The fight now brewing in Washington over the budget clearly reveals the irresolvable clash of ideologies that has been coming for years. It will be resolved only by the outcome of the presidential election on 6 November 2012, and that campaign is now beginning, unseasonably early.
The Republicans, self-styled "conservatives”, want to cut back spending on entitlement programmes like Medicare, Medicaid and "welfare" (i.e. pensions), but not on “defence”. They also want to cut taxes, especially for the better-off. The Democrats, more or less "liberal" (in the American sense, i.e. social democrats) want to preserve social programmes, and to increase taxes for those earning over $250,000 a year.
But - and here is the rub - the Republicans are more conservative than the Democrats are liberal. It is not just that President Obama’s centrist instincts have led him to reach out to the Republicans a hand of friendship that has been contemptuously refused. The Democrats really are less committed to their mixed ideology than modern Republicans are to the stern pieties of modern Republicanism.
The decision of the ratings agency, Standard & Poor’s, to change its evaluation of the quality of America’s sovereign debt from “stable” to “negative” has caused furious cackling in the Washington and Wall Street poultry-runs. It should not perhaps be taken too seriously, for two reasons.
First, the three ratings agencies which owe their prosperity to the good relations they can maintain with the big Wall Street investment houses, made fools of themselves when they gave to the junkiest of derivatives the triple-A rating they now threaten to deny to the best paper of the world’s wealthiest nation.
Second, it is unlikely that the agencies will actually strip the United States treasury-bond of its status as the world’s safest investment. The down-rating, it is widely assumed, is in the nature of the warning to the politicians to take America’s deficit, and the ballooning of the public debt (now almost half owned by foreigners) more seriously than America’s political and financial elites have yet taken it.
If that was the intention, it ought to be successful. For the threat to the long-term health of the economy by the deficit and the debt - and the ideological polarisation that prevents politicians from addressing them - is indeed both serious and urgent.
Some of the difficulty lies in the fact that both Republicans and Democrats are partly right. The Republicans are right in saying that the deficit must be reduced. The immediate danger is less that the United State will default on its public debt than that inflation will get out of control, which might ultimately have that very effect. The Democrats are right that the method for reducing the debt must not destroy nearly a century of efforts to use government to make American society more, well, democratic.
The ideological contest
What is clear is that the clash between the two parties’ diametrically opposed views of the budget crisis will not now be definitively resolved this year. It will come to dominate the 2012 election. That contest will be a clearer conflict between ideologies than America has seen for many decades.
It is tempting, if facile, to quip that Sarah Palin has already guaranteed Barack Obama’s re-election in 2012. By achieving such a prominent position and effectively blocking the sunlight from more conventional contenders, Alaska’s former governor may have jinxed the crowded Republican field.
But Barack Obama, who has just announced his own campaign for re-election, unusually early, faces long and difficult months before he can be sure of reaping the reward she may be unintentionally offering him.
Since the economic crisis that exploded in 2008, American politicians - congressional Democrats, establishment Republican conservatives, and the Obama administration - have failed to address (even in many cases to acknowledge) the immense scale of the deficit and its implications for the American future. When the Simpson-Bowles presidential commission published its cautious but impressive deficit-reduction proposals in November 2010, both liberals and conservatives denounced them. Washington politicians’ unwillingness to vote for even modest pain for their constituents seemed to reflect a deeper carelessness about the looming long-term threat.
In April 2011, that conclusion seems even clearer. Partisan negotiators came within seventy minutes of shutting down the government while they haggled over whether the deficit should be reduced by $33 billion or by $40 billion, and rather predictably settle on $38-and-a-bit billion. That is trivial alongside a deficit of an imperial $1.5 trillion. In February 2011, President Obama released his 2012 federal budget. It predicted that the 2011 deficit would rise to $1.6 trillion. With revenues at $2.2 trillion - on a GDP of roughly $15 trillion - almost half the expenditure of $3.8 trillion would have to be covered by borrowing.
