The equity markets this morning are selling off whatever patina of expectations that might have existed about a Romney victory and U.S. Treasury securities are rallying mightily, signaling anticipation of lower U.S. economic growth under the second Obama administration.
Our quadrennial demonstration of the degree to which the entire country is divided and politically irreconcilable was once again upon us last night, and the prevailing zeitgeist is that our federal government will remain deeply divided and dysfunctional. This conclusion increases market concerns about the so-called “fiscal-cliff,” the debt ceiling in general, and the ability to make any meaningful headway towards a final resolution of the household debt overhang, to address global trade issues and to create an environment that fosters economic growth.
The collective wisdom is that we will have another four years of political gridlock in Washington, but allow me to advance an alternative narrative.
President Obama’s victory last night provides the country with an opportunity that was, unfortunately, squandered during the president’s first term. The White House, chastened by its narrow victory and benefiting from the freedom to operate that historically characterizes second term administrations, is likely to move into next week and next year with a far more combative message than the milquetoast and entirely elusive “bipartisanship” of the president’s first term. And this will ultimately prove to be a good thing for the nation.
Republicans in the House of Representatives, and to a lesser extent in the Senate, are today coming face to face with the reality that their collective message could not defeat a Democratic president suffering from a nearly 8 percent unemployment rate, and a massive 14.5 percent underemployment rate, to say nothing of a generally anemic economy and a lackluster set of policy responses to same. The tens of millions upon tens of millions, from the 0.01 percent, injected into the Republican juggernaut proved (surprisingly to many) quite ineffective in furthering the Republican point of view. There will be considerable reflection on this reality, but that is not where this story ends.
Before last night, since Lyndon Johnson, we have had only one re-elected Democratic president in our midst (and LBJ, of course, was not elected to his first term), and Bill Clinton spent so much of his second term tangled up in, well, a thong, while benefiting enormously from the strong (mostly policy-unrelated) economic tailwinds that generated his ultimate legacy. And yet, history demonstrates that second term presidents have an extraordinary ability to operate . . . and to “call out” opponents in front of the American people when they thwart progress.
So here is what I believe will result from the new status quo. A newly re-elected president will (finally) be outraged enough to vigorously confront those on the Hill who have essentially shut down the federal government. He will, this go-round, take his case directly to the American people and leave the obstructionists with a clear and unambiguous choice: put partisanship aside and get with the program, or be prepared to see what I believe would be the full dismantling of the post-Reagan Republican argument in the 2014 congressional mid-term election.
That the country didn’t buy that argument is now established fact. That conservatives are exposed to the power accruing to a president who no longer needs to be concerned with his re-election is equally obvious. And that Republicans in congress must now choose between holding their seats and going down in a blaze of ideological glory will be pretty much the only two options available . . . if a re-elected Barack Obama has any sense of the political advantage that he was graced with yesterday.
I’m betting that the somnambulant Obama of the first debate is wide awake today. And I’ll wager that a large number of Republicans will see the light.