09/21/2010 12:31 pm ET Updated May 25, 2011

It's Their Party

The big news this week is the multiple victories wrought by so-called Tea Party candidates in Republican primaries in Delaware and New York.

In the former the GOP stole general election defeat from the jaws of almost certain victory by casting aside Rep. Mike Castle in favor of Christine O'Donnell as their nominee to run for the US Senate, and in the latter the nomination of Carl Paladino virtually guaranteed the election of Andrew Cuomo as New York's next Governor.

In both states the fortunes of the Democrats were sagging. Castle was favored to win fairly easily in Delaware and was central to any GOP takeover of the Senate. And though New York's endorsed Republican Party candidate, former Rep. Rick Lazio, was not remotely favored to beat Cuomo this fall, Paladino's nomination makes that more or less impossible and may substantially damage GOP under ticket prospects as well. This, moreover, is a bit of a political hat trick here in New York inasmuch as the under ticket of state Senate and Assembly incumbents -- the substantial majority of which are Democrats -- is almost universally despised.

As a Democrat, of course, I should be happy.

Perhaps even send the Tea Party a thank you note.

But I am not.

And I won't.

And here's why.

The country is in desperate need of moderate Republicans, nowhere more so than here in New York. As was made clear in this year's debates on health care and financial reform, the GOP's steady drift to the far and fringe right has made progress on policy virtually impossible. Though the 2010 health care bill was almost a carbon copy of what Republicans themselves proposed as an alternative to HillaryCare in 1994, the GOP en masse opposed the 2010 version. There was no prospect for any public option so long as Democrats attempted to fashion a filibuster proof margin on the bill. And once the public option was eliminated, there really was no prospect for cost control, a private insurance based model having been made made the base line for any bill and the competitive pricing pressure that would have been created by the public option having been eliminated.

The GOP similarly opposed the Dodd-Frank Financial Reform Act even though the Democrats had jettisoned from it a host of measures to which Wall Street objected. Left on the cutting room floor, for example, was the resurrection of some form of Glass-Steagall (separating commercial and investment banks, or, as it were, investors from speculators), as well as any outright ban on proprietary trading by banks for their own accounts (which creates enormous conflicts of interest, with large houses like Goldman ultimately on both sides of ostensibly arms length market bets).

Financial reform, therefore, much like health care reform, has turned out to be largely an effort in shoring up the very entities which led us to near economic death in the first place. We now require banks to have far larger capital reserves (a good thing). But we have done very little to stop them from engaging in some of the practices that helped generate the financial collapse in the first place. And we did nothing to free up credit now, reduce the on going risk of foreclosure (which is real for many), or grant real relief to those now underwater.

My somewhat counter-intuitive view is that a House with 20-30 GOP moderates and a Senate with 10 of the same would have made these results impossible, essentially because there would have been a group of truly swing voters in play that would have changed both the Democrats' initial "asks" and the final form of any compromise.

On health care, although you wouldn't know it from the rhetoric that turns any Democratic legislative proposal into this era's version of Marxist dialectic, the public option was a compromise. True lefties favored some form of single payer or Medicare for all, and the right wing's plan was essentially limited to killing suits for medical malpractice (either by capping damages awards or creating specialized health care courts where medical experts determine liability and damages). The middle ground between these poles was the public option, offering the choice of enrollment in a public Medicare-like plan to any who wanted it, which in turn would have created real competition with the private insurers and thus helped keep a lid on costs.

If there had been real GOP moderates in play, the Democrats might have started with single payer and then fallen back on the public option. Instead, they made the public option their starting point. Unfortunately, however, you can't sell the public option as the compromise it was meant to be if as a practical matter there is nothing on the table to the left of it. There wasn't. And so what we got was health care reform circa the pre-Gingrich 1994 Republican revolution, and none of the post-Gingrich Republicans voted for it anyway.

Something similar happened on Dodd-Frank. Wall Streeters sharpened their knives and made sure that virtually nothing about the inherent structure of 2008 finance was changed in 2010, and in response Democrats in Congress kept compromising the regulatory measures that would have changed that structure by taking them off the table. At the end, what you got was some mild regulatory oversight coupled with capital reserve reform, but nothing more. Speculative trading will be curbed a bit. But the major players will still be on both sides of the market, and "too big to fail" will have been rejected only until the next implosion requires a reprise of the measures taken in late 2008.

In contrast, a Democratic bill that started with separating the commercial and investment banks a la the New Deal, in a Congress with 20 GOP House members and 10 GOP Senators in play, could easily have led to a compromise that ended the heavily conflicted practice of proprietary trading and took the wind out of the speculative sails fueling Wall Street's greatest abuses.

Alas, it was not to be.

Instead, the Grand Old Party has morphed into the Tea Party, an amalgam of the very angry and the apparently inept. Paladino in New York tells us he is "mad as hell" and I believe him. In fact, his madness may be clinical as he proposes to "seize" Ground Zero so as to prevent the (non) Ground Zero Mosque, a trick that uses the Takings Clause of the Fifth Amendment to gut the Establishment Clause of the First Amendment.

Welcome to Carl's Constitution.

Where the Bill of Rights is at war with itself.

For her part, O'Donnell in Delaware parades as a lower 48 version of Sarah Palin, oblivious to her obvious deficiencies (e.g., non-payment of taxes) as she promises to cut spending and "take back the country." Given that spending cuts in a near Depression are the last thing any sound economist advocates, her plan can only make it more difficult to pay the mortgage on which she has apparently defaulted.

Or refund the campaign contributions she used in a prior race to pay her personal expenses.

It's their party.

You can cry if you want to.