Debt Ceilings and Trojan Horses: What the Fight in Washington is Really About

The debate over raising the debt ceiling limit is a Trojan horse. It is only partially about allowing the government to pay for obligations that it has already incurred. If that were all it is about then the vote should be pro forma. But it is not. It is merely a proxy for a different set of battles that now appear to have little to do with the debt ceiling. Instead it is about power, influence, the 2012 election, and a zero-sum view of the world.

There is a sense in which the debate over the debt ceiling is about economics and government. By that, it is over the role of the government in the economy and what is the best way to provide goods and services into the future. It is a debate, at its best, about government versus markets, how public debt affects economic growth, and perhaps even a discussion over entitlements. If only that were true then the discussion would be more lofty and interesting than it is now. But instead, because the debt ceiling is a proxy for other battles that is what makes it so hard to resolve.

First, the debt ceiling is about influence. Who runs Washington, D.C.? Is it President Obama, Harry Reid and the Senate, John Boehner, or the Tea Party freshman? For each of them, they view this battle as a personal test of strength. For Obama, this is a test of presidential strength and influence. A faltering economy is already dooming his presidential re-election and he is only saved by the fact that the Republicans are running a gaggle of mediocre candidates against him. But look at Obama–he looks perfectly powerless as a bystander in the debt debate. His speech last Monday night was a drip. It was a plea to the American public to help him out. He literally conceded he has no influence over Congress in this debate, practically begging its members to come to reason. His speech came after he tried to negotiate a deal.

For Obama, part of the problem lies in the fact that as Senator he voted against raising the debt limit, but the real problem is one dogging his presidency–competence and a hands-off attitude to do the real dirty work. He refuses or is incapable of expending personal capital to get what he wants in Congress. That approach almost cost him his health care bill, and it also led to him getting a weak Dodd-Frank law and in caving in on the Bush-era tax cuts. Obama just does not know how to fight and execute. Thus, Obama needs the win on the debt limit to save his presidency. Another crash to the economy only makes him look even weaker and more ineffective.

Boehner too needs this win, but also on his terms. He is a weakened speaker of the house after this week. The bill he pushed through on Friday was simply stupid–it was no different than an earlier one but this time it had a balanced budget amendment attached to it. That amendment, even if passed, would not solve any problems. Congress would still have to make the tough economic choices it fails to do now. Another gimmick. The speaker had to pass something, especially after the Tea Party alliance, to prove he was in charge. He is not. He is trapped and it is not sure he is either the leader of his party or leader of the House. If he did what made the most sense–craft a more moderate bill that appeals to House Democrats and which looks more like the Reid bill, then he alienates the Tea Party members who might not continue to support him as either party leader or speaker. But by passing the bill he did–after making it a clash of wills–he showed how little influence he had over his caucus.

For the freshman Tea Party, their stated aim is a zero-sum battle with Obama. Passing a debt ceiling is viewed as a victory for Obama, a capitulation to the Washington status quo, and a resignation of their principles. Better the world be brought down than show weakness.

Finally, for Harry Reid, he needs to show he and the Senate Democrats are still relevant. Snubbing their nose at the Boehner bill and passing their own Senate version is about showing that they have more influence than the House.

One could go on and on, charting out the real interests and battles here that lie behind the debt ceiling debate. It would be easy to describe the rational ways out of the crisis–delink the debt ceiling from debt reduction, or develop more permanent solutions to the issue, such as repeal the redundant and no longer needed 1917 law that requires congressional approval for increases in the debt ceiling, or even serious tax reform as part of a deal to raise the debt ceiling–but all that is an appeal to a serious and adult way out of the issue that presupposes that the debate is really about the debt ceiling. But it is not. All of the parties here have personal interests and agendas to hold fast, rendering the debt ceiling debate merely a Trojan horse for what is really driving the fight.

The Minnesota Budget Deal: Lipstick on a Pig

The deal that ended the government shutdown in Minnesota was terrible both in how it was negotiated and in what it produced. While initially all parties who negotiated it described it as bad, increasingly they are defending it, seeking to find beauty in its ugliness. Yet let’s call this effort what it is—putting lipstick on a pig!

