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Thursday, November 4, 2010

IT'S OVER; NOW WHAT?

With the Republicans now in control of the House of Representatives and with a firm hold on the minimum of 41 votes needed to stop legislation in the Senate with a filibuster, there is plenty of speculation about what the next two years in Congress will look like.
The scenarios include a total gridlock with a small Democrat majority in the Senate blocking any and all Republican initiatives coming from their majority in the House and the threat of an Obama veto backing them up. The reverse also lends credibility to this forecast, with Republicans in the House blocking bills originated by Senate Democrats and the Obama Administration.

Another possibility cited, is that Obama will move towards the political center and attempt to work with Republicans in the House to make progress on the most important though less ideologically sensitive issues.

A more robust reaction on the part of the President and Congressional Democrats has also been proposed. This would have the President and the Democrat Senate leadership move forward with their legislative agenda and then aggressively “campaign” against Republican “obstructionism”.

The reality will certainly be a mix of the possible scenarios. The Republicans will not “shut down” the government as they did once with highly adverse political consequences during the Clinton administration. The President still must send an annual budget to Congress and Congress must continue to pass a budget, although not the President’s. Budget priorities will certainly reflect the new Republican aversion to large or less important spending measures but it is much more difficult to undo existing spending programs than to initiate them given the political pressure that would be mounted by the affected groups. Still, there is some talk about reversing spending levels to those of 2008, although no specifics as yet have been identified.

Expecting Obama to make a significant move to the “center”, a term defined very differently by the two parties, is probable more “hope” than “change”. Obama, while not rigidly “progressive”, as his willingness to abandon the "public option" in the health care bill shows, is still a big government liberal with a collectivist mentality. He is also already in trouble with the "progressive" (far Left) base over that concession, his inability to close the Guantanamo prison, his continued pursuit of the wars in Afghanistan and Iraq, his lack of alacrity in revoking the military’s “Don’t Ask Don’t Tell” policy rejecting openly homosexual members, and his apparent lack of enthusiasm for major environmental legislation.

This year’s mid-term elections are going to create a general context for the presidential election of 2012. Obama will have to read the “tea leaves” and decide if his reelection prospects are best served by acknowledging a move to the Right amongst moderate and independent voters or regaining the loyalty and enthusiasm of his 2008 Democrat majority i.e. ideological liberals, unions, the young, women and minorities. Since solidifying one's base first, is the conventional wisdom of presidential politics and with only two years to go, it will be difficult for Obama to make too much of a move to the center, which would be defined as the "Right" by the party’s liberals. Post mid-term election musings in some liberal circles about the possibility of a Democrat primary challenge to Obama in 2012 have already reached the media. Such a tactic, if true, is probably calculated to pressure Obama to hold the line against conservative/Republican initiatives in the new Congress. An actual challenge would be a disaster for both Obama and any challenger as it would split the party between blacks and whites, and liberals and moderates and almost certainly have the same result as Ted Kennedy's primary challenge to Jimmy Carter in 1980, a bad loss.

All this does not mean that there is no room for cooperation on some issues. Barring outright ideological warfare, common ground might be found on such issues as trade.
Currently there are three “free trade agreements” which have been negotiated and are waiting for congressional approval. The most significant in terms of economic impact is the Korea-United States agreement which was completed in 2007. Bilateral trade with Korea was $84.7 billion in 2008, and although sharply reduced in 2009 by the world wide recession, the prospect for a rebound and significant trade growth is good. There are still some issues that need to renegotiated but a successful treaty would have genuine benefits for U.S. agriculture, especially beef producers and also the newly restructured American automobile industry.

Free trade agreements with Panama and Columbia are also pending. Obama has voiced support for all these agreements and with the “free trade philosophy” in general, and in the past, Republicans have also supported such agreements so this is an area of possible cooperation. Obama will, however, have to overcome the usual opposition of organized labor to free trade agreements which they see as taking jobs away from American workers and facilitating the moving of jobs overseas by domestic manufacturers. In a jobs sensitive political environment, these agreements may have to wait for the political intensity of the election to subside.

