The New Congress and the Coming Class War
According to Newsweek's Jonathan Alter, the president recently told friends, "All I want for Christmas is an opposition I can negotiate with." Well, he had one, briefly, so long as he was willing to cave in to its demands to bust the budget with a massive gift of more than $130 billion in tax cuts to the wealthiest 2 percent of the country and the gutting of the estate tax. That cleared the decks for other "victories" and "compromises" and led to widespread insider approval of Obama's ability to "make the system work." Like 13-year-olds at the movies, pundits love "action," period, never mind its consequences.
It's hardly surprising that few of them noticed that even during this decidedly brief Era of Good Feelings, Republicans refused to fund the government through the end of the fiscal year. Instead, both parties agreed to extend current levels of funding temporarily to avert an immediate government shutdown, with the mutual understanding that the postelection House will be much stingier than the old one. So Obama bought himself some peace in Hawaii, but at the cost of returning home to a metaphorical house on fire.
What is not understood by those who cover contemporary conservatives (and, one fears, by those who negotiate with them) is that while they like to talk about all kinds of values, these are always subordinated to a single, unchanging and uncompromised goal: class warfare.
Think about it. Ronald Reagan and George W. Bush talked incessantly about fiscal responsibility and lost no opportunity to denounce deficit spending, but these principles flew out the window when it came time to cut taxes on the rich. The new bunch are even worse. Incoming House Ways and Means Committee chair Dave Camp recently told George Will that one of the biggest problems with our tax system is that too few poor people pay income tax.
In addition to the tax cuts, but far beneath the radar, Republicans fired another volley in the right-wing class war by refusing to approve funding to continue the Build America Bonds program. These bonds, which make up roughly 20 percent of all new debt sold by states and local governments because of a federal subsidy equivalent to some 35 percent of interest costs, ended on December 31, as Republicans proved unwilling even to consider renewing them. The death of the program could prove devastating to states' future borrowing. According to the Center for Budget and Policy Priorities, states face a $140 billion budget shortfall next year; some predict that the figure could rise to as much as $3 trillion over time when one includes unfunded liabilities to pay for retiree benefits.
This serves the purpose of Republican class war in two respects. It forces localities to slash their budgets for services like snow removal and public schooling—a form of transfer payment from the wealthy to the rest of us. But even more, it will eventually force localities to default on their pension obligations, and thereby destroy the credibility of the public unions that negotiated them. Note that they are doing this at a moment when the recovery is imperiled by the loss of public-sector jobs. But forget the recovery; Republicans Devin Nunes, Darrell Issa and Paul Ryan are co-sponsoring a bill to demand that state and local governments recalculate the likely size of their pension obligations in light of the downturn or risk the loss of the right to issue tax-exempt bonds.
Hamtramck, Michigan, recently profiled in the New York Times, is the future to which these Republicans look forward. The town already ceased taking care of the trees and grass on public property and ran out of money for street plowing just before the recent blizzard. Localities like Hamtramck are getting little help from the state legislature, however. "All our communities have done is cut, cut, cut," said Summer Hallwood Minnick, director of state affairs for the Michigan Municipal League. "They're down to four-day workweeks and the elimination of parks, senior centers, all of that. So if there's anything else that happens, they will be over the edge."
Ditto Prichard, Alabama, which recently ceased mailing monthly pension checks, in violation of state law. A retired fire marshal died in June and was found without running water or electricity in his house. These are extreme cases, but the danger is widespread. Rare is the locality whose pension obligations are fully funded, and none are dealing with it terribly responsibly. New Jersey, for instance, under Republican hero Governor Chris Christie, simply refused to fork over the $3.1 billion due its pension plan this year. Christie will worry about that tomorrow.
The conservative Reuters columnist James Pethokoukis has helpfully laid out the Republican strategy. By refusing to bail out the states, local governments will be forced to go the route of either Hamtramck or Prichard, cutting services, pensions or both. Republicans may even pursue legislation allowing states to declare bankruptcy and let the unions fight it out in the courts. "From the Republican perspective," Pethokoukis explains, "the fiscal crisis on the state level provides a golden opportunity to defund a key Democratic interest group." Barack Obama, forgetting, once again, which side elected him, chose to reinforce this right-wing narrative by unilaterally—and unnecessarily—freezing the salaries of all federal workers. Once again, it pains me to add, he elicited not a single conservative concession in return. Obama, like so much of Washington, loves to see the deal done and worry about the details later. But with a radical Republican majority coming to power in the House, what America needs right now in the White House, Mr. President, is a fighter, not a referee.