A Bad Budget Process

The government is shutdown. Barricades block access to the capitol. The legislature is suspended. The press and public are barred from observing negotiations. The opposition is kept in the dark. Once a deal is struck and the legislature is allowed to meet the public is given little notice about their deliberations which take place in the dark of the night. Members are restricted in their debate; they have no time to read the bills. They are told to vote for the bills and ordered to be finished by dawn. Sound like politics in a dictatorship or former communist country? Welcome to Minnesota.

From the week before the shutdown to the ugly end last Wednesday, Minnesota was a model in anti-democratic politics that violated all accepted norms of transparency, openness, and accountability. The Republican leadership and Governor Mark Dayton insisted on secrecy to allow for candidate debate, demonstrating hostility to democracy, a contempt for process, and an indifference to open government. What they did is possibly also illegal, violating Minnesota Statutes §13.D, the Open Meetings Law. Were a local government to have done what the legislature and the governor did it would violate the law. The process was bad.

And A Bad Budget Deal

But did the ends justify the means? Did the bad process produce a good result? Except for the delirious who have to salvage something out of it, no one likes the deal struck. But there are two types of dislikes. One is where everyone has to give but the final product is good for the state. The other is where everyone gives and it is bad for the state. The deal struck is the latter.

The budget deal is bad for Minnesota. Nothing was done to address the long term structural deficit the state faces; it is more budget gimmicks. K-12 faces more shifts and possibly borrowing from schools that never gets repaid. Minnesota’s competitive economic edge has historically resided in its highly educated workforce. Yet the budget deal sacrifices long term welfare and economic good for the state, continuing a repeated raiding of education money that questions how much of a priority Minnesota really places on schools.

The tobacco settlement money gets robbed, diverting it from the stated purpose to address health costs and education surrounding smoking. The borrowing here off the tobacco money means increased debt for the state. Thus, Minnesota continues to borrow and shift debt to the future in ways similar to what federal government has done for years. It is no different than paying off one credit card with another. In 2013 Minnesota will be back to the same place it is now. Minnesota is effectively deficit spending but budget tricks and borrowing hide that reality.

In short, long term problems and needed investments are sacrificed to end the current shutdown crisis. The governor and the legislature shut Minnesota government down to reach this deal? Given how bad it was, maybe it would have been better to continue the shutdown.

The Leadership Crisis

But why such a bad deal? One can point to political gridlock, dueling claims of political mandates, ideological polarization, and a host of other issues. But ultimately the blame comes down to a lack of leadership among the three principals–Senate Majority Leader Amy Koch, Speaker of the House Kurt Zellers, and Governor Dayton.

But why the lack of leadership? One answer is that all are inexperienced. None of them had ever been responsible for moving a budget through the legislature. For Koch and Zellers, they are new leaders heading up caucuses for the first time in years in the majority, composed of many new members and rookie committee chairs. They were not up to the job. For Dayton, the lack of leadership was surprising given his resume. Yet his experience in executive positions is distant, his relationship with the DFL party has always been fragile, and this was his first time shepherding a budget through the legislature.

Terrific, Minnesota’s political leadership this year were rookies and JVs.

So here is the leadership deficit: If this is the best deal Dayton, Koch, and Zellers can negotiate, with a process that was undemocratic and possibly illegal, then that questions their ability to lead the state and their parties. The three should have never let Minnesota get to this place.

Bachmann,Pawlenty, and the Government Shutdown: As Minnesota Goes, so Goes the Nation

The parallels between the politics of the Minnesota governmental shutdown and the impasse at the federal level to extend the debt ceiling are compelling. But to understand both, one especially needs to look at the transformation of the Minnesota Republican Party, a party once representing a more moderate stance which is being increasingly remade in the image of Michelle Bachmann and the Tea Party. This change offers lessons about the prospects of a deal on the debt ceiling, the rival presidential campaigns of Minnesotans Michelle Bachmann and Tim Pawlenty, and the nature of American politics and the Republican Party in general.

On the surface the dispute in Minnesota between the Democratic Governor Mark Dayton and the Republican legislature had been over the state budget. Dayton wanted to spend $37 billion and erase the $5 billion deficit with some cuts that do not hurt the poor or education, and with tax increases on the wealthy. The GOP wanted to spend $34 billion and erase the deficit with cuts alone that seem to burden the poor, elderly, education, and local governments. But the budget is a proxy for a deeper disagreement over rival views of the government versus the market. The Republicans see government and taxes as bad, intruding upon the wisdom and functioning of markets. Let markets act and they will generate jobs prosperity, and solve the basic problems of society.

