Mood Shift?

President Obama’s handling of the debt ceiling crisis may ultimately turn out to be seen as political mastery, a symbolic point where the country shifted from a dissatisfaction with the Democrats to frustration with the way the tea party prevents the Republicans from pursuing the rational policies voters thought they’d get.

Right now Obama isn’t getting a lot of credit for how he handled this.  Many Democrats compare Obama to past leaders and say he could have pushed the GOP harder.   I do not share that assessment.  Too much was on line, especially the nascent recovery that Obama will rely on to bolster his chances at re-election.   A default, a shut down of much of the government to avoid default would do tremendous damage to the economy.   Misuse of the 14th amendment would have started a constitutional crisis, severely damaging the economy and leading many to believe Obama was abusing power.  Any of those scenarios would have destroyed the Obama Presidency.

If Obama were to have played this differently, he would have had to have done it starting last year.   Perhaps even as late as May he could have framed the issue differently and forced an earlier decision.  Even that might not have worked.      Still, criticism of Obama has been rather muted compared to the anger at the tea party.   That is the narrative coming out of this drama, not one of a weak Obama.

When the public and especially independents shifted to the right to vote in a Republican House, they did it for one reason: to force the two sides to compromise and work out solutions together.   The country is moderate and pragmatic, even if the political activists are ideological and partisan.   They thought the 111th Congress pushed too hard to secure the Democratic agenda, over reaching their mandate.    But as the President said, people wanted divided government, not dysfunctional government.

President Obama comes out of this looking Presidential.   He called for a balanced compromise on national TV.  He then stayed aloof from the final negotiations once it was clear the “grand deal” of a $4 trillion mix of cuts and new revenues — a deal that would have been good for the economy — was rejected because the tea party cannot abide ANY tax increase.

He let Reid, Pelosi, McConnell and Boehner do most of the dirty work.   He was criticized for not leading when he spent four days outside the public view making phone calls and having private meetings.    Those saying he wasn’t leading have fallen victim to the idea that media presence = leadership.     It appeared at one point Reid and Boehner were close to a deal that would have been worse for the Democrats, and a private meeting with Obama stiffened Reid’s spine.   Boehner complained, but it was clear that Obama had set down markers that the Republicans could not pass.    As blame grew on the GOP for turning down an historic compromise, Boehner realized he’d gotten all he could get.

The result — a compromise that does nothing, and doesn’t even start making cuts until 2013 — simply pushes the debate down the road.   That is a victory for Obama.   Moreover, it does not harm the economy going into 2012.   The year the cuts could damage the recovery is 2013 — setting up a huge debate for the election.   Not agreeing to any cuts would have assured bond downgrades and loss of investor confidence in the dollar, doing considerably more harm to the economy than spending cuts or tax increases would.

Congress is getting approval ratings lower than any time in history.   Those on the right who were pointing to low approvals of the Pelosi House have gone silent; the GOP is no more popular.   GOP candidates walk gingerly among the tea party brigades.   Some like Mitt Romney and Jon Huntsman realize they’ll never win over the far right, they have to neutralize their strength.  I suspect this fight has improved their chances.   Moderate Republicans don’t oppose tax increases as part of the mix for debt reduction, and they certainly don’t approve of risking default over a principle.   Many have been horrified by this spectacle and worry about the direction their party has taken.

I’m not predicting certain re-election for Obama, but the chance that it will be either Obama or a moderate Republican like Romney or Huntsman is greater than before.    People like Bachmann will still rile up the party faithful.   The Democrats may not take back the House, but strident tea partiers in unsafe districts face a good chance of losing — even Michelle Bachmann could lose.

In short, public disgust at this whole spectacle — not so much the result but the way in which it played itself out — is going to have political ramifications.   The tea party has, as the saying goes, “jumped the shark.”   They’ve peaked and over reached.    In essence, Americans are becoming sick of the ‘politics of emotion.’    People are tired of angry rants, demonization, refusal to compromise, and mistaking rigidity for principle.    We’ve got real problems, they want people to solve them.   We’ve got real disagreements, they want people to compromise.

