If you harboured any hope that the Republican victory in the mid-term US polls would usher in an era of civility and compromise in Washington, don’t watch this video clip. In it, Republican Congresswoman Michele Bachmann voices outrage on CNN over the cost of President Barack Obama’s state visit to India, which she quotes as a highly improbable $200 million (Rs 888 crore) a day.* Her interviewer notes that the White House has dismissed the figure as inflated and invites her to admit that the number is “made up”. Undeterred, Bachmann repeats that Obama is a big spender and needs to be reined in, presumably by Republicans like her.
In modern American politics, nothing is more important than a good negative story to tell about your opponent—not even the facts. Having won the mid-terms last Tuesday by blaming the recession on Democrats’ fiscal profligacy, Republicans are in no hurry to shift from attack mode into governing. Bachmann’s dubious claim is one example. Another is Senate minority leader Mitch McConnell’s declaration two days after the election: “Our top political priority over the next two years is to deny the President a second term in office.”
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Those, clearly, are not the words of compromise. Brace yourself for a nasty round of trench warfare in Washington—with some serious implications for the global economy.
There will be no more fiscal stimulus for the US economy: That the Democrats caused the recession by overspending taxpayers’ dollars doesn’t bear up to scrutiny, economically speaking. But as politics, it worked brilliantly. At one point last year, Congress considered approving billions in new government spending to strengthen the still feeble US recovery. After Tuesday, no politician would dare support any such proposal.
With Congress unwilling to act, the Federal Reserve has become the default source of economic stimulus. The day after the polls, Fed chairman Ben Bernanke announced that the central bank will flood the economy with $600 billion in newly created dollars in hopes of prompting banks to lend and businesses and consumers to spend. Will it work? No one knows. The Fed has never tried anything quite like this. The risks are considerable: Flooding the world with freshly minted greenbacks could undercut the dollar, trigger a round of competitive devaluations by finance ministries worldwide, hike interest rates and, perversely enough, prolong the recession. With Congress on the sidelines, however, the Fed is the only white knight around. And the only tool it has is the monetary printing press.
Fiscal sanity will be harder to achieve: On 1 December, Obama’s bipartisan National Commission on Fiscal Responsibility and Reform will submit a proposal for bringing the US treasury’s ballooning debt under control. By agreement, Congress must vote the proposal up or down, without modification. Press leaks indicate that commission members plan to suggest painful cuts in some widely popular programmes and the elimination of beloved tax breaks like that for interest on home loans. Approving such a plan would have been difficult in a unified government. Now—well, it is hard to be hopeful.
Healthcare reform will be undermined: Campaigning Republicans promised to repeal healthcare reform, Obama’s main legislative achievement. Since their victory fell short of a majority in the Senate, Republicans don’t have the votes literally to overturn the reviled but much misunderstood law. But they could cripple it by refusing to fund efforts to put it into effect. “They’ll get not one dime from us,” said John Boehner, the new majority leader in the House.
In any likely scenario, the Republicans will not interfere with the most popular aspects of the law, those that favour seniors and employees covered by health insurance at work. Instead, they would “de-fund” the portions that extend health coverage to the 50 million Americans now uninsured. Problem is, until those uninsured are in the mainstream healthcare system, healthcare costs will continue to spiral out of control.
How will Obama respond to his opponents? Reasonableness seems his preferred leadership style, and indeed, in the days since the election that was the tone he struck when asked about his electoral defeat. In a Town Hall meeting with students at St. Xavier’s College in Mumbai, Obama said, “One of the beautiful things about a democracy is that when the people are not happy it is their right, obligation and duty to express their unhappiness—much to the regret sometimes of incumbents.” The election defeat, he admitted, meant that he would need to consider “a mid-course correction”, which he would determine in conversation with Republicans.
Reaching a compromise with Republicans has precedent: After a stinging Democratic defeat in the 1994 mid-term elections, Bill Clinton salvaged his second term by moving to the political centre and adopting portions of the Republic agenda for his own.
Compromise, however, requires that the other party meet you halfway, and it’s clear that Republicans feel no need to do that. There is a growing drumbeat among Democrats urging Obama to be a bit more bloody minded: to model himself not after Clinton but rather after Franklin D. Roosevelt, the US president during the Great Depression. Like Obama, Roosevelt faced an economic catastrophe and struggled unsuccessfully to reduce unemployment. But by painting himself as the common man’s defence against the predations of rich bankers—and painting Republicans as the bankers’ friends—he never paid a political price for it. “They are unanimous in their hate for me, and I welcome their hatred,” he famously declared of bankers in his 1936 campaign stump speech. Then, as now, running against bankers was not a bad idea.
Obama has never made any secret of his admiration for Mohandas K. Gandhi, and three days after his electoral defeat, Obama and his wife visited Gandhi’s home in Mumbai. But perhaps in this situation, Gandhi is the wrong hero. With triumphant Republicans showing no interest in sharing national leadership, peaceful resolution of differences may be a non-starter for now. To save his party’s agenda, he might forget the Gandhian metaphor of the spinning wheel and put a little Roosevelt spin on his situation: It’s me or the bankers who got us into the mess. Take your pick.
*The $200 million estimate originated with an anonymous Indian official quoted by the Press Trust of India. Apparently, neither Bachmann nor the anonymous official were aware that $200 million is greater than the daily cost of the war in Afghanistan and 40 times the price tag of similar presidential excursions in the past. Perhaps the official confused dollars and rupees.
Eric Schurenberg is editor-in-chief, CBS Interactive Business Network, and former editor of Money.
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