A Further Perspective

Now Here’s What’s Next

You heard it here first, but more important is to get it right from here on out.

By 11.3.10

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In July 2009, in an article in this space entitled "2010," I wrote:

Next year's elections are going to produce a political earthquake. That is because we currently suffer the most left-wing government in our nation's history. After just 6 months in office, the flower children that rule Washington in overwhelming numbers are already smashing through all records regarding federal taxes, spending, deficits, and debt. Obama and his ultra-left Democrats adopted a so-called stimulus bill raising spending a trillion dollars that never had a prayer of actually creating jobs and promoting long-term economic growth, because it was based entirely on old-fashioned, brain dead, proven to fail, Keynesian economics.

Among the specific political predictions in the article: "Turncoat Arlen Specter from Pennsylvania will also be retired next year, when he will find that an 80 year old, opportunist, RINO Republican is not going to appeal to Democrat primary voters any more than Republican primary voters."

In October, 2009, in an article in this space entitled, "Acting Like a Bunch of Christies," I wrote,

"I know they don't know it yet. But the Democrat Party is in a death spiral similar to the last days of the wooly mammoth during the Ice Age. Forget about 1994 and 1980. There is no precedent for what is coming….By next year, the disasters will not be here yet, but enough Americans will see what's coming to produce the first political earthquake."

In a column a month later I argued that the greatest danger for Republicans for this year is that they will underestimate their strength and as a result not win all the races they could have won. See now, e.g., New York.

Notice that I got both today's politics and today's economics right in these articles well over a year ago. I bring that up so that you will know where to go to find out what's happening next.

Losing Control

The first implication of what happened yesterday is that President Obama has lost control of the Democrat party. Don't expect any Congressional Democrats to blindly follow Obama any longer where their political instincts sense danger. This opens enormous opportunities for conservatives and Republicans.

One of those opportunities is on the budget, where President Obama also lost control yesterday. The locus of power on federal budget policy now lies in the office of House Budget Committee Chairman Paul Ryan (R-WI). Budget resolutions are not subject to veto, or even to filibuster. In this new political environment, it is not going to be politically viable for President Obama to veto Republican budget bills because they do not spend enough. If those bills are sufficiently well crafted, such vetoes can be overridden now.

Republicans would commit grievous policy and political errors by compromising with Obama on the budget. They need to do what the voters have now elected them to do, and this is exactly what Ryan plans to do. They need to adopt sharp reductions in spending, following the models of Governor Christie in New Jersey, Governor McDonnell in Virginia, and the new Conservative Party government in Great Britain. The Democrats will not go down with Obama fighting what the people are obviously demanding on spending.

On December 1, President Obama's Deficit Commission will issue its report. This Commission was not elected by the people to do anything. The new Republican majorities were. Republicans should just pocket all the recommended spending cuts, and thank the Commission for its work, ignoring anything else. I predict Ryan and the Republicans will do just that.

Pundits on the right as well as the left have drawn the wrong conclusions about the similar budget confrontation between President Clinton and Congressional Republicans in 1995. Clinton won the cosmetics, but Gingrich and the Republicans won the substance, enacting sharp spending restraint with pro-growth tax cuts that soon resulted in large budget surpluses. In the current, far stronger, anti-spending, anti-government political environment, President Obama is far weaker than Clinton was.

Republicans just need to be careful not to get stuck promoting spending cuts that will lose the political base that catapulted them into the majority. That can be done with the current plan to return spending to 2008 or 2007 levels except for Social Security and Medicare, along with repealing Obamacare and President Obama's crony capitalism, green energy, corporate welfare, and other bailout spending.

The other big opportunity for Republicans now even with President Obama and his veto pen is on extending the Bush tax cuts for all. The political momentum from yesterday will likely be sufficient to extend those tax cuts at least for another two years, leaving the 2012 election to decide more fundamental tax reform. Enough Democrats will not want to increase taxes for anybody in this bad economy to force Obama to accede or face the serious prospect of another veto override.

The Democrat Left will argue that with the huge budget deficits we cannot afford to extend these tax cuts for upper income earners. But with the top 1% of income earners already paying more in federal income taxes than the bottom 95% combined, no significant revenue is going to be generated by trying to raise taxes on them still more. On capital gains taxes alone, every rate increase over the last 40 years has resulted in less revenue rather than more, and Obamacare already raised capital gains taxes for the future. If Obama's comprehensive, across the board rate increases cause a renewed, double dip recession, the result will be far less revenue overall, rocketing the deficit past $2 trillion.

Republicans would win with these arguments. At best, Obama's tax policies if not stopped would just add to the capital strike and capital flight, meaning extended if not worsening high unemployment. The American people have just said they do not find that acceptable.

