Senate Democrats' fruitless effort to force a withdrawal of U.S. troops from Iraq this week carries a side lesson for everyone on Wall Street watching other parts of the Washington political agenda. The lesson? From hedge fund taxes to energy legislation to expansion of government-financed health care, it appears that the domestic policy phase of the Bush presidency is pretty well over.
Here's the connection. The Iraq debateshowed once again how partisan politics is overpowering just about every other reflex within the body politic. So even though Republican lawmakers have grown ever more fearful about the fallout from an unpopular war--and senior statesmen such as Pete Domenici and Richard Lugar have broken with the president--there's still no filibuster proof majority in the political center to force a change in direction. When the possibility of one appeared over Iraq, Democratic strategists chose to sharpen lines of distinction with Republicans rather than seek a compromise; most Republicans remain unwilling to defy their president.
That's the story on nearly every issue in this Congress, and will be.
On immigration, most Republican WERE willing to defy the White House. But the result was the same: the center did not hold. It's a smart bet to expect the same result on hedge fund taxation. Even if Democrats line up a filibuster-proof Senate majority on the "Blackstone bill"and "carried interest" issue--which isn't likely--presidential aides are talking veto.
They are talking in the same way on the Democrats' so-called S-Chip legislationto dramatically expand children's health care coverage. A veto would be just fine with Democrats, who would welcome the chance to portray Republicans as cruel to kids in the 2008 campaign.
Now that Republicans have lost control, the White House has discovered the issue of spending restraint. So the threat of vetoes on spending bill--toothless when the president and Republican leaders were relying on pork to protect vulnerable GOP incumbents--now have real meaning since the pork in question is Democratic.
The fate of energy legislation is murkier as Democrats face their own internal divisions over whether to stiffen fuel efficiency requirements on automakers and require utilities to use more "renewable" energy. There's at least some chance that a bill that could clear Congress could also be signed by Bush before he leaves office.
But the lesson of 2007, reinforced this week, remains: Don't count on it.
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