As the budget process in Washington lurches from crisis to continuing resolution to debt limit scramble — with Congress seemingly incapable of dealing with fiscal issues without the prospect of immediate financial collapse — it is worth considering the structural reasons for this seriousness deficit. Some view the culprit as partisan polarization or the disproportionate power of Senate minorities — both of which play a role. But the main challenge is this: Our two-party system has produced a three-party government.
Despite predictions of bloodshed between mainstream Republicans and Tea Party freshmen, the GOP in Congress has remained a single political force. After an internal argument about the inclusion of Medicare reform, most Republicans rallied to Rep. Paul Ryan’s budget. After getting criticism for timid cuts in the April continuing resolution, Speaker John Boehner is skillfully herding his caucus toward a debt limit confrontation with the White House — setting out ambitious-sounding goals that leave him considerable flexibility in actual negotiations.
Republican leaders have proved themselves capable of producing proposals that unite perhaps 90 percent of their congressional delegation, losing just a thin margin at each end of their ideological spectrum. But the job is made easier by the narrowness of the Republican ideological spectrum. A party that used to range from moderates to Reagan conservatives now ranges from Reagan conservatives to Tea Party conservatives, both offended by President Obama’s fiscal excesses.
On fiscal issues, the Democratic Party is really two parties. One consists of European-style social democrats, represented by leaders such as Nancy Pelosi. They have not embraced the socialist ideology of, say, the old British Labor Party. But their instincts, in nearly every specific decision, tend toward increasing the size and role of government in the American economy. Deep down, they would have preferred a single-payer health-care system. In the current fiscal debate, they hope to address the debt crisis by dramatically increasing the percentage of American economic activity taken in taxes.
The other Democratic Party is socially liberal and pro-business. These Democrats attempted to weed out the excesses of Obama’s health reform in the Senate. They are attracted to the deficit reduction approach of the Simpson-Bowles commission — including tax increases, but weighted toward spending reductions. They are a minority of the broader Democratic Party but they hold the balance of power in the Senate. Their numbers in the House have been diminished as Republicans have secured conservative Democratic districts. But such “Blue Dog” Democrats were influential enough in the last Congress to prevent an overwhelmingly Democratic House from passing a budget.
There are perhaps 10 pro-business Democrats in the Senate, often led by Budget Committee Chairman Kent Conrad. Their numbers and influence, however, are currently inflated by the cohort of incumbent Democrats facing reelection and spooked by the prospect of running on a pro-tax platform.
The conflict between social Democrats and pro-business Democrats is already undermining the possibility of a unified 2012 Democratic budget. In the Senate Budget Committee, Conrad’s attempt to craft a proposal based on Simpson-Bowles failed, largely because Sen. Bernie Sanders — a socialist independent who caucuses with the Democrats — objected. Conrad was forced to come back with a more liberal proposal, which has vulnerable and moderate Democrats angry.
Again and again, Democratic leaders have failed to produce budget approaches that unite 90 percent of their caucus. This is not entirely their fault. The ideological distance between social Democrats and pro-business Democrats is wider than any ideological gap on the Republican side. If pro-business Democrats were formally independent as a party, like the Liberal Democrats in Britain, they might be tempted to form a coalition government with Republicans — using their influence not only to block the proposals of social Democrats but to gain a share of power. But America’s two-party system doesn’t allow for this strategy.
The last time Democrats got past this internal division was during the Clinton years, when a pro-business president led social Democrats toward his position. Obama leaves it purposely unclear which Democratic Party he represents. While his instincts are liberal, he seems perfectly willing to abandon his social democratic allies when it serves his interests. A grand budget deal acceptable to Republicans — including spending cuts, structural changes in the budget process and meaningful entitlement reform — would take the spending issue off the table and might ensure Obama’s reelection. But to get that deal, Obama must persuade three parties.