I think many are in a contemplative mood, seeing that after all the drama of the past month, it looks like the Democrats, with the full faith and leadership of President Obama, will cave almost completely to the Republicans. We could have done this weeks ago. On the Democratic side of the aisle, some might hope the White House can retain some leverage regarding the timing of the next debt ceiling vote and the expiration of the Bush tax cuts, but given President Obama’s lack of negotiating skill, this is the very thinnest of hope. On the Republican side of the aisle, I imagine the the relief is joyous – imagine, holding the economy hostage and walking away the victors! Just a day after looking set to tear each other apart, no less.
Four thoughts come to mind:
- The debt-ceiling has been proven to be a very effective weapon, simply because there exists a non-trivial contingent of Republicans willing to push the button, but not a single Democrat. With that dynamic, the Republican goal of dismantling the social safety net looks achievable. They only need to chip away at it one debt ceiling at a time.
- Obama’s attempt to stabilize the political system by moving to the center has failed utterly and completely. The problem for Democrats is that Obama’s “center” keeps moving to the right. Obama thought that as he co-opted Republican positions, such as Romney care, he would gain Republican support. Instead, he pushed the Republicans even farther right as the only way to differentiate themselves from Obama. Then Obama thinks he needs to meet in the new “middle” – and hence we get a deficit deal with no revenue triggers, but only after a near-debacle that leaves the rest of the country, if not the world, shaking their heads. Will this episode bring sanity? No – expect the Republicans to move further right in the next debate.
- Is it futile to vote Democratic? Seriously, it is obvious now that your vote will deliver the same policy outcomes should you choose Democratic or Republican – but by voting Republican (at least on a national level), you also get the satisfaction of being on the winning team.
- Finally, it is utterly unbelievable that we are about to pursue an obviously contractionary policy course when the White House is held by a Democrat and in the wake of a GDP report that vividly illustrates the weakness of the economic recovery. Yet here we are. Team Obama must believe that deficit reduction worked in the 1990’s, and thus should work now. Would a Republican president have seen the unemployment rate and the pace of growth and thought the odds of reelection where greater with a debt ceiling plan that couples long-term cuts with near term stimulus?
While considering the madness of the situation, one has to make an effort to find peace. With that in mind, I again offer up the simplicity of summer, with a picture I tentatively call “Bee Pollinating Pumpkin Flower #25”:
This post originally appeared at Tim Duy’s Fed Watch and is reproduced here with permission.