Some excellent reporting by the Washington Post allows us to appreciate just how well planned and executed was the Republicans' maneuver to use the vote to raise the debt limit as an opportunity to exert influence over the federal budget. It worked just as planned months in advance, and the influence of Freshman Tea Party Republicans peaked in Washington just as long term budget strategy was being laid for years to come.
But it is an ambitious act without an encore. After peaking in the spring and summer, Tea Party influence will decline in the fall. And sure as the leaves will turn brown, it is about to get very frustrating to be a Tea Party Republican in September, October, and November. The Tea Party leverage was based on the fact that they knew a government default would be unacceptable to Obama and the Democrats so they were able to get a deal almost 100 percent on their terms. But the debt limit has now been increased and on October first the question will be whether the entire government shuts down. The leverage will shift entirely to the Democrats because a government shutdown would not be so bad for President Barack Obama or House Minority Leader Nancy Pelosi but a protracted shutdown would be intolerable for House Speaker John Boehner. This fall Democrats will have all the negotiating leverage.
All this should lead Democrats, especially President Barack Obama to think anew about what is politically feasible as we transition from a political world where House Republicans had, but no longer have, effective veto power over the federal budget. Obama should be leading the way with the economic plan America needs, not the plan he can get past John Boehner. Democrats should not limit themselves -- and Republicans will not have as much leverage to limit Democrats -- if Democrats can put forward a new economic vision that can lead America back to true prosperity.
The next showdown has already started. After two economic policy showdowns already in 2011, the next deadline is once again upon us. The government runs out of money when the fiscal year ends at midnight on September 30, unless Democrats and Republicans can agree on the appropriations bills, or far more likely, a continuing resolution to keep the government funded at current levels as modified by the earlier deals. House Republicans are expected to call for even deeper cuts setting up yet another budget conflict.
But the next budget battle will be nothing like the recent debt ceiling battle which Republicans understood to be their "leverage moment" because they knew Democrats had zero tolerance for default. This meant Democrats had zero bargaining leverage, so they frustratingly made concession after concession. In a negotiation, the side that makes the first concession usually makes all of the concessions -- that is the side with no leverage. It was the Democrats last spring but it will be the Republicans in the fall. Their "leverage moment" has come and gone and the debt limit has been raised until 2013.
Democrats have all the leverage this fall. The Republican leverage in the debt ceiling showdown was based entirely on the unacceptability of a default to Democrats, as Treasury Secretary Timothy Geithner reminded everyone at the high-profile meetings with dire warnings. But in the end Boehner was not even able to earn his own victory. It fell on House Minority Leader Nancy Pelosi to whip the needed Democratic votes to pass the legislation. Boehner gave away his leverage in that moment and Pelosi has broadcast her intention to not allow the same scenario to happen again.
If default would have been entirely unacceptable to Democrats in the last round, a government shutdown in October would be intolerable for Republicans in the next rounds -- for several reasons. First, it would be the third high stakes showdown in 2011 and if it actually lead to a shutdown of the federal government this could convince voters that electing Republicans into divided government caused nothing but conflict when what America needs is for its leaders to come together with no higher priority than getting our economic problems solved.
Secondly, as we learned in 1995 and 1996, government shutdowns are always losing territory for Republicans, because even if many Americans complain about government in general, Americans like a lot of specific things government does. Many voters may view Washington as a sea of acronyms, but take away the FAA for a single day and people notice. The same would be true of USDA and FDA food inspectors, and the Veteran's Administration, and on and on.
Put all this in the context of an environment this September that is going to be fairly hostile to budget cutters as every local news organization will be loaded with back-to-school stories featuring bright, energetic, laid off teachers and the overcrowded classrooms of the teachers that were able to stay on the job. Some people may remember that Tea Party candidates were elected last fall, but America's parents may not remember endorsing education reform in the form of fewer good teachers and larger class sizes. A protracted government shut down in this environment will cause antipathy to Tea Party America to boil over no matter who scored tactical points in the blame game run up.
Simply put, Democrats and political commentators are placing a lot of emphasis on the Tea Party Republicans, but this is all so last week. The House Republicans, no longer able to credibly threaten to make life intolerable for Democrats, will never be able to match their level of influence in the next rounds of negotiations. Realizing this, Obama must join House Minority Leader Nancy Pelosi in knowing the Democrats have to fight for job creation in the next budget battle and be willing stand firm for their approaches and values. Obama needs to put forward an aggressive but balanced plan for short-term, medium-term, and long-term economic policy now because there is a very good chance that after some posturing, some brinksmanship, and even a week or two of standoff in the form of a government shutdown, the Republicans will end up accepting something quite close to the next plan Obama puts on the table.
America needs a bold economic plan that balances long term debt reduction with strong measures to create jobs and get the economy moving. Some people argue that the strength of the Tea Party and House Republicans makes this impossible, but with diminished Tea Party influence in the fall budget negotiations, Obama is free to propose the economic policies America needs.
Our recommendations for that economic policy will follow as the next part of this series.