Whichever party can appear more adult, level with the American people, and show a capacity to compromise and reach out to the middle, will have the upper hand in 2012.   President Obama played that role in this last crisis, making him the only one of the principles who could truly condemn the ‘manufactured crisis’ with credibility.   John Boehner’s image was tarnished by both outbursts and bravado — bragging the Senate will “fold like cheap suit” while the country is heading to catastrophe doesn’t make him look very dignified.

Democrats may hope that this continues, and that the tea party divides and exerts undue control over the GOP.   That would help the Democrats in 2012.   But that would not be good for the country.   Best for the country would be if the majority of Republicans who do not agree with the tea party stand up and reassert their power.    I’d much rather the face of the GOP be Senator Olympia Snowe than Representative Michelle Bachmann!   This country needs real debate and engagement of diverse ideas, not partisan war.  With the public no longer as entertained by or fooled by the emotion-laden spectacle of Glenn Beck’s rants and tea party calls for revolution, it’s time to settle down and take a pragmatic approach to the problems facing the country.

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  1. #1 by Black Flag® on August 5, 2011 - 16:09

    Scott,

    Your “idol” worship of violence providers get’s a bit deep sometimes.

    President Obama’s handling of the debt ceiling crisis may ultimately turn out to be seen as political mastery,

    There was no skill here.

    Neither side has no plan, no idea, no concept, and no hope to solve the economic problems – because it has been political action that has critically damaged the economy – thus, their solutions (of which not one thought of stopping their manipulation) all would cause deeper harm.

    Thus, anything he was willing to do was would be disastrous – and his disastrous plan was no better than the disastrous plan of any other politician – as exampled by the Bush years.

    A choice between disastrous plans looks no different.

    Indeed, other than doing nothing – every plan was the same; delay the Reckoning into the future.

    from pursuing the rational policies voters thought they’d get.

    The voters have competing demands.

    They want their subsidies – Welfare, Healthcare – and a huge army.

    But, they do not want to pay for it.

    They will vote out any one who risks their loot.
    They will vote out any one who demands they pay for their loot.

    This only leaves – fiat money creation and debt.

    Thus, that is exactly what the voters got.

    A default, a shut down of much of the government to avoid default, or misuse of the 14th amendment to start a constitutional crisis that would severely damage the economy and lead many to believe Obama was misusing his power. Any of those scenarios would have destroyed the Obama Presidency.

    You identified the goal exactly.

    Save the Obama Presidency … by making the problem deeper, the Reckoning harsher, and risking the nation itself …. for another President in the future.

    The best possible solution, today, would have been default – let the bond holders get stiffed, as they are too stupid to know they will get stiffed anyway.

    Yes, this has consequences – a Deep Depression – but now would be less suffering then in the future. Now, this guaranteed consequence will be hugely worse for your kids.

    But as the President said, people wanted divided government, not dysfunctional government.

    If only the People would be blessed with a wholly dysfunctional government!

  2. #2 by Ron Rouintree on August 5, 2011 - 16:15

    I am so wanting to agree with you. But it appears to me that the T Party is taking over the Republican party and pulling the public along with it. The Democratic party has failed to articulate a narrative that addresses the debt and employment issues. While I disagree with the T Party message as not only wrong but actually leads us deeper into trouble and could actually cause a full fledged depression. The parallels of today with the late 20’s and 30’s is remarkable.
    From day 1, and in the very words of Republican leaders their goal is not only to oppose the policies of Obama, but to make sure whatever he tries to that he personally fails. This next election will not be about policy, it will be about power. The electorate will be voting not on policy, but on who they believe can actually do something, and doing something is simply another word for power. The Democrates must demonstrate they not only have good policy, but can exert the power to implement that policy.

  3. #3 by Cindy Johnson on August 5, 2011 - 17:21

    Ohhh, I so hope your right, Scott! The Tea Party & other Repubs has made me think the Dems need to start hollering to get the people’s attention!!

  4. #4 by thebigweasel on August 5, 2011 - 18:31

    I disagree with your appraisal of Obama (I’m in the “he is weak” camp), but the Republicans have definitely overstepped. Mitch McConnell smirked that the Republicans would have a fresh set of demands for the next credit-extension debate, which was perhaps the worst possible thing he could have said in front of already-nervous markets.

