Dispatch September 2008

Why There's No Deal Yet

Henry Paulson’s dropping to one knee to woo Nancy Pelosi suggests, troublingly, that he doesn’t get Congress. The target of seduction should be the leader on the other side of the aisle.

Marc Ambinder’s item on why Democrats don’t simply pass their own bailout bill is correct: they’re insisting on rank-and-file Republican support so that if the plan fails they alone won’t face the political repercussions. A cover story I wrote last September has relevance to the bailout debate because it illustrates the two scenarios—the good one and the bad one—currently facing Democrats.

The broader purpose of the article (“The Rove Presidency”) was to look at why Karl Rove and the Bush administration failed to bring about the political realignment they desired. The short answer was: Rove had no idea how to govern. The administration’s greatest domestic policy debacle—and the fulcrum point of Bush’s presidency, I argued—was the bid to privatize Social Security just after Bush’s reelection. The example illustrates what Rove did wrong, and provides a museum-worthy example of the “bad scenario” Democrats fear will result from acting alone on a bailout:

           There was an important difference between the administration’s first-term achievements and the entitlement overhauls (Social Security and Medicare) and volatile cultural issues (immigration) that Rove wanted to push through next. Cutting taxes and furnishing new benefits may generate some controversy in Washington, but few lawmakers who support them face serious political risk. (Tax cuts get Republicans elected!) So it’s possible, with will and numbers alone, to pass them with the barest of majorities. Rove’s mistake was to believe that this would work with everything.
           Entitlement reform is a different animal. More important than reaching a majority is offering political cover to those willing to accept the risk of tampering with cherished programs, and the way to do this is by enlisting the other side. So the fact that Republicans controlled the White House and both houses of Congress after 2002—to Rove, a clinching argument for confrontation—actually lessened the likelihood of entitlement reform. Congressional Republicans didn’t support Rove’s plan in 2003 to tackle Social Security or immigration reform because they didn’t want to pass such things on a party-line vote. History suggested they’d pay a steep price at election time.
          ...Rove pursued his [Social Security] plan with characteristic intensity, running it out of the White House from the top down, like a political campaign, and seeking to enlist the network of grassroots activists that had carried the Bush-Cheney ticket to a second term. Bush gave Social Security prominence in his State of the Union address, then set out on a national road show to sell the idea. But after an election fought over the war, Social Security drew little interest, and in contrast to the effect Bush achieved on education in the 2000 campaign, public support didn’t budge. (It actually worsened during his tour.)
          Unlike Reagan, Bush did not produce a bill that could have served as a basis for negotiation—nor did he seriously consult any Democrats with whom he might have negotiated. Instead, Rove expected a bill to emerge from Congress. The strategy of a president’s outlining broad principles of what he’d like in a bill and calling on Congress to draft it has worked many times in the past. But Rove had no allies in Congress, had built no support with the American public, and had chosen to undertake the most significant entitlement reform since Reagan by having Bush barnstorm the country speaking before handpicked Republican audiences with the same partisan fervor he’d brought to the presidential campaign trail—all of which must have scared the living daylights out of the very Republicans in Congress Rove foolishly counted upon to do his bidding.

As no one needs reminding, Rove’s plan bombed and cost his party control of both houses of Congress a short while later.  To illustrate what he should have done—and to see why Democrats are wise to insist on broad Republican support for a bailout—I offered the example of the (eventual) bipartisan effort to shore up Social Security during the early Reagan administration:

          Before he was president, Ronald Reagan talked about letting people opt out of the Social Security system, a precursor of the plan Rove favors. In 1981, in the full tide of victory, Reagan proposed large cuts—and the Republican Senate refused even to take them up. The mere fact that they had been put forward, however, was enough to imperil Republicans, who took significant losses in 1982.
          The following year, Reagan tried again, this time co-operating with the Democratic speaker of the House, Tip O’Neill. He now understood that the only way to attain any serious change on such a sensitive issue was for both parties to hold hands and jump together. To afford each side deniability if things fell apart, the two leaders negotiated by proxy. O’Neill chose Robert Ball, a widely respected Social Security commissioner under three presidents, while Reagan picked Alan Greenspan, the future chairman of the Federal Reserve. Key senators in both parties were looped in.
          As Ball and Greenspan made headway, it was really O’Neill and Reagan who were agreeing. To assure both sides political cover, the negotiations were an all-or-nothing process. The plan that was eventually settled on addressed the solvency problem by raising the retirement age (which pleased Republicans) and taxing Social Security benefits for the first time (which pleased Democrats). Unlike in 1981, Republicans in Congress weren’t left exposed. Democrats couldn’t attack them for raising the retirement age, because Tip O’Neill had signed on. Republicans couldn’t complain about higher taxes, because Democrats had supported Ronald Reagan’s plan.

Given this history, it’s no wonder Democrats balk at moving without support from House Republicans. Henry Paulson’s dropping to one knee to woo Nancy Pelosi suggests, troublingly, that Rove isn’t the only guy who doesn’t get Congress. The target of seduction should be the leader on the other side of the aisle.

Presented by

Joshua Green is an Atlantic senior editor.

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