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Who Won the Budget Battle?

President Obama may have gotten his budget (once the House and Senate iron out their differences), but along the way he may have sacrificed his chances for slaying the Republican Party and establishing that permanent governing majority which both political parties crave.  

An over-reaching budget, which drowns us in red ink and devotes more of the GDP to the government than at any time since WWII, may turn out to be a setback for the administration. As Obama forfeits his claims of fiscal responsibility, he has emboldened the opposition and made moderates in his own party, rightfully so, very nervous.  

Liberals are generally pleased, but liberal giddiness is not a barometer of long-term success. As Michael Goodwin observed, "That pattern is tired already. Starting with the stimulus, Obama's initiatives have depended almost entirely on liberal Democrats." His budget received not a single Republican vote. Mainstream op-eds and former Clinton officials have panned it as a jump into the fiscal abyss.  

This has given Republicans plenty of running room. Bill Kristol explained:  

And the Republican Party is united in a principled way. I don't think people can look at it -- independent voters can't look at the Republicans now and say they're just being opportunistic or, you know, knee-jerk anti-Obama.  

They object in principle to this massive expansion of government's role in the economy, taking over the health care system, et cetera. And I think it allows -- I think he's allowed the Republican Party to recover more quickly than one would have expected and conservatives, actually, to recover more quickly than one might have expected after the 2008 elections.  

For 22 Democrats in Congress, including well-known names like Senator (and one-time VP contender) Evan Bayh, the budget was simply a step too far, an act of fiscal irresponsibility they could not countenance. And even House Majority Leader Steny Hoyer seems a wee bit nervous, explaining that we really need to get our financial house in order. "Such deficit spending would be reckless, however, without a plan to get our deficit back under control," Hoyer wrote in the Wall Street Journal. Some day they'll get around to that, I'm sure.  

Meanwhile, as the public gets increasingly antsy about the spasm of government expansion, Obama is at risk of losing the populist battle. Following in the wake of the AIG debacle, his scheme for allowing a handful of firms to buy toxic assets from banks (with little downside risk to anyone but the taxpayer) is continuing to draw fire from the Left. Now mainstream reporters are onto the scam. Mara Liasson noted:  

Look, they said, and you heard David Axelrod say, they don't want to be in the car business, they're not in the car business, this is kind of a way to get a fast-track, perhaps, orderly bankruptcy, if that's what it's going to take, of the car companies.

I think the bigger issue that was raised this week in terms of the auto industry is why did they get a kind of shove towards bankruptcy, where the Wall Street bankers get bailed out?

And when you read this week about the huge payouts that a lot of these Obama administration officials are getting from Goldman Sachs or from other hedge funds and banks where they worked before they came into the administration, and other complaints from some hedge funds that feel they're being cut out of the public-private investment funds that they're setting up to take the toxic assets off the balance sheets because they don't meet these very strict criteria that the administration has written that seem to allow only Goldman Sachs and Blackstone and some other hedge funds to apply, I think that cronyism is going to be something that they have to -- that's a potential problem for them.  

So where does this leave us? A very possible outcome in the budget battle may be a gigantic increase in domestic spending and debt, but no substantial progress on the president's two main policy initiatives, global warming and health care. It is once thing to "get something" for all that spending, it is quite another to run up the debt and wind up with, well, a lot of debt.  

Democrats and media pundits are now hinting that cap-and-trade may be off the table and health care reform may simply amount to some "incremental" changes but not the far-flung redesign once envisioned by the victorious Democrats. That would be meager results indeed for the agent of change, especially at a time he is thought to be at the height of his popularity and facing probable congressional losses in 2010.  

Meanwhile, Republicans are making the most of what little they have. They have united around a new sense of fiscal conservatism. They have beaten back card check and likely cap-and-trade as well. They are the ones with public support for an anti-bailout, anti-crony capitalism platform.  

Yes, Republicans have received hugely negative media coverage which has sought to paint them as the party of "no" and hobbled by internal dissension. But fawning media coverage was never in the cards for the GOP.  

The focus for Republicans will remain on the staggering deficit, the growing unemployment figures, and the political extremism of Obama's agenda. If the economy makes a stunning turnaround, all of that won't amount to much. But if the economy doesn't bounce back and indeed the escalating spending results in 1970s-style stagflation, then that opposition will become a badge of honor and the starting point for a platform for the future: less government pork, more support for private sector job growth, no crony capitalism, and an end to government bailouts. In that sense, the Obama budget may be good news indeed  -- for Republicans.