The political ramifications of caving in to the Republicans on the 2011 budget cuts may be significant for the Democrats: diminishing President Obama's re-election chances, further alienation of key Democratic constituencies, and further disillusionment of the most active and progressive elements of the Democratic party. Closing the enthusiasm gap that doomed the 2010 campaign for the Democrats may be a tall order. On the other hand, the President and Congressional Democrats may have a grand strategy for attracting independents and retaining the loyalty of the base as the next even bigger battle for the 2012 budget is ready to unfold and will certainly involve defending the Social Safety Net programs.
It seems that the President and his advisers believe that (i) the Budget Compromise of $33 billion in spending cuts will not impair significantly the economic recovery, (ii) it will enable him to score political points for moderation and gain favor with the independents, (iii) he will retain favor with most of his Democratic base by portraying himself as the last defendant against further cuts and the protector of popular Democratic programs and (iv) he will confront and expose the Republicans as extremists during the next big battle, the one for the 2012 Budget, which will include issues of reforming/cutting benefits from Social Security, Medicare and Medicaid. I have problems with all four of these assertions but I also can see the partial validity of the President's strategy and tactics.
First, the calculation that over 200,000 private sector jobs will be added to the economy, while only 20,000 state and federal jobs will be lost each month, may be overly optimistic, as discussed in Part I of this article. The resulting unemployment rate even under the best of assumptions may not fall below 8% by summer 2012. Also there are currently many other negative economic factors present (enumerated in Part I), which were absent during the recoveries after the recent recessions in 1983-1984 and 1995-1996 -- these were successfully exploited by Presidents Reagan and Clinton resulting to their re-elections in 1984 and 1996, respectively. The recessions that preceded these recoveries were considerably more shallow than the Great Recession of 2008-2009. And the pace of economic recovery was much faster.
In particular the similarities with Clinton's situation in 1995-6 are especially weak. By spring of 1995 (the supposed equivalent to spring 2011 in this presidential election analogy) the economy had bounced back, averaging 200,000 new jobs per month. By early 1996, it was roaring -- creating 440,000 new jobs in that February alone. The 1991-1993 recession that had preceded these events was a mild recession caused by the Fed Reserve tightening its monetary policy. By contrast, the 2008-2009 Great Recession was systemic, not a part of the perpetual cycle of expansion and contraction of free-market economies. The financial crisis that caused it resulted from the bursting of a giant debt bubble, irresponsible lending and speculation by the banks and Wall St, negligible oversight by regulators, and the US consumers' habitual abuse of credit card debt and home equity loans.
Second, the assertion that the President (and the Congressional Democrats) will carry increased favor with independents and reverse the 2010 loss of independent voters by appearing eager to compromise with GOP and to pursue serious deficit reduction is legitimate, but is also conditioned on the pace of economic growth. As we discussed in Part I there is a number of reasons for the economic growth to slow in 2012, the expiration of the stimulative measures of the Dec 2010 Tax-Cut Compromise been potentially the most important. The perception of the economy growing at a good pace and of improving overall economic conditions will be critical in a presidential election year, even if the unemployment rate is still above normal levels. This worked for Reagan in 1984.
The President also hopes that he has given serious indications of moving to the center. He engineered the Tax-Cut Compromise of Dec 2010, he changed his Chief of Staff and added business-friendly advisers, he is willing to accept serious budget cuts. He has allowed States to pursue their own Health Care Reform (HCR), if this meets the broad coverage and lower cost conditions of the current HCR law. He believes that, when he gets compared to the GOP-controlled House which is dominated by the Tea Party and is often pursuing an extremist uncompromising agenda guided by their social and cultural preferences, independents will be turned off by the GOP and turn to him as being a true moderate and the only adult in the room. The danger is that the conservative narrative of budget deficits and spending cuts has made significant inroads with public opinion and is dominating the conventional wisdom; this is ably assisted by the near monopoly of conservative media which are tirelessly working against the President's best efforts in this direction and will blame him and the Democrats for failing to compromise.