    There’s a rumor sweeping the financial sector that S&P is going to lower the US credit rating to double-A after the markets close at 4pm EDT. I hope the rumor is untrue, but the markets are taking it seriously, hence the wild gyrations we’re seeing now.

    Imagine you’re a friendly neighborhood banker. (Let’s call you Mr. Potter). You’re walking along the street, and you pass a house you hold the note on. The husband and wife are out front, shouting at one another, and the wife is saying that if the husband doesn’t buy her a new car, she’s going to blow off next month’s mortgage payment and wreck his credit rating. She doesn’t even seem to care that you are standing right there and can hear all this.

    So, Mr. Potter, what is your thinking when the husband turns up a few days later requesting a car loan?

    • #5 by Scott Erb on August 5, 2011 - 18:40

      The bond markets wanted to see real efforts to tackle the debt — and that requires tax increases. Moreover, tax increases harm the recovery less than spending cuts. The agreement accomplished nothing — the GOP is trying to paint it as a victory to mollify the tea partiers and maybe get dissent among Democrats, but it was really just pushing the problem to later on.

      A downgrade would get a lot of Republican donors very upset, and McConnell and Boehner have to listen to them.

  5. #6 by thebigweasel on August 5, 2011 - 19:17

    I -am- expecting a downgrade. I just didn’t expect it immediately.

    Some of those biggest donors helped underwrite the Tea Party, although I doubt they’ll have the introspection and honesty required to stop them from savaging McConnell and Boehner. On the other hand, I’m not feeling any great sense of moral outrage over that particular piece of unfairness.

    • #7 by Black Flag® on August 5, 2011 - 19:26

      Thebigweasel,

      The downgrade has long been done already – the smart money isn’t stupid and they ignore Moody’s et al – Pimco, for example, the largest private holder of T-bills completely divested itself of them.

  6. #8 by Black Flag® on August 5, 2011 - 19:24

    Scott

    Moreover, tax increases harm the recovery less than spending cuts

    What???

    Bizarre economic reasoning.

    With your understanding, you must believe that if government took 100% of the economy and spent everyone’s money – the economy would be rosy and peachy keen

    …oh, wait, they did that in Russia, China and N. Korea….

    No, Scott, spending cuts improve the economy.
    Tax cuts improve the economy.

    Getting government out of the economy improves the economy.

    To overcome the post-war Recession of WW1:

    President Harding reduced government spending by $1.5 billion his first year as director, a 25% reduction, along with another 25% reduction the following year.

    In effect, the Government budget was cut in ½ in just two years.

    Harding believed the federal government should be fiscally managed similar to the private sector having campaigned “Less government in business and more business in government.”[

    “Harding was true to his word, carrying on budget cuts that had begun under a debilitated Woodrow Wilson. Federal spending declined from $6.3 billion in 1920 to $5 billion in 1921 and $3.3 billion in 1922. Tax rates, meanwhile, were slashed—for every income group. And over the course of the 1920s, the national debt was reduced by one third.”

    On March 4, President Harding assumed office while the nation was in the midst of a postwar economic decline, known as the Depression of 1920–21. By summer of his first year in office, an economic recovery began.

    Harding cut taxes, starting in 1922. The top marginal rate was reduced annually in four stages from 73% in 1921 to 25% in 1925. Taxes were cut for lower incomes starting in 1923.

    Revenues to the treasury increased substantially. Unemployment also continued to fall. Libertarian historian Thomas Woods contends that the tax cuts ended the Depression of 1920–21—even though economic growth had begun before the cuts—and were responsible for creating a decade-long expansion

    But heck, that contradicts your messianic love for the State….

    • #9 by thebigweasel on August 5, 2011 - 20:57

      I wasn’t aware PIMCO had divested.

      That bodes badly.

    • #10 by Scott Erb on August 5, 2011 - 21:08

      It is a well known economic fact that government spending is more of a stimulus to the economy than a tax cut. Spending can be directed, while tax cuts are often not used to stimulate, or go to purchasing foreign goods. As usual your rant is bizarrely off base and to go back to the 20s plain weird. I appreciate you don’t want to let go of your ideological faith, but you’re losing complete touch with reality, man!

