Belmont Club

The Rumble of the Falls

Back in 2010 I predicted that the emergence of a Tea Party challenge to Republican leadership would be incomplete until there was a corresponding insurgency from the Left.

The Democrats have not yet developed an insurgency equivalent to the Tea Party within their ranks. Their base is consequently forced to respond to the economic crisis by pulling the same old establishment levers which only serve to increase their poverty. …

The status quo is clearly in trouble, but it will not collapse completely until its dependents realize that it can no longer deliver the goods it falsely promised them. A revolt within the Leftist constituency led by the constituency itself, rather than their traditional patrons will sound the true death knell for the old system. The Tea Parties can only heighten the issue. But a revolt by the Democatic minority and blue collar constituents will be the coup de grace.

The question is whether the defeat of  Obama’s trade deal signals the start of that revolt.  “The House of Representatives on Friday delivered a blow, though perhaps a temporary one, to President Barack Obama’s signature goal of strengthening ties with Asia when it defeated one measure, but approved another important to finishing a Pacific Rim trade pact.”

In a dramatic vote, Obama’s own Democrats, as well as Republicans, failed to produce enough support to approve a bill that would have given aid to workers who lose their jobs as a result of U.S. trade deals with other countries. The measure was soundly rejected in a 302-126 vote. The White House dismissed the failed vote as a “procedural snafu.”

That was quickly followed by the House’s narrow approval of a separate measure to give Obama “fast-track” authority to negotiate the Trans-Pacific Partnership trade deal. But the legislation is stuck in the House because of the defeat Obama and House Speaker John Boehner suffered on the first vote.

A House Republican aide told reporters that Republican leaders hope to try again Tuesday to pass the worker aid portion of the bill, allowing the measure to be signed into law by Obama, but its chances were unclear.

The Economist writes, “opposition to the president’s trade agenda involves an odd alliance between Democrats who distrust global trade and Republican hardliners who distrust Mr Obama and resent being asked to give him more authority to do anything.” But it is more than that. The opposition was an alliance between conservatives who mistrust the Republican leadership and Democrats who are afraid that Obama is selling out one party constituency, the blue collar workers and minorities, to satisfy the other constituency — the party’s corporate contributors.

The setback was not only a crisis for Obama, but also a crisis for the establishment political class. They ran out of money to pay everyone off. For the administration it portends the makings of a perfect storm. The president’s domestic, economic and foreign policies are collapsing simultaneously. Even if Obamacare survives the Supreme Court King vs Burwell challenge, the high premium increases demanded by insurers across the country suggest it’s already in an insurance death spiral. The problem is that subsidies alone cannot overcome adverse selection. Now with Obamacare dying and the trade dead nearly dead in the water and foreign policy in a shambles, it will be nightmare town for establishment candidates in 2016.

The Republican rebel position is probably best represented by Senator Jeff Sessions of Alabama, who describes the deal as a naked presidential power grab of the constitutional powers of the Congress, cooked up with the connivance of the leadership of his own party.

If, as promoters amazingly suggest, the President had more powers without fast-track, he would veto it. The authority granted in “Trade Promotion Authority” is authority transferred from Congress to the Executive and, ultimately, to international bureaucrats. The entire purpose of fast-track is for Congress to surrender its power to the Executive for six years. Legislative concessions include: control over the content of legislation, the power to fully consider that legislation on the floor, the power to keep debate open until Senate cloture is invoked, and the constitutional requirement that treaties receive a two-thirds vote. Legislation cannot even be amended.

Neo-neocon went so far as to say “it reminds me a little bit of the Enabling Act in Germany in 1933—not in degree, because the Enabling Act had an enormously broad sweep compared to the narrow one of the trade bill. But the upshot of the trade bill would be that Congress itself would be voting to give Obama more power.”

The Democrat rebels oppose it for another reason. It will undercut many of the special deals the party has forged with voter blocks. In the words of Peter Baker and Jenniffer Steinhauer of the New York Times, it would “exacerbate inequality”.

After decades of watching presidents secure trade agreements from South Korea to Mexico, even in the face of opposition from their base, Democrats have broadly come to the conclusion that such agreements exacerbate income inequality.

“Enough is enough,” Representative Debbie Dingell, Democrat of Michigan, said during the debate.

Phil Schiliro, who managed congressional relations for Mr. Obama in his first term, said after the votes that Democrats believe the people they represent have suffered from past trade pacts. “I don’t think it’s a lack of loyalty to the president; I don’t think it’s a lack of wanting to be with the president,” he said. “If your friends genuinely have a different view, that’s the hardest thing to square.

The worst suspicions of foreign audiences were stoked by a Wikileak which purported a secret deal between American Big Pharma and the Obama administration to protect high drug prices through intellectual property rights. Administration supporters even suggested the rebuff amounted to a vote of mistrust in Obama.

The measure as is would limit Congress to an up-or-down vote on any final trade deal, an authority granted to many previous presidents. The aim is to assure negotiating partners that agreements won’t be altered by lawmakers. Supporters say that means other countries will be more willing to make their best offers.

Every Democrat from the Philadelphia area – each with deep labor ties – voted against the fast-track bill and the related measure, even though they had been backed by the likes of Mayor Nutter and former Gov. Ed Rendell.

Obama has interpreted the setback as a signal that he hasn’t offered enough quid pro quo to sell — or buy — his case. But maybe this time he’s out of money. A crisis, if it is anything, is another word for things you could formerly do which you suddenly can’t. Just as a man of a certain age may find he can’t get out of bed one morning, so too may Obama be discovering that he tried to buy one thing too many.

It had to happen. After seven years of expanding his power, even into such small things as streams and waterways, he is finally receiving this message: “Your card has a temporary hold. Please use a different card or contact your bank.” At least its still not “Your card number is not valid. Please update your card number,” or “Your credit card is expired.” But its getting there.

The tragedy is that trade, done properly, is the engine of growth. Some economists even believe that protectionism led and will lead to a depression. The trouble is that the political class wants the best of all possible worlds: international trade, but a protected domestic industries; it wants crony capitalism but entry to other markets. The reality is that they can’t have their cake and eat it too. Trade creates and destroys jobs, but in every case is creates radical change. And Washington doesn’t want change.  It wants status quo. In the past there was enough of a Design Margin to buy everyone off, even if everything stayed more or less the same.

But not this time. The Democrats finally faced the fact that the Trade Adjustment Assistance designed to compensate workers for job losses could not make up the difference any more than Obamacare subsidies could lower insurance premiums in the net. This time the price for more trade had to be real reform: less crony capitalism, fewer sacred labor cows. And this was a price that no one was willing to pay.

Trade initiatives are by definition acts of faith in the future — and in the political leadership.  They are the acceptance of a certain amount of destruction in the present in the expectation that the future will be better.  It’s a rust belt worker believing that though he may lose his job, he will gain a higher paying one down the road.  Unfortunately not only has America run out of payoff money, it’s also run out of faith in the president and perhaps, in the New Deal itself.

It’s not inconceivable that president Obama may yet “save his legacy” through personal lobbying and persuasion. But he will have to reach deeper down for this time than ever, touching perhaps the bottom of the barrel. Yet it will be a Pyrrhic victory. The revolt against Washington may not have fully started, but the rumor of it is plainly in the air.

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