This new status quo is hardly ideal for the Democrats. There are cuts in reimbursements to Medicare providers and other reductions in social spending. Moreover, the combination of higher taxes and lower government expenditures may well send the economy into recession. But however unpleasant for Democrats, the new status quo is simply unbearable for most Republicans. And it drives a wedge between different parts of the Republican coalition. Defense contractors and hospital administrators will demand relief from the spending cuts, while the rich will demand lower taxes. But nothing will happen until Obama signs new legislation. And that allows Obama -- and his party -- to have a say about what tax reductions and expenditures are passed.
Commentators have warned that if nothing is done immediately, the country will go off a "fiscal cliff," but the term is actually a misnomer. Once the tax rates go up and the cuts begin, it will take some time for them to have a serious effect on the economy, and the tax increases can always be reversed retroactively. This gives Obama plenty of time to strike a deal, if he has the fortitude to wait.
What most observers don't realize is that, after January, Obama will enjoy an enormous bargaining advantage. He will start from a baseline of higher taxes, decreased defense expenditures, and increasing revenues that will shrink the deficit with each passing day. Obama will surely want to make some changes, especially in order to keep the economy healthy. But after the beginning of 2013, entitlement reform, tax reform, and long-term deficit control will become far easier, because any changes to the status quo will lower taxes instead of raise them and increase defense expenditures rather than cut them. Moreover, this time Obama knows that any agreement must include regular raises in the debt ceiling.
Republicans, who have previously been intransigent, will now feel compelled to negotiate in earnest, because doing nothing will cause different parts of their base to turn against them. Jonathan Chait sums it up well: Once the baseline for bargaining flips, "the Republican anti-tax crusade will be broken, and with it the pathology that has launched the deficit wars."
January 2013 is Obama's magic moment. He has a chance to break the Republican stranglehold on the country's domestic agenda and put Democratic policies in place. That is how Obama might become a transformative president -- or failing that, one of the most successful preemptive presidents in American history. But he will only get one shot at greatness, and he must take maximum advantage of it.
It will not be easy. There will be enormous pressure on Obama to cut a deal during the lame-duck session of Congress immediately after the election. Wavering Democrats fearful of a new recession will insist that Obama prevent the Clinton-era tax rates from ever going into effect. Centrist pundits will demand that Obama adopt the Simpson-Bowles deficit-reduction proposal, which is actually to the right of what he could probably get from the Republicans after January 2013.
But if Obama can hold tough until January, he can strike a deal on entitlements, defense, and taxes that will favor Democratic priorities for a long time. This would also increase the fissures in the Republican coalition, heightening the divisions between defense hawks, anti-tax ideologues, and deficit crusaders. And, to top it off, Obamacare will remain in place, and a guarantee of health care for Americans will become part of the social contract for the foreseeable future.
Obama needs to do one other thing, however, that will make his task much easier. He must champion reform of the Senate. The current combination of filibuster and hold rules limits effective legislative reform, and it makes it difficult for Obama to staff federal agencies -- like the new consumer protection agency and the Federal Reserve -- with experts who will promote his policies. It also prevents him from stocking the courts with new judges who agree with his constitutional values. As Reagan well understood, no transformation in political regimes is complete without a transformation of the executive branch, the independent administrative agencies, and the judiciary.
Democrats have little to gain from sticking with the existing Senate rules. If Mitt Romney wins and his party retakes the Senate, the Republicans will have few scruples about changing the rules of the game to promote their policies. McConnell has no intention of allowing current Majority Leader Harry Reid to do to him what he did to Harry Reid. Because some kind of Senate reform is inevitable, it is rational for the Democrats to benefit from it first, while they can.
Of course, if they retain control of the House in the 2012 election, Republicans have one last card to play: impeachment. Republicans have been trying their best to find a damaging scandal during Obama's first term, so far with little success. But the longer a presidency lasts, the greater the chances are that something will turn up, especially in a president's second term. And if a scandal takes off, Republicans can try to impeach Obama. Scandal and impeachment are serious dangers for preemptive presidents, whose legitimacy is usually already under siege. It is worth noting that of the three presidents who have either been impeached (Andrew Johnson, Clinton) or resigned under threat of impeachment (Nixon), all three were preemptive presidents (Johnson, a war Democrat, became president following Lincoln's assassination and quickly got caught up in a power struggle with a Republican Congress).
Finally, if Obama wants to make his influence lasting, he must work to create an economy prosperous enough to help ensure that a Democrat follows him in 2016. Preemptive presidents usually aren't succeeded by members of their own party, but reconstructive presidents often are. If another Democrat -- say, Hillary Clinton -- takes the oath of office in January 2017, that will be the strongest indication that, at least for the Democrats, it is morning in America. The Age of Reagan will be over, and the Age of Obama will have begun.