And yet there's reason to question whether meaningful legislation will emerge from this maelstrom, especially if the president is not from the same political party as the majority in the House and the Senate. Despite mythology to the contrary, divided government has never been particularly conducive to important pieces of legislation -- and more importantly, the rise of polarization and the decline of moderates in Congress makes the hurdles of divided government more challenging than they've ever been during the postwar era. As a result, it's entirely possible we'll have another placeholder or "framework" deal in early 2013 -- embodying the false hope that with just a bit more time, we could finally reach a more substantial agreement.
The situation in early 2013 is thus a microcosm for examining a new and fundamental dilemma of our political economy, one that is driven by the disappearance of moderates in Congress. National elections continue to be won by appealing to the swing voters in the middle of the political spectrum. (Indeed, because the rise of polarization creates safer bases for each side, it makes centrist swing voters ever more crucial to winning presidential elections.) And yet, after winning national elections by appealing to centrists, politicians quickly learn that actually governing from the center is less and less feasible given the hyperpolarization now reflected in Congress.
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Instead, major legislation is more likely to succeed on a partisan basis. But that's only possible in the rare instances in which one party wins the political trifecta -- the White House, the House of Representatives, and close to 60 votes in the Senate. Furthermore, a party that uses those rare moments of political supremacy to enact significant legislation on a partisan basis will typically suffer enough backlash to destroy the temporary dominance.
The United States will thus spend significant periods of time with divided government. And the rise of polarization and the associated decline in congressional moderates means that the harm from such periods is likely to be higher than in the past, since divided government was less debilitating when the center in Congress was more heavily populated.
We need not, however, lose all hope, even with divided government. After all, and however improbable it seems right now, it's possible that the drama of early 2013 will produce an agreement that avoids undue immediate fiscal austerity while modestly reforming the tax code and entitlement programs.
Imagine, for example, the following scenario that I describe in more detail at the end of this essay: The administration, having tried valiantly but failing during the lame-duck session to extend the tax cuts only for those with incomes below $250,000, allows all the tax cuts to expire at the end of the year. Taxes rise, the debt limit looms, and commentators on CNBC say the world is about to end.