For Dayton, while market solutions and the private sector are the preferred places to produce jobs and make decisions, they recognize markets fail. Markets fail to address needs of equity. They produce inequities in wealth and income distribution, they fail to address core problems of education funding and disparities, they fail to address problems in infrastructure investment.

Yet the Republicans are not consistently anti-government. Many still find it necessary to hire police and enforce basic laws, and apparently to enact laws to prevent same-sex couples from marrying, ban stem-cell research, and outlaw abortion. The real difference between the Republicans and Dayton is over how much government and who it should favor. It is a debate of government versus the market, individual versus society, and secularism versus religion. These debates in Minnesota parallel what is happening at the national level in Congress and with the Republicans and President Obama. The fight over the debt ceiling is merely a proxy for a deeper divide over government.

The debate over 'why government' is ideological. Yet arising simultaneously are other phenomena aggravating the debate over 'why government'–the triumph of ideology over pragmatism and party polarization. Minnesota microcosms the nation. The ideological divide, especially for the Republicans, means all or nothing. By that, if one side is right the other must be wrong and therefore no compromise is possible. As Kurt Zellers, Minnesota's Republican speaker of the house, stated: “Whether it's a half a tax increase, a whole tax increase, or a quarter tax increase ... it's a bad idea.” Thus the equivocation of compromise to capitulation.

But demographics reinforce partisanship. Minnesota is more than a red and blue state–it is polka dotted. The partisan distribution of the state has a clear geographic pattern. The Democrats solidly have the Twin Cities and some of the other urban cores, the Republicans have the rest. The geographic partisanship is hard to correct with redistricting given residential patterns. This means the electoral forces that should drive elected officials to compromise do not exist. Instead, fully partisan areas simply reinforce the current ideological divide. In Minnesota there are only a handful of legislative seats that can really swing, the rest are solidly partisan. This creates little incentive to compromise. The same pattern exists in Congress, with less than a quarter of the seats really swing.

But political parties nationally and in Minnesota are more polarized than a generation or so ago. There is more ideological cohesion in the parties, especially for the Republicans. At one point the Minnesota Republican Party was moderate, selecting individuals such as former governor Arne Carlson and U.S. Senator David Durenburger. They represented a party still connected to the old Rockefeller wing. Neither are now welcome in their old party. They have been eclipsed by two new versions of the Republican Party. Version one, the Reagan remake, produced Tim Pawlenty and it was clearly more skeptical toward taxes and government, yet not uncompromisingly hostile. Arne Carlson raised taxes when needed and Pawlenty did it via user fees.

Yet Minnesota now has a new version of the Republican Party replacing the Reagan brand. Its roots go back to Barry Goldwater and it expresses frustration with the Reaganites who it viewed as too willing to compromise with Democrats. Reaganism lost nerve and principle, and it needed to complete what he started but did not finish. It is a party centrally guided by religious fundamentalism, constitutional originalism, and political purism. This is Tea Party Republicanism–the party of Michelle Bachmann in Minnesota and Sarah Palin nationally.

Pawlenty’s presidential bid is a casualty of this new Republicanism. He is either too moderate for it or he is forced to drive further to the right, aping messages his rival Bachmann already resonates. He is a dinosaur or Johnny-come-lately, a candidate without a clear narrative or constituency. But the other casualty is Minnesota state politics. The inability of Tea Party Republicans to compromise drove Minnesota into a shutdown, and it continues to dog its resolution even after Dayton gave into many of its demands. The Minnesota shutdown is the moment of opportunity for the Republicans–use the leverage to get it all. This too seems to be the mantra for the Republicans at the national level when it comes to the debt ceiling.

The lessons one learns from Minnesota is that the remaking of the Republican Party, reinforced by demographics, has produced a showdown with disastrous effects. This is the same phenomena operating at the national level regarding the debt ceiling. The results from Minnesota offer pessimistic predictions for the country.

