Downgrades and Market Drops

One of the nice things about being poor is not losing money in the stock market. I almost feel like a lucky ducky.

I take it the media are linking today’s stock market plunge to the S&P downgrade, which makes Professor Krugman crazy

They really are trying to make my head explode, aren’t they?

Once again: S&P declared that US debt is no longer a safe investment; yet investors are piling into US debt, not out of it, driving the 10-year interest rate below 2.4%. This amounts to a massive market rejection of S&P’s concerns.

The S&P downgrade may be contributing to investor unease, but today’s plunge was more likely caused by “investors suddenly noticing just how weak the fundamentals are. Also, the mess in Europe,” Professor Krugman says.

Parliament on the Potomac

In a rare moment of reduced fog, Ross Douthat comes within a few hundred yards of a clue today. Yes, 10,000 monkeys in a room full of typewriters, etc. But let’s take a look.

Douthat dutifully concedes that American government has become, in S&P’s words, “less stable, less effective, and less predictable.” He says this has happened because with each election, politicians of both parties (ahem) are trying to force a transformative realignment of power that will establish their overwhelming dominance over the nation’s policy.

Both parties, you say? We know that’s what Republicans have been doing. Karl Rove openly admitted he was working for a “permanent Republican majority.” However, Douthat writes,

The dream of realignment has become the enemy of such compromises. It inspires politicians to claim sweeping mandates from highly contingent victories: think of Dick Cheney insisting on another round of deficit-financed tax cuts in 2003 because “we won the midterm elections” and “this is our due,” or the near-identical rebukes that President Obama delivered to Eric Cantor (“Elections have consequences — and Eric, I won”) and to John McCain (“the election’s over”) during the debates over the stimulus and health care.

So, to Douthat, the President asking the minority members of Congress to stop obstructing his policies is the equivalent of Karl Rove’s permanent Republican majority. I don’t think so.

The losers, meanwhile, wax intransigent, while hoping for a realignment of their own. After all, why cut a deal today if tomorrow you might overthrow your rivals permanently? Better to just say “no” flat out, as the Bush-era Democrats did with Social Security reform and the Republicans did with health care, and hope that the next election will deliver you the once-in-a-generation victory.

Certainly, members of the minority party do not have to roll over and vote to pass bills they don’t like just because the President wants them passed. But there is a huge difference between opposing and obstructing, just as there is a huge difference between making factual arguments against policies you don’t like and whipping up public hysteria by screaming that President Obama wants to kill your grandma.

A criticism I see cropping up a lot lately is that Republicans act as if they are the majority in a parliamentary system, not a presidential system. Tom Moran writes in the Newark Star-Ledger,

The problem is these guys won’t compromise. That might be OK for a minority party in a country like Britain, where a parliamentary system gives all the power to the majority party. But our democracy splits political power into pieces. And it can’t work without compromise.

Parliaments function by building consensus coalitions, sometimes made up of representatives from several parties. And, of course, usually the prime minister serves at the pleasure of the majority in parliament. Parliamentary majorities usually can pass whatever legislation they want and don’t have to compromise with the minority.

But in the U.S. the government has always functioned, when it functions, through compromise. Even a majority can’t enact whatever it wants without limit.

Moran interviewed Norman Ornstein, a political scientist and fellow at the conservative American Enterprise Institute who is generally regarded as a moderate. Ornstein said the last time Congress was this unable to compromise was right before the Civil War. Ornstein continues,

“First of all, it’s not just the Tea Party. The most significant element is this: Back in 1973 they created the Republican Study Committee as the right-wing caucus of the Republican Party. It was a tiny group, like 10 percent of Republicans. This year it’s close to 80 percent. This isn’t just the Tea Party, or just freshman. It’s many others. And with them, it’s a hard-line my way or the highway, even within their own party. Just being ideologically strong doesn’t mean you have to throw pragmatism out the window like this. They are behaving like a parliamentary party. …

… “We live in a country where the Framers had the genius to see that in an extended republic like ours, with very different geographies and viewpoints, that you’d need deliberation and debate so that when you came to a decision it would be accepted as legitimate. When you erode that, you start to erode the legitimacy of the whole system. …”

Making the whole system illegitimate means voters blame all politicians indiscriminately and go on binges of throwing all the bums out. And since the disgusted electorate is attracted to candidates spouting inflammatory rhetoric that reflects its disgust, often the new elected bums are worse than the old bums, which in turn makes the whole system “less stable, less effective, and less predictable.”

“Republicans in Congress aren’t listening to broader public opinion, or even Republican opinion. They’re looking at a sliver of it. What they’re looking at is whether they can get through a primary.”

In fact, a small and well-funded minority has hijacked the legislative process, and neither the voters nor the opposition party seem to know how to stop it.

At The Guardian, Michael A. Cohen writes,

The American political system discourages radicalism and relies on compromise. Yet the violation of even the most customary rules of governance has made such deal-making now nearly impossible. It was once considered a given that, with the rarest of exceptions, a president would be able to appoint his own charges to key policy-making positions; and the debt ceiling was considered an occasionally politicised but generally pro forma exercise. No longer. In a system designed around collegiality, Democrats have few tools in their arsenal to combat the GOP’s political obstinacy.

As a result, America is increasingly moving toward a parliamentary system in which politicians, rather than voting along regional lines or in pursuit of parochial interests, cast their ballot solely based on whether there is a D or R next to their name. Such a system might work well in the UK, but in the US, with its institutional focus on checks and balances and the many tools available for stopping legislation, a parliamentary-style system is a recipe for inaction.

But a confused, estranged, and often angry electorate irrationally rewards the obstructionists in elections, even when polls show they generally favor Democratic policy ideas (keeping Medicare, for example). I think even few progressives fully appreciate how much the system is broken, and they are angry at Democrats for not doing a better job at getting around the Republicans. And, certainly, there is room for criticism. But I still say that much of the anger from the Left toward the Obama Administration began with unrealistically high expectations. And anyone who thinks that merely electing someone “toughter” will take care of the problem is still clueless.

John Harwood:

“It’s a problem for everybody in office,” said Tom Davis, a former chairman of the National Republican Congressional Committee who describes himself as happily retired from the House.

“The political system, Republican or Democrat, over the last decade has delivered two failed wars, an economic meltdown, 20 percent of homes underwater, stagnant wages,” he said. “Voters look at the political system as a whole as just not giving them anything.”