  7. #11 by Black Flag® on August 5, 2011 - 21:00

    http://www.reuters.com/article/2011/03/09/us-pimco-debt-idUSTRE7285M020110309

    (Reuters) – The world’s largest bond fund has gone ultra bearish on the United States, dumping all of its U.S. government-related debt holdings.

    The move by Bill Gross’s $236.9 billion PIMCO Total Return fund completed last month comes in the wake of a vicious Treasury market sell-off and just days after he questioned who will buy Treasuries once the Federal Reserve halts its latest round of bond purchases in June.

  8. #12 by Black Flag® on August 5, 2011 - 21:13

    Scott

    t is a well known economic fact that government spending is more of a stimulus to the economy than a tax cut.

    Perhaps in your bizarre economic understanding, but the fact is, it is not.

    Taking the productivity out of the market and giving it to the unproductive part of society does NOT improve the economy

    Believing your comment can only mean you are easily fooled by illusions.

    Spending can be directed, while tax cuts are often not used to stimulate, or go to purchasing foreign goods.

    Exactly – directed by unproductive men into their own pork and barrel projects – to you, is “good” economics.

    Tax cuts return earned revenue back to the producers – who are exactly the people who should be spending the consequences of their own production.

    The recession of the 20’s is a prime example of the consequences of a reduction of government – where all your examples since then have amply demonstrated the folly of government action.

  9. #13 by Lee on August 5, 2011 - 21:17

    I thought this was an interesting post, Scott. I too personally felt that the president handled this well. However, my mother who is a senior (living in ME) feels that he was very callous of the elder population. I wonder if that perception which is possibly shared by this segment of the population at large will be a factor at election time.

  10. #15 by classicliberal2 on August 5, 2011 - 21:32

    “Many Democrats… say he could have pushed the GOP harder. I do not share that assessment. Too much was on line…”

    And that’s exactly why those saying that are right, and you aren’t, Scott. The ink hadn’t even dried on the signature on the deal before Mitch McConnell started crowing about how the Repubs were going to be playing this same game again the next time the debt ceiling came up.

  11. #16 by Black Flag® on August 5, 2011 - 21:40

    Classic,

    So, you hold that the debt doesn’t matter; that the “ceiling” should be raised whenever it needs to be?

    Then why bother with a “ceiling”? Is the facade so important?

  12. #17 by Black Flag® on August 5, 2011 - 21:43

    Scott, Classic, et al:

    So, by the position you hold, the ceiling should always be raised whenever it needs to be.

    Is there any scenario where you would suggest the debt ceiling not be raised?

    Or would you reverse your positions if it was the Reb. needing to raise the debt ceiling – in other words, your position is not based on any economic principle, but merely the color of the shirt of the man sitting in the Big Chair?

    • #18 by classicliberal2 on August 6, 2011 - 02:19

      “Is there any scenario where you would suggest the debt ceiling not be raised?”

      Whenever congress doesn’t spend enough money to require that it be raised. It makes little sense to approve spending that will exceed the debt ceiling without raising it at that time, but that’s what congress does.

      • #19 by Black Flag® on August 6, 2011 - 02:27

        Classic,

        So, in your view, if Congress determines it should spend more into debt, it should be able to without any restraint or resistance?

      • #20 by Black Flag® on August 6, 2011 - 02:28

        …and if you agree, why was a “ceiling” implemented at all?

  13. #21 by thebigweasel on August 5, 2011 - 22:27

    Black Flag:

    The debt ceiling IS a facade, and one whose legitimacy and use has been questioned by many.

  14. #22 by Black Flag® on August 6, 2011 - 03:18

    Congrats, Scott.

    The package you advocated for got this response:

    S&P issues unprecedented downgrade of US credit rating, saying debt package falls short

    • #23 by Black Flag® on August 6, 2011 - 03:19

      … but they waited until Friday – the typical day for releasing disastrous news…

      …hope you sold yesterday, because Monday will be a bitch….

  15. #24 by Black Flag® on August 6, 2011 - 03:23

    “S&P said it was now “pessimistic about the capacity of Congress and the administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government’s debt dynamics anytime soon.””

  16. #25 by Black Flag® on August 6, 2011 - 03:48

    “The US Postal Service warned on Friday that it could default on payments it owes the federal government, just days after the US government itself narrowly averted a default.”

    The first of many…

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