Aftermath

The Republicans achieved nothing, but they did a lot of damage. That seems to be the emerging consensus this morning as Americans put their heads up over the trench parapets, and as government workers trudge back to work.

There are a few things to remind ourselves of in the aftermath of the crisis.

1. It is not over. We have a few weeks of relative quiet and the battle begins anew in January. The optimists hope that the Republicans have learned and will not repeat their shutdown threat. That seems to be the idea many Senate Democrats are circulating. They feel that this week’s defeat will force the Republicans back towards a more moderate policy stance and thus make budget negotiations slightly more easy. The pessimists argue that there are just as many Ultras in the House as before and that, given their history, they will have learned nothing. Their policy stance remains the same, they still want to reduce or eliminate entitlements in the name of deficit reduction. And, given their minority status, their negotiation weapons are limited to the same hostage taking threats as before. I am somewhere between these two poles. I think that part of the Republican party would like not to repeat a shutdown, but they are not the majority within the GOP House caucus. That means things are still volatile and the Ultras still have great power to disrupt. Indeed much of today’s press is about how the Ultras think they caved too soon: their goals remain the same, so expect them to be obdurate once more.
2. We all ought to be clear: the Republicans have won a great victory. Our economic and budget policy conversation is still being conducted on their turf. The topics are all theirs. Nowhere is more stimulus on the agenda; nowhere do we hear talk of tax cuts for workers – don’t forget the GOP won the reversal of the payroll reduction which was a big tax increase on workers; nowhere do we hear of talk about the minimum wage; nowhere do we hear talk about tax increases on the wealthy; nowhere do we hear talk about raising the limit on incomes for payroll taxes. And so on. Instead the chatter is all about controlling costs, which inevitably means lower entitlement spending.
3. The US government has not had an agreed budget since 2009, it has been funded by a series of ‘continuing resolutions’. This is the salient fact of the crisis. It demonstrates that there remains a gulf between the two major parties about the nature, and purpose, of government. Every debt default or shutdown threat we have had since 2009 has ben motivated by that difference. There is no common ground. Or, at least, there is little common ground. This is why the so-called moderate Republicans have been so willing to abet the Ultras. Their tenuous coalition has few threads holding it together, but opposition to entitlement spending is one. A very strong one. This is in sharp contrast to the older, more moderate, Republican post-war position, before Reagan shifted the entire debate out to the right.
4. Given this, we ought not to imagine a more benign negotiation over the budget to take place just because the Republicans lost this last battle. There remains very little space for consensus. This implies another round of bitter exchanges, or, perhaps, yet another failure and thus more use of continuing resolutions.
5. Then there is the state of the GOP. Last night’s voting still included 144 Republican naysayers in the House and 18 in the Senate. Those are not insubstantial numbers. Even when faced with the dire prospect of debt default over a hundred GOP House members voted – in essence -for that default. Only 87 Republicans crossed the aisle to support the resolution and avert disaster. This is a clear reminder of the depth of feeling, and the continuing power of the Ultras. The House GOP caucus is in disarray. It is the epicenter of our dysfunction. To rebuild more cohesion its leadership will still have to bend to the Ultra’s will – they appear to be the slightly larger portion of the caucus. The alternative is a more formal split into two right of center parties. This would be healthy for the country but spell doom for both and so is unlikely without at least one, if not many, more tactical defeats like this week.

And, let us be clear on that: this was a major, but tactical, defeat. It does not mark a strategic shift.

This is what I want to keep drumming away at.

Our policy debate has been held on firmly Reaganite ground for decades. The meta-argument has not altered. The prevailing intellectual framework is still free market, anti-worker, and anti-government. Our media elite sees it that way. Our business elite sees it that way. And, to their shame, many erstwhile progressives in those elites also see it that way.

The upshot of this is that the center of gravity in our politics remains further to the right than it used to be. The current Republican party sits well to the right of Reagan, and the Democrats have shifted accordingly. Hence the depressing record of recent Democratic presidents seeking to achieve minor victories for progress, and being unable, or unwilling, to shift the nation back to its post-war position. Corporate money influence has a lot to do with this, and Wall Street’s power is a particular bane.

The post-war balance of power produced great things for our middle and working classes. Indeed the extraordinary surge in the middle class of those decades was based upon that balance including and protecting the entitlements that reduced risk, and thus releasing wages for spending, thus fueling growth. In other words the balance had a demand side bias. Ever since Reagan our policies have had a supply side bias. This has eroded wages, increased risk for workers, slowed the middle class to a halt, and only truly benefitted profits and those who excel in a supply side economy – management, and well educated workers. The result has been a series of bubble economies, bank crises, an unsustainable accumulation of private sector debt, and the perception that social spending is also unsustainable. This shift from demand side to supply side bias, along with the political shift that enables it, is what I refer to as Reaganism. It has been the prevailing wisdom of our era. It is wrongheaded. But the next budget negotiation will still take place using it as a context.

Which is why I see the strategic advantage still laying with the GOP.

Yet, as I have said often, there is a time limit pressing on the Republicans. The huge demographic shifts bringing more diversity to America, and the failure of Reaganism to lift the middle class, have produced the extremism we now suffer through. A well-off elderly white middle class would not be as susceptible to Ultra agitation, nor would it be so virulently racist. It would be complacent. The massive inequality caused by the supply side bias has undone the social contract and opened the door to extremists whose narrative is of an older better time – before “they” undermined everything. With the “they” being minorities living off of government hand-outs.

Because the demographic surge continues, and because no one is reversing Reaganist economic policy sufficiently to reflate wages, we cannot expect extremist sentiment to fritter away. Indeed we can expect it to sharpen more. Thus this week’s Republican fiasco does not imply an end. It is just one more battle in an ongoing war that will no be won any time soon.

It is a war of attrition, but time is on the progressive side. So our goal is not to give ground.

We will see if Obama understands this when the budget talks get underway.