Monday, April 11, 2011

US budget debate points to big ideological divide

Business Times - 12 Apr 2011


US budget debate points to big ideological divide

Voters will probably have to make a major choice between two competing visions in 2012

By LEON HADAR
WASHINGTON CORRESPONDENT

THE race for a budget deal came down to the wire. Federal funding was slated to run out at midnight on Friday and the government would have shut down if no budget deal had been reached by then. The government of the world's remaining superpower - engaged in at least two full-blown wars and recovering from the worst economic recession since the Great Depression - was going to run out of money. About 800,000 American federal employees would have been out of work; passports wouldn't have been issued; the annual National Cherry Blossom parade scheduled to take place in Washington, DC on Saturday would have been cancelled to the disappointment of close to 100,000 expected spectators.

But the high-stakes game of chicken between Democratic President Barack Obama - represented in the negotiations by Democratic Senate Majority Leader Harry Reid from Nevada - and the Republican Speaker of the House John Boehner of Ohio ended up with no losers or winners. As the hours ticked, there were new signs that the two major players in this exercise in political brinkmanship were about to reach the endgame.

Political drama

Earlier in the day as a budget deal continued to elude Congress, each side was still fighting hard to put a possible shutdown decision into the other's hands. Holding press conferences, appearing on cable television news shows, blogging, Facebooking and Tweeting, Democrats and Republicans were trying to outline their competing narratives in which the other party plays the role of the villain - the one that was disregarding the public interest and playing politics - in the political drama.

At the same time, as they continued negotiating and operating in the expectation that a deal could be reached, neither the White House nor the Republican leaders wanted to be perceived by their supporters as well as by the general public as the side that blinked first and yielded to the pressure of its adversary.

From that perspective, each player seemed to have concluded that the most effective strategy involved not giving up until a few minutes before midnight. And that is exactly what happened.

'We have come to an agreement to cut spending and keep our government open,' Mr Boehner said, announcing the agreement reached with Mr Obama and Mr Reid two hours before the midnight deadline.

Mr Boehner said the House would now approve a short-term bill to keep the government operating for a few more days while the budget deal over government spending until fiscal year 2011 ends on Sept 30 was finalised.

Stumbling block

Notwithstanding all the drama, the suspense and the heated rhetoric in recent days, the gap between them was actually very narrow. The Republicans pressed for a deal that would include about US$39 billion in spending cuts. The White House and the Democrats were pushing to keep the reductions to about US$34 billion. The difference of about US$5 billion amounted to 0.1 per cent of the US$3.5 trillion federal budget.

But what seemed to have been the major stumbling block to a deal until the last moment were Republican demands that the final package include new restrictions on abortion funding and environmental restrictions. The Democratic message that the Republican leadership has been 'hijacked' by the right-wing social conservatives in their party clearly put Mr Boehner and his colleagues on the defensive. They were worried that American voters - in particular, the independent voters at the political centre - will punish the Republicans in next year's elections for risking the shutdown of the federal government and for possibly threatening the fledging economic recovery as a way of appeasing the radical members of their party.

Indeed, both the Republicans and the Democrats recognised that the fight over the shutdown was going to be first act in a long and bruising confrontation over their opposing strategies on how to deal with the mounting US federal budget deficit that would probably spill over in the 2012 presidential race and Congressional elections. The next act would probably be a legislative clash over whether to allow the US Treasury to borrow beyond the current US$14.3 trillion debt limit.

Huge cuts

And then there is the more comprehensive debate on where and how to slash government spending. Republican Paul Ryan from Wisconsin introduced this week a major plan to cut the deficit by close to US$6 trillion in the next year by making huge cuts in government funding of two major healthcare programmes for the elderly and the poor. And his plan is expected to be adopted by the Republican-controlled House in the coming weeks.

In short, the debate over the budget would be setting the ideological parameters of the 2012 election campaign, with both parties targeting the same electoral bloc, the so-called independent voters who in many ways had provided presidential candidate Obama with the margin of victory during the 2008 vote, including in traditionally red states such as Virginia.

These voters were attracted to Mr Obama's centrist and 'post-partisan' message he had been promoting during the campaign and his pledge to fix the ailing American economy and create new jobs.

But many of these 'independents' - mostly white middle-class professionals who live in the suburbs of large cities - deserted the president and his party during the 2010 midterm elections and switched to the Republicans who succeeded in taking control of the House of Representatives and several key governorships.

Public opinion polls suggest that by dumping Mr Obama and the Democrats in 2010, these independent voters had expressed their dissatisfaction with what they perceived to be part of a shift on the part of Mr Obama from the political centre to the left.

More specifically, Mr Obama seemed to have failed in convincing the same voters that the massive government spending or 'stimulus' programmes, including the costly health reform programme, would help stimulate the ailing economy. Instead, against the backdrop of a sluggish economic recovery, the Republicans and their allies in the Tea Party movement succeeded in wining over many independents by arguing that Mr Obama's Keynesian economic policies were the problem and that they were not only unsuccessful in reviving the economy and creating jobs, but were also responsible for the massive federal budget deficits threatening long-term American economic security.

Opinion polls suggest that the strategy employed by the Republicans and their allies in Fox News and other right-wing media outlets has been instrumental in creating the perception that Mr Obama was a Big Government liberal, if not a 'socialist', who together with the members of the left-wing members of his party was planning to take control of the American economy.

So now Mr Obama and the Democrats are hoping that the fight over the budget would help them to turn the tables on the Republicans and regain the independent vote in 2012. Under this scenario, the Republican Congressional leaders would be perceived by the public to be under the influence of the 'extremist' right-wing members of the Tea Party and the right-wing social-cultural conservatives who want to restrict the right of women to have abortion and to defund social-economic programmes that assist the unemployed and the poor.

In fact, there seemed to have been a major opinion gap between the members of the Tea Party and the independents on whether they prefer a compromise or a government shutdown. Tea Party members and other Republican activists who constitute the electoral base of the party wanted a shutdown, while independent voters favoured a compromise, which explains why Mr Boehner decided he needed to make a deal with the White House and the Democrats.

Missing point

Moreover, Mr Ryan's proposed budget plan provides another opportunity for the Democrats to contrast their economic approach with that of the Republicans during next year's election campaign. Opinion polls suggest that a large majority of Americans opposed the central element in Mr Ryan's proposal of gradually eliminating government support for the programme that provides healthcare for Americans over the age of 65.

At the same time, Mr Obama and the Democrats are expected to point out to what is missing from the Republican plan: doing away with the Bush era's tax cuts for wealthy Americans and making deeper cuts in the defence budget.

Indeed, the American people are probably going to have to make a major choice between two competing ideological visions next year.

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