An American in Vilnius

Today ends my one week excursion to Mykolas Romeris University in Vilnius, Lithuania, to teach in a human rights program. This was my second trip to the beautiful city, the last time being October 2008 when the State Department sent me here to speak about the presidential elections and American politics.

Lithuania is a beautiful but tiny country of 3,000,000 people with rolling hills and dairy farms that remind me of Wisconsin and upstate New York.. It is one of the three Baltic states along with Latvia and Estonia. It is east of Poland, south of Latvia, and north of Belarus. It is an ancient country dating back 1,000 years when at one time it ruled from the Baltic to the Black seas. It was gobbled up by Germany and Russia, achieving independence in 1918, only to be taken over by Russia during WWII. It endured Russian occupation until its independence in 1991.

Lithuania is now a stable western-European style democracy. It is a member of NATO, the European Union, and the Council of Europe. It is a progressive, free society. Vilnius, the capital, is a stunning city. Once known as the Jerusalem of the North, it had a large thriving Jewish population until Hitler liquidated them. Between Hitler and then the Soviet KGB, Vilnius and Lithuania faced brutal oppression. The Old Town of Vilnius is rich with beautiful old churches and ornate architecture. It is simply a pleasure to walk the streets and see the people.

Lithuania has been in my heart for years. As an undergraduate I took three semesters of Latin. My teacher was from this country. She was the smartest person I ever met and my all-time favorite professor. Reportedly she knew more than three dozen foreign languages.

After 2008 I was asked to return and teach. I came this summer to join faculty from France and Lithuania to teach students in human rights. The students came from Lithuania, Belarus, France, Ukraine, and the United States.

The joy of teaching here is the contact with so many people from around the world. Experiencing their perspectives on America (we are less relevant to them than we think), understanding their struggles, and seeing how different generations view issues such as human rights.

Human rights here are important in a society that had them suppressed for so long. I visited the KGB museum–stood in cells where people were executed. I stood in the spot were executions took place and which, when the Soviets left in the 1990s, they tried to hide by destroying records, painting over blood, and cementing over human bones.

Americans complain about government. They think their liberties are abused. They whine they want change. The protest about taxes and injustice. They need to visit Lithuania. This is a country that is stable and did not shutdown–contrary to what happened in Minnesota.

Blink: How and Why Mark Dayton lost the Budget Battle

The loser always blinks first in a staring contest. Governor Mark Dayton blinked first.

The late Thursday afternoon announcement that Dayton and the Republican Legislative leadership had reached a tentative budget deal was a near capitulation by the governor. He failed to get his tax increases on the wealthy to fund his spending, instead agreeing to the final Republican offer to fund the budget with more accounting shifts and a borrowing off of the future tobacco settlement funds. Dayton gets to say he got more spending and maybe a bonding bill without social legislation that he opposes. But these victories were insignificant and irrelevant. What does the deal mean for Dayton, the Republicans, Minnesota, and perhaps the Democrats in Minnesota and at the national level?

What Dayton lost: It’s not just the budget battle

The budget battle was a contrast of dueling ideologies and claims to mandates. Dayton ran promising tax increases on the wealthy to fund new spending, erase the deficit, spend $1 billion on a bonding bill to put Minnesotans back to work, and change the direction of the state. The Republicans ran against taxes, new spending, and staying the course. They got more of what they wanted than Dayton.

Dayton consistently blinked. He cut back several times on his idea for tax increases. He kept reducing or hedging his electoral pledge on taxes, at each point further reducing the amount he wanted to tax. He even compromised on taxes, pleading instead for any type of revenue increase. At each juncture the Republicans said no, seeing weakness offers to compromise. In the last few days, despite claims his claims in court that the governor had inherent authority to address the budget shutdown, Dayton was never willing to use this claimed authority. Perhaps Dayton thinks to the general public this final giving in to the Republicans looks like he was the more responsible one willing to compromise in the best interests of the state, to Tony Sutton and the GOP it is a sign of weakness. A sign perhaps that in future negotiations Dayton will similarly give in.

