “shellacking” sustained by the Democrats was largely seen as a referendum against President Obama’s economic policies, in particular government spending. the newly appointed Speaker of the House, John Boehner, kicked off his acceptance speech highlighting the economic discontent that put his party in power:
I’ll be brief, because we have real work to do – and this is not a time for celebration, not when on in 10 of our fellow citizens are out of work, not when we have buried our children under a mountain of debt, not when our Congress is held in such low esteem.
The victory of the House Republicans thrust the party back into the political game granting them a window of opportunity to make the case that the true guardians of the economy occupy the conservative party. If they could do this in the next two years, they would be on their way to controlling the White House in 2012. If they didn’t make their case, then their victory in the House wouldn’t be so much of a victory as it would be an experiment by a frustrated electorate. So, how are the Republican’s doing considering the debate on the debt ceiling? Will the bad economy spell disaster for Obama, or will the voters blame the Republicans instead? What will be the prevailing narrative come election time?
Let me offer a timeline to put all of this in perspective. Let’s start with the election of 2010. Again, most saw the Republican victory as a reaction to the Recovery Act of 09′ and the Stimulus Act of 08′ by voters concerned with excessive government spending. However, this was more of a communications problem than a policy problem. Despite the President’s oratory ability, he didn’t make a convincing case to the voters for stimulative spending. As a result, he came across as the prodigal president. The more angry forces of the electorate galvanized the far right by mischaracterizing the government’s Keynesian policies as socialism. This led to small but strident groups on the periphery, such as the Tea Party, to reframe the Republican victory in the House as a referendum on the President himself. Critics of the President questioned his patriotism, his ethnicity, and even his constitutional legitimacy to hold office. A culture of suspicion emerged making compromise with the President unpopular. But, compromise is just what the Republicans did.
Fast-forward to December 2010. Now in control of the House, the Republicans convinced the Democrats to compromise on the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, which extended the Bush-era tax cuts for an additional two years. Needless to say, this was a victory for Republicans as it advanced their efforts to ebb government spending and keep American’s hard-earned money out of the hands of government. However, this Act was a victory for Obama as well, not because it include a pay-roll tax cut or extended unemployment benefits, but because it moved him closer to the center. The Democrats obviously didn’t see it this way, but the more they remonstrated with the President, the more he looked like a centrist, even a conservative. He was careful, though, to let the Republican’s take ownership of the tax cuts. He said in his speech, referring to the tax cuts:
Now, candidly speaking, there are some elements of this legislation that I don’t like. There are some elements that members of my party don’t like. There are some elements that Republicans here today don’t like. That’s the nature of compromise. Yielding on something each of us cares about to move forward on what all of us care about.
Two things happend here. First, he redefined what it meant to be fiscally responsible – appeal to both sides of the aisle, listen to the concerns of the people, and be willing to sacrifice a little to reach compromise. Second, by denying ownership of the tax cuts for the wealthy, he positioned himself to challenge those cuts, should they prove ineffective, and deflect criticism to the Republicans.
Tea Party member remained implacable. Perhaps they feared that this compromise would vindicate the “socialist” President. Nonetheless, they voiced their anger towards a House they elected to defeat Obama, not compromise with him. The Republicans in the House, especially the freshman, would not forget.
Fast-forward again to our current crisis concerning the debt ceiling. The current government deficit looms over $14 trillion. The debate over how to address the debt immediately split into diametrically opposed sides. The Republicans fought for spending cuts arguing that the government has a spending problem, not a revenue problem. Democrats, on the other side, have fought to raise taxes for top percent income brackets arguing that the lower and middle class can’t should all of the costs for government programs. The answer to who has the more powerful argument could be found in the previous debate over the Bush-era tax cuts. The chart below is from the Center on Budget and Policy Priorities
As of now, the current policy on tax breaks for the rich will only add to the nation’s deficit. While the Republicans won politically by gaining control of the House, they lost the economic argument. Yet it’s the Republicans who are adamantly against revenue increases, despite that most Americans prefer a balanced approach. The poll below was conducted by the Kaiser Family Foundation
80% say that increasing taxes for the wealthy should play some role in deficit reduction. What this shows is that Americans prefer a balanced approach and suggests that any bill should use both Democrats and Republican’s preferred plans. However, compromise between the parties have shifted any emerging plans far to the right as evidenced by Harry Reid’s plan which has no revenue and reduces the debt by over two trillion dollars. But the House Republicans say it didn’t go far enough. The House delayed voting on a plan to raise the debt limit because John Boehner’s plan didn’t go far enough either. As of now, Boehner has a tougher job than the President as he is desperately urging his caucus to produce something that can pass the Senate. But freshman in the House seem to be taking their cues from the Tea Party who want them to take a stronger stance this time around.
How will this debt ceiling debate affect the Presidential election? To summarize, the President’s stimulus was unpopular but he moved closer to the center by giving Republicans an extension of the tax cuts. Amidst a very dangerous debt crisis, those tax cuts appear to be part of the problem rather than the solution. Despite this, the House refuses any compromise which includes revenue in it. As the Democrats move further to the right, the Republicans appear unreasonable and inconsistent with the general will of the people.
How can we explain this? The Republican take-over of the House positioned them to take the Presidency in 2012. However, the din of the Tea Party pulled them further away from the middle where they no longer represented the moderates who elected them into office. Instead, the party of fiscal responsibility surrendered their economic ideals to mollify those on the conservative edge. If this is the dominant narrative come election time, then it situates the President in a very promising position to appeal to those moderate Republicans not represented by the Tea Party. This may even spell trouble for the Republicans in the House.
This brings me to my last point. Democrats reading this should not form sanguine expectations about the 2012 election. I’m not predicting that the President will win; I’m arguing that he could win despite the slow healing economy. If that happens, his reelection will not be an enthusiastic one, even if the Democrats regain control of the House. Voters are upset with both parties, and the results of the next election may say more about how Americans feel about the losing party than the winning party.