Third, the President hopes to retain the loyalty of the Democratic base despite moving to the center and accepting the budget cut compromise. This is made more difficult by the fact that cuts to essential government programs and services, much valued by Democratic constituencies, are part of the compromise. In the second section of our Daily Kos article "Rival Fiscal Agendas Threaten Government Shutdown" (click here: refer1) we have described in some detail the government agencies that will face significant cuts and the nature of these cuts. They include FDA, EPA, SEC, IRS, DOT, DOE, NSF, NIH and CDC. In particular, slashing funding for EPA, SEC, FCPB, DOT and IRS will undermine important clean energy initiatives and relax further environmental regulations, limit enforcement of Wall St regulations and cripple the newly created FCPB (Financial Consumer Protection Bureau), eliminate all high-speed rail programs, and even limit collection of much needed tax revenues. And then there are the cuts to PELL grants for college students, job training programs, funding to local communities for hiring police officers, housing programs, heating assistance programs, food assistance to low-income women and children, and help to community centers.
And as if these cuts were not enough, the GOP "policy riders" (amendments to GOP's $61 spending cut proposal by Tea Party-backed GOP freshmen) defund Planned Parenthood, defund implementation of Health Care Reform, eliminate NPR and PBS, defund the National Endowments for the Arts and the Humanities, and slash deeper into the budgets of EPA, SEC and FCPB, even defund FCC's implementation of net-neutrality rules. These stand as a serious obstacle to closing the budget cut deal. Adopting any of these policy riders in the final budget deal is unacceptable by the Democratic base.
Many of the most active members of Democratic base are already losing patience with the President and the Senate Democrats. They see them as not standing up to the Republican onslaught on the middle class, workers and the poor. They perceive Obama's pro-business overtures, the 2010 Tax-Cut Compromise, the non-intervention (or taking a strong stance) in the Wisconsin and other union-busting Republican efforts, and the reluctance to expose the effects of GOP's spending cuts on a large portion of the population as selling out many of the progressive principles and causes. The enthusiasm gap between Republicans (and Tea Partiers) and Democrats has been partly blamed for the 2010 election results, when only 87 million voted as compared to 131 million voting in 2008. Many Democratic voters stayed home, some were again coerced by the Republicans to vote against their own self-interest. How the President and the Democrats in Congress expect to reverse this trend, when they do not stand for the interests of their natural constituencies ?
Finally, it seems that the President and key Democratic strategists believe that they should now get the $33 billion 2011 budget compromise behind them, and proceed to the next even bigger battle for the 2012 budget, where they will make their final stance and draw a line in the sand. If we take Rep Paul Ryan (R-WI) at his word, the GOP 2012 budget he is preparing to unveil will include significant cuts and changes in Medicare, Medicaid and Social Security. The President's strategy here may be to finally confront the GOP and expose the extremism of the Republican proposals, the impact of additional spending cuts (probably as high as $100 billion for 2012 in discretionary spending), as well as the unacceptable to the middle class changes and reductions in the benefits provided by the Social Safety Net, said to be over $4 trillion (over the next 10 years).
How the President and the Democrats deal with this challenge will be a determining factor for the 2012 elections. Allowing the Republicans to demolish the Social Safety Net and the major accomplishments of FDR's New Deal and L. Johnson's Great Society will never be forgotten or forgiven by the middle class, workers and the poor. The key constituencies of the Democratic Party will rebel and a Progressive Party may materialize. My hope as a progressive is that the President and Congressional Democrats will seize on this opportunity to stand up for the interests of 90% of our people. Negotiations with everything on the table will not be acceptable; a line in the sand must be drawn to safeguard the programs for the neediest Americans.
The framework of the President's Commission on Deficit Reduction is a no starter, it calls for only $1 in raising tax revenue for every $3 in spending and benefit cuts, instead of the other way around, this is a recipe for disaster. Instead of compromising again or caving in to the Republican demands, this must be seen as a golden opportunity to expose the extremism of the GOP agenda: dismantling the social safety net for the majority of the population while lowering taxes and giving more tax breaks for the wealthy and the corporations. To put it in the simplest of terms the GOP agenda is: tax cuts for the rich, program cuts for the poor. With Rep Ryan's proposal, GOP is ready to embark on the most devastating act of class warfare ever launched against the vast majority of the American people. The Democrats must resist and counter it with everything they got, if not, they will become irrelevant and reduced to impotence. If they decide to resist, the President and the Democrats must develop and propagate widely a strong consistent message, coupled with an unprecedented grassroots campaign on the ground, to counter the Republican advantage in the Media and the avalanche of money that the GOP's corporate and billionaire backers will be throwing against Obama and the Democrats in the next campaign.