Dayton’s decision to compromise potentially makes him irrelevant in the future. Think about it. Dayton gets a bonding bill. Politically who is helped by the bill? Not Dayton since the bill will long since be forgotten if he runs again in 2014. Instead, the Republicans benefit. They get funding for capital projects back in their districts that will help them with their re-election in 2012. The GOP does not need Dayton for social legislation. Gay marriage is already going to the voters as a constitutional amendment. The same can happen with abortion, stem cell research, and voter ID. The Republicans can end run Dayton at will in the future.

Moreover, Dayton just alienated the DFL and state workers. DFL legislators stood behind Dayton and he abandoned them, giving them little cover for 2012 and with their supporters. Among his base there is anger too that he gave up on them after they all supported him in 2010 and in the shutdown.

A bad deal for Minnesota

The budget deal is bad for Minnesota in many ways. Nothing was done to address the long term structural deficit the state faces; it is more budget gimmicks. It appears K-12 faces more shifts and possibly the borrowing from them never gets repaid. The tobacco settlement money gets raided, diverting it from the stated purpose to address health costs and education surrounding smoking. The borrowing here off the tobacco money means increased debt for the state. Thus, we continue to borrow and shift debt to the future in ways similar to what federal government has done for years. It is no different than paying off one credit card with another. In 2013 Minnesota will be back to the same place it is now. Minnesota is effectively deficit spending but budget tricks and future debt obligations hide that reality.

Perhaps Dayton is counting on 2012 producing DFL victories in the legislature that will change things, but do not bet on that.

But why did Dayton blink first?

The answer is simple: Dayton cared more about the government and Minnesota than did the Republicans. He was afraid of the lasting impact the shutdown would have on the state’ economy and government. Settle before more damage is done. The Republicans were willing to risk more–their negotiating strategy dovetailed with their views on government. So what if government is shutdown or crippled. They wanted to reduce government so hanging tough worked for them. For Dayton and the Democrats, they believe in government and what it does and the idea of supporting government by prolonging a shutdown ultimately proved too much for the governor.

So what does it all mean?

The Minnesota budget impasse and the shutdown was becoming a nationalized political issue much in the same way that the battle over collective bargaining became so in Wisconsin. Do Republicans in Congress read what happened in Minnesota as a sign that if they took hang tough Obama too will blink? Obama too cares more about government that Congressional Republicans. He faces a tough election in 2012 and he has already demonstrated willingness to compromise (the Bush tax cuts) to reach out to moderate or swing voters. Look too to see him blink before or more than the Republicans in Congress.

Afterthought

It was not the closing of many governmental services that drove Minnesotans to anger about the shutdown. The real crisis seemed to be when the racetracks and lottery closed, bars had difficulty getting beer, liquor, and cigarettes, beer distributors could not stock Minnesota shelves, and the baseball fans faced the prospect of baseball without beer. Perhaps life without gambling, booze, and smokes is what brokered the compromise. What would Minnesota be without the them?

Broken Politics: Ending the Shutdown and Fixing the State

Minnesota politics and its once pristine national reputation are broken. Politically, the government shutdown is only the mostly recent reminder of how decrepit and polarized it is. A near shutdown in 2001, partial in 2005, a botched unallotment in 2009, heated recounts in 2008 and 2010, and now 2011 all point to something beyond personalities and more structural in Minnesota. The faces have changed, yet the problems persist. The State’s reputation for the Minnesota Miracle, the land of Lake Wobegon, a state where government is clean and works, is shot. Even states like California, with persistent budget problems, or Wisconsin under Scott Walker, do not shut down but eventually manage to adopt budgets. We stand alone as a dysfunctional example of political polarization.

Divergent ideologies, combined with partisanship and rival claims of electoral mandates certainly feed the impasse between Dayton and the Republican legislative leadership. But the roots of this impasse go deeper. Demographic and electoral forces in Minnesota explain how ideology created the shutdown, offering clues both to short and long term solutions to ending this current crisis and perhaps addressing future ones.

Ending the Shutdown this Time

Dayton and the legislature appear not to have a sense of urgency in resolving the deadlock. This is the argument I made on Fox 9 News on July 6, with Heidi Collins. There are many political reasons for this lack of urgency.