Although strong disagreements exist over their nature, cooperation on tax policies might also be possible. The so called “Bush tax cuts” expire in January and both Obama and the Republicans want to extend them in some fashion. The basic difference is that Obama wants to let tax cuts for couples making over $250,000 a year expire while retaining them for everyone else. Republicans want to retain them for all tax brackets. Since there is agreement on the need to keep the reduced tax rates for most tax payers, it would seem that some form of compromise could be negotiated.

Inheritance taxes are also set to go up dramatically in January, and again, both the Obama Administration and Republicans have indicated a willingness to come up with a new formula for exemptions, although the Democrats merely want to create new levels of exemptions and Republicans want to do away with inheritance taxes altogether. Still, since there was a discussion about the issue before the mid-term election season got going, there is some hope that progress can be made on this issue. The issue on taxes of any sort is complicated by ideological rigidity on both sides and the conundrum of reduced government revenue (deficit enlargement) versus economic simulation (job growth) that reduced taxes would produce. The so called “marriage penalty” which imposes higher taxes on married couples than single people living together, in the same tax bracket and the Alternative Minimum Tax which currently does not take inflation into account, are also areas in which Republicans and Democrats mostly agree have to be adjusted.

Thus while, some legislative cooperation is possible, there are a number of important issues which are more ideologically sensitive, and thus more controversial, that have little prospect for success given the hostility and polarization that characterized the mid-term elections. Little progress can be expected on so called “comprehensive immigration reform”. The two parties are just too far apart, with Republicans emphasizing border control as a first priority and Democrats more focused on “a path to citizenship” for the 12-14 million illegals already in the U.S. and an expanded “guest worker” program. The strict anti-illegal immigrant legislation passed by the state of Arizona and the Obama Administration’s lawsuit against Arizona, further poisons the atmosphere for Congressional action as it winds its way through the federal courts.

The Democrat’s major environmental bill, “cap and trade” which seeks to limit harmful industrial emissions by government regulation and create a “market” for allowable emissions, passed the House but not the Senate. Even though the Democrats still control the Senate by a slight majority, the House version is essentially “dead on arrival” in that body and Obama as much as said so in his post election news conference.

The Democrats will try to pass as much endangered legislation as possible in the “lame duck” session before the newly elected Congress takes over in January. The pro-union “card check” legislation which requires companies to allow unionization based on a majority of workers signing an approval card instead of a secret ballot is one of these.

Another is the Fair Pay Act which is has been around a few years but hasn’t generated sufficient support. If introduced, this act will be attacked by Republicans and the business community as a further example of “big government” interfering in the free market, and properly so. It would require some kind of determination of the “economic value” of each job to a company and prohibit differences in pay scales for different jobs with the same economic value. The purpose is to overcome by government directive and law suits, disparity in pay scales for jobs which are predominately held by females. The law would discard the role of the free market (supply and demand) in determining wage rates and effectively put government into a management position for all large businesses. However, with the loss of 60 House seats which many blame on the perception of “big government” excesses, their might be reluctance on the part of Democrat survivors to take on this issue. The economic environment and the emphasis on job creation makes this a bad time for more government meddling in the private sector. Also, a Republican filibuster effort could be expected. There is however, always the possibility that one or two of the more liberal Republicans could defect on social legislation of this sort and allow a vote. The two female Republican senators from Maine and the newest Republican in the Senate, Scott Brown from liberal Massachusetts could conceivably support this ridiculous legislation but it in all probability will never make it out of committee if it is introduced at all. A vote on the military's exclusion of homosexuals however may well be introduced in the more liberal "lame duck session".

The new Senate will be a more conservative body, not only because of the increased number of Republicans but because several of those individuals like Rand Paul (R-KT) and Toomey (R-PA) are so called "Tea Party conservatives" i.e. deficit hawks. It remains to be seen if the liberal Democrats up for reelection in 2012 will take heed of the nation's swing to the right and vote accordingly or dig their heels in rely on the hope of previously reliable liberal constituencies to preserve their seats.

Another important result of this election has been the significant increase in governorships and state legislatures held by Republicans. This will have a significant impact on the upcoming decennial congressional redistricting process as well as the politics of the 2012 presidential race. Things are looking up for the Republicans in this respect and the field of prospective candidates is growing. But that is another story which the media and the pundits will shortly commence. For now most people are just glad it’s over.

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