Another big opportunity for Republicans is legislation to remove EPA authority to regulate carbon dioxide, which is not a pollutant but a natural substance essential to all life on the planet. As the EPA proceeds with this Obama plot, its threat to the economy and jobs and burdensome unnecessary costs will become overwhelmingly unpopular, drawing enough Congressional Democrat support to overwhelm Obama here too.

Much more difficult will be repealing Obamacare. Republicans here should move to enact in one ideal bill repeal of the Obamacare policy atrocity, and replacement of it with the Patient Power alternatives, which would be quite popular. That would include a health care safety net leaving no one without essential health care, and coverage of pre-existing conditions with high risk pools. This legislation would amount to a big spending cut over the long run. Even if Obama successfully vetoes it, this will frame the issue correctly for 2012.

Republicans should also promote bills to frame the issue on long term fundamental entitlement reform. Personal accounts for Social Security and sending the remaining 184 federal welfare programs back to the states would be popular long term initiatives. Careful Medicare reforms based on personal accounts, and health insurance vouchers tantamount to Medicare Advantage for all, similar to the Ryan Roadmap reforms, would be politically seaworthy.

This afternoon, President Obama will come out and graciously offer to work with the Republicans in compromise. No one should be fooled by this calculated deception. The President will just be trying to save his political bacon for a renewed surge to the Left, and will agree to no compromise in the interim. The Republicans should graciously respond that they would be glad to work with him too, and insist on his support for the above agenda.

Why They Lost

President Obama and his Democrats lost so badly yesterday because voters on the Right, the Left, and in the middle felt so badly misled in 2008. Obama sent the message in 2008 that he was a centrist moderate. But he has governed since the election as the most left-wing President in history, and laid the foundation for worse. Obama offered the nation starting all the way back in 2004 a new, post-partisan politics ending the squabbling in Washington. But he has governed since the election along strictly party lines with no significant compromises, more recently telling an Hispanic radio audience that it is time to "punish our enemies and reward our friends."

In one debate with John McCain in 2008, Obama promised "a net spending cut" for the budget overall. After the election, he delivered a wasted, ineffective, trillion dollar stimulus bill, and increased federal spending by a fourth relative to GDP in just two years. During the 2008 campaign, Obama promised a tax cut for 95% of Americans. The American people do not believe that his temporary, $400 per year, $8 per week, "Making Work Pay" tax credit delivered on that promise.

The Democrats won control of Congress with "Blue Dog" Democrats promising that they would be more conservative than the Republicans, especially on fiscal issues. Those supposed conservative Blue Dogs then voted into power the most left wing Congressional leadership in American history, who produced record shattering deficits and debt.

But President Obama's own liberal base also felt misled and betrayed, as working people suffered near double digit unemployment for almost two years, with no end in sight. Hispanics suffering extended unemployment well over 10%, and African Americans suffering extended Depression levels of joblessness, were not going to turn out in large numbers to vote for more of the same. Nor were those suffering record poverty, food stamp dependency, and foreclosures, or liberals in sympathy with them. Those who felt the Obama hype meant they would no longer have to pay their rent, and would enjoy goodies out of the Obama "stash," naturally were not going to show up to vote this year when none of that panned out.

The more ideological on the left felt betrayed by the continuation of the Bush War on Terror policies, with thousands of troops still in Iraq, a Bush style surge in Afghanistan, Gitmo still not closed, and aggressively expanded drone attacks. This reflects a fundamental long-term problem among Democrats. The Left feels Obama has been too conservative. The American people said yesterday he has been way too far left. Can the Democrat Party, including millions of "Blue Dog" conservatives, even hang together and remain viable in this political environment?

Obama's Future

If Republicans are successful in enacting the above agenda, the economy will boom. No doubt Obama and his propagandists will take credit for that. But the public will not be easily fooled. The economy boomed with the Kennedy tax cuts in the 1960s as well. The Democrats were massacred in 1966 nevertheless, and Nixon was elected in 1968, defeating the liberal Humphrey.

President Obama is rigidly ideological, and he is going to fight until he goes down with the ship. But the Democrat Party is not going to go down with him anymore. If his polls do not improve quickly, he will have a fight on his hands for renomination. Only the above-described, Republican-engineered change of course on economic policy can save him. If the Obama agenda persists, however, the Democrats will not renominate him.

An articulate Republican who can project a vision for roaring prosperity and fundamental reforms empowering working people would be unstoppable in 2012 in any event. My prediction: Gingrich-Rubio 58%, Obama-Biden 40%. 

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About the Author
Peter Ferrara is Director of Entitlement and Budget Policy at the Heartland Institute, General Counsel of the American Civil Rights Union, Senior Fellow at the National Center for Policy Analysis, and Senior Policy Advisor on Entitlements and Budget Policy at the National Tax Limitation Foundation. He served in the White House Office of Policy Development under President Reagan, and as Associate Deputy Attorney General of the United States under President George H.W. Bush.