Please enjoy another insightful guest post from the Intelligent Observer, Jeffrey Goldberg.
Resurgent Republicans: Will they dictate the political narrative over the coming year? Here’s how:
- Take actions Republicans can spin as pro-growth while blocking any new federal stimulus. (Read, Tax Cuts).
Democrats bungled the opportunity to address the soon-to-expire Bush tax cuts prior to election night. It’s now an easy issue for the new Republican majority. During election night interviews two key House Republicans, Mike Pence and Eric Cantor, stated that their first action would be to extend the Bush tax cuts. The Republican position barely varies from the Obama administration’s position on this issue; the only current difference is whether to make the cuts for the wealthiest taxpayers temporary or permanent.
Republicans will claim and receive credit whether the rates are extended during the current lame duck House session or after the new Republican Congress takes over in January. Maintaining the Bush rates will not spur job growth- these tax rates have been in effect throughout the long recession and jobless recovery.
- Repealing the Health Care law, and financial and environmental regulations.
Republicans can blame Democrats for continuing joblessness by claiming that the new laws and regulations are crushing the economy. This argument fits the current public mood and will be politically effective despite the following facts:
- The Great Recession started nearly two years before Obama took office;
- Most of the Health Care law isn’t taking effect for three more years; and
- Wall Street is booming and seems entirely unaffected by new financial regulation.
Major causes of the continuing economic funk—de-leveraging in nearly every economic sector and the massive long-term trade imbalance—are complex issues and hard to explain. But blaming an unpopular government is easy.
- Reap the political benefits from the continuing stagnant economy.
The prospects for strong economic growth over the next year are slim. A hamstrung federal government unable to provide additional stimulus will ensure slow growth. Major federal spending cuts—Republicans promise to cut discretionary spending by $100 billion in the first year—may send the economy into a double dip recession. But no matter who is really to blame, history tells us that the public blames the party in the White House for a bad economy, not the party in control of Congress.
What will the Democrats Do?
The Democratic Party has certainly not been rendered hopeless. The White House and Congressional Democrats may try to pursue any or all of the following strategies to improve their public standing:
- Propose a payroll tax holiday. This might provide a short-term economic boost and would be hard for Republicans to oppose.
- Generate targeted proposals for government investment (don’t use the word “stimulus”) in alternative energy (sold as energy independence not carbon reduction measures) and new technology. There is always a constituency for government money and these are politically sophisticated sectors of the economy. Democrats would be wise to find the money for these proposals from wasteful and/or unnecessary government programs, which always exist.
- Pursue accomplishments overseas, especially regarding Iraq, Afghanistan, Iran and the Middle East. It is hard to envision real progress in any of these areas but Hillary Clinton remains popular; put her out in front of all foreign policy initiatives.
- Bash China over trade and currency issues. Although this is treacherous territory for the US, trade unions and tea partiers would unite on an anti-China policy, and the economy would benefit by steps that would reduce the trade imbalance.
- Capture Osama Bin Laden. For political impact this should have been done last month, but it’s never too late.
- Play nice with Republicans. This will not work. Republicans tout Bill Clinton as the model Democratic president who moved to the middle after the 1994 midterms. But don’t forget that 95% of congressional Republicans voted to impeach Clinton after passage of welfare reform and after he balanced the federal budget.
- Cross their collective fingers and hope for a business-cycle shift and a surge in hiring.
Guest post by Jeffrey Goldberg