Short term the shutdown does not end unless one side surrenders or both sides compromise. Surrender is difficult, no one wants to look like they have caved in. Conversely, with the two sides ensconced in their rival positions, compromise too looks like capitulation. Any good mediator will tell you that the way out of the current problem is something that allows both sides to claim victory–a perceived face-saving or win-win situation. Republicans cannot give on taxes and revenue unless they get something else their political base wants–new laws on social issues. Thus, not a surprise that prior to July 1, the Republicans seemed willing to give on some revenue, but in return for limits on stem cell research. The Republicans need to show something to their base if they are to compromise. Similarly, Dayton has been willing to give on taxes, but needs something else such as a global agreement on spending, to look like a victor and appease his base.

But while one waits for the compromise or capitulation to occur, one has to ask what forces will drive the two sides to this compromise? Clearly appeals to the public good have not worked for the last six months. Once the shutdown occurred, and the longer it goes, the short term sting from it decreases as life under partial government become normal. Moreover, the courts, the special master and even Dayton seem willing to let the judiciary order more spending, thereby reducing more pain. It appears no one trusts the political process to do the right thing.

What about an outside force to resolve the dispute? The Carlson-Mondale blue ribbon panel was stillborn from its inception, both because the Republicans do not trust Arnie Carlson who is not one of them anymore, and because adopting recommendations of a panel would imply deference to reason and rationality and not politics. The panel could have offered political cover to the two sides to compromise, but its logic appeals to moderates and swing voters, not the political bases who are driving the impasse. Perhaps the bases need to feel the pain of the shutdown? For the Republicans, something is necessary to make millionaires demand an end to the shutdown, something that costs them money. The same is true for the Democrats.

But perhaps a different outside force is needed to bring the parties together, but what? This is the structural issue.

Broken Politics and the Electoral Connection

One would have thought that political anger of voters would drive legislators and Dayton to the table. But that presupposes they and Dayton fear reelection. Certainly some legislators, maybe 30 or less, live in swing districts where this is an issue. But for the vast majority, this is not a concern. Minnesota is a red and blue state. The partisan distribution of the state has a clear geographic pattern. The DFL solidly have the Twin Cities and some of the other urban cores as well as St. Louis County, the Republicans the rest.

The geographic partisanship is hard to correct with redistricting given residential patterns. This means the electoral forces that should drive elected officials to compromise do not exist. Instead, fully partisan areas simply reinforce the current ideological divide. Longer term, then, one of the causes of the partisanship is the geographic red-blue divide in the state reinforced by districting. Addressing this problem is an imperative, but the solutions are hard to envision. In the short term, impetus for ending the shutdown may come from the legislators in the swing districts who are fearful of losing in November 2012.

Partisanship is also exacerbated by the caucus system. It rewards extremists on both sides who have the time and tenacity to outlast everyone else in seeking to influence the direction of the major parties. The caucus system nurtures zealots, ideologically opposed to the other side and often unwilling to compromise. Abolishing the caucus system, or at least seriously restructuring it to encourage more diversity within each party, should also be on the horizon.

At the gubernatorial level, not since Arnie Carlson’s reelection in 1994 has a governor been elected with a majority vote. Since then, the winners have been elected essentially by their political bases. The presence of a third party candidate has literally guaranteed minority governors not to be beholden to swing voters for their election. Adoption of ranked choice voting for statewide offices might resolve this, making governors indebted to more swing voters might force them to compromise.

Non-Solutions: It's not the gift ban law

Finally, two non-solutions. Some will call for the return to non-partisan legislative elections as Minnesota once had. Removing the party labels will not remove the underlying partisanship. Second, some will point to the state gift ban law, contending that because lobbyists can no longer wine and dine legislators, members of the two political parties no longer socialize. The gift ban law does not prevent legislators from socializing, it simply says special interests cannot buy influence through gifts. Blaming the gift ban law for the impasse is no different than a legislator stating: “I will not cooperate with the other side unless a lobbyist buys me a meal.” This sounds like a five year old threatening to hold his breath until he gets the toy he wants.

Overall, the government shutdown is sourced in partisanship rooted in demographic forces accentuated by an electoral system that makes compromise more difficult. It renders both a short and long term solution difficult, damaging the governability and reputation of Minnesota.

Minnesota Government Shutdown--What's Next?

Analysis on FOX9 News regarding what it might take to get the two sides to come to the table and hammer out a deal.

Professor Talks Shutdown after Prediction: MyFoxTWINCITIES.com