The Republican positioning
The ideological gap has been widening since the Reagan revolution of the 1980s. The Bill Clinton administration did something to reduce the scale of the deficit. The George W Bush administration, by spending extravagantly on two wars and by such domestic measures as paying out $550 billion over ten years on free prescriptions for senior citizens without reducing drug-company profits, pushed it back up again.
The basic underlying problem is that too many Americans - still persuaded that their nation is incomparable wealthy and productive - find it impossible to take seriously the idea that the country has fundamental economic problems; and even when they do, they tend to blame Democratic liberal improvidence. Yet since the Reagan era, Republicans have abandoned their traditional role as guardians of fiscal probity.
It would be a rash analyst who would claim to foresee what will be on the minds of American voters eighteen months from now. Some unexpected event - in Pakistan, the middle east or the Maghreb for example - could utterly transform the mood. Yet it is safe to assume that the 2012 election, like all presidential elections, will be largely decided by what voters feel about the nation’s economic prospects.
If real unemployment (as opposed to official measures) is as high in November 2012 as today, the president will be on the defensive. If, moreover, the Tea Party and the House Republicans are successful in framing the deficit as evidence of Democratic profligacy, the Republicans will have an opportunity. Can they take it?
Perhaps not. So far, a procession of mainly dull candidates and potential candidates has filed across the political horizon: Romney, Huckabee, Barbour, “Jeb” Bush, Gingrich, Christie, Daniel, Pawlenty and the rest. A difficulty in handicapping American political races is the long-established tradition among possible runners never to admit that they want to be considered until it is futile to deny it. Even what is known as a “Sherman declaration” (“I would not serve if elected”, said the general in 1884) may not deter speculation: at least two interesting outsiders (Bobby Jindal, Indian-descended governor of Louisiana and General David H Petraeus) have actually used the Sherman formula without ending rumours that they may run.
It is hard to avoid the perception that potential Republican candidates for 2012 are deterred by the hovering figure of Sarah Palin. That in itself is a reflection on what has happened to the party of Abraham Lincoln. Whether Palin runs or not, it is now clear that the central domestic issue of the campaign will be the debt, the deficit and the economy.
No one should underestimate President Obama’s tactical skill. Repeatedly, he has managed to come back with some soothing gain from the most unpromising political imbroglio. He will however have to do better than that. He is not as popular as might have been predicted at his inauguration. He is not feared as a really successful president would be. His record is not so brilliant as to be unassailable. And the Republicans have so far escaped punishment for the insinuations they have made or indulged about his religion or citizenship.
The president’s voice
The Republicans are carrying handicaps, too. The weightiest perhaps is the demographic deficit. The Republican Party is seriously disadvantaged by its attitudes to race, to minorities and to immigration.
The 2011 census reveals that the Hispanic population of the United States, now more than 50 million, or nearly 17% of the population, has grown by an astonishing 43% since 2000. Since the Hispanic birthrate is far higher than that of any other sizable group, the date at which white folks will cease to be the majority in the United States is no longer over the horizon.
Already well over one-third of the population is African-American, Hispanic, or Asian. The Republicans will pay a high cost for what once seemed electorally clever, their scarcely veiled preference for white voters. That is a mortgage on the future of the Republican Party. Unless it can convince voters, and especially African-American, Hispanic and Asian voters, that it is no longer the white folks’ party, then Barack Obama’s re-election is probably safe.
Before then, however, he has got to abandon his usual custom, and mix it with the Republicans on the vital issue of the deficit. He has begun explicitly to oppose the Republicans' mean-spirited policies. On 14 April in Chicago, he said: “We’ve got to reform defence spending. We’ve got to reform healthcare spending. But we’re not going to sacrifice our fundamental commitment that we made to one another through Medicare and Medicaid and Social Security, the safety net for our people. And we need to bring some balance to our tax code.”
It is a beginning. For more than two years, the president has followed his cautious instincts. He has behaved as if he did not understand the deep ideological polarisation in the country, a division based on growing inequality. He surely does understand it, but so far he has avoided the political risk of speaking out about it. Now he seems to realise that accepting that risk is an essential step towards his re-election - and a historic victory over Sarah Palin, Fox News, the Tea Party, the freshmen House Republicans, and all the powers of corporate interest behind them.
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