Wednesday, November 24, 2010

Optics and gut checks

On Monday morning about 10 a.m., at locations in Boston, and in Stamford and Greenwich, Conn., FBI agents executed search warrants issued by the Justice Department to raid the offices of Loch Capital Management, Diamondback Capital Management LLC and Level Global Partners LP — the first of forthcoming federal inquiries into an evolving form of insider trading, involving “expert network” firms paid large fees by hedge funds to match those funds with industry specialists, whose specialized knowledge of given companies is transmitted to securities traders.

The raids on these precincts of American wealth were troubling enough, happening as they did while the country rebounds from a recession that’s still rippling through (despite its official obituary a few months back). But considering the leverage an issue of concern either gains or loses vis-à-vis the public’s perception of that issue —the way it looks to ordinary Americans — Monday’s raids could deal a public-relations setback to the proponents of tax cuts on Capitol Hill.

For months now, conservatives at think tanks, in the media and in Congress have rallied around the idea that repealing the Bush tax cuts would be the first big step toward revitalizing the battered national economy. With more than 15 million Americans out of work, the Republican position has consistently been that repeal of all of those tax cuts — including cuts for those making more than $250,000 a year, at a loss of more than $700 billion in tax breaks to that moneyed class — would be something close to a magic bullet for the economy.

(Never mind the fact that the nonpartisan Congressional Budget Office has reported that an extension of the Bush-era tax cuts to the country’s wealthiest 2 percent would not be the best approach to stimulating job growth as a spur to the overall economy. The cuts would “roughly double the projected budget deficit in 2020,” a CBO report found in September.)

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Few things distill the us-versus-them component of the debate over the tax cuts quite like the image of armed civil-SWAT squads from the FBI descending like avenging locusts on three hedge-fund headquarters in the wee small hours. But the adversarial reflex has a basis in law: In Tuesday’s Dealbook blog in The New York Times, Peter J. Henning explained the apparent reasoning behind the Monday raids:

“By using a search warrant rather than a grand jury subpoena, prosecutors have signaled there is a good chance that securities laws were violated, and they want evidence gathered quickly and in a way that avoids the possibility that some material might be destroyed.”

It’s safe to say that, after the panoramic criminality of Bernie Madoff, and the list of scandals and collapses from Worldcom to Enron to AIG to Lehman Brothers, the mood of Americans probably isn’t capacious enough right now to make allowances for more of that willfully bad behavior. Not when they can’t even get their unemployment benefits extended.

And the optics of the DoJ investigation — how it looks, how it plays with the broad cross-section of the American people — matters. When a country weary of Wall Street’s proven greed-is-good mentality has to face it again, in the middle of the worst economy since the Great Depression, the burden of proof is on the conservatives on Congress to justify moving $700 billion into private hands in what would amount to a bailout for the rich. Some of the same people who’re likely to be “persons of interest,” at least, in the DoJ investigation now underway.


It’s a tall order convincing everyday people that Wall Street and business in general have middle-class interests in mind when hedge-fund managers and their minions are pocketing monster bonuses at the same time they may be illegally gaming the same system that enriches them.

It just looks bad. And for the conservatives for whom tax-cut support is a conditioned reflex, an unwillingness to support cuts for the 98 percent of Americans earning less than $250,000 a year without cutting taxes for the 2 percent who earn that and more is starting to look downright uncharitable. In a Nov. 17 CNN/Opinion Research poll, 49 percent of the respondents said tax cuts should expire for the wealthiest Americans. A mid-October poll by The Hill found that 63 percent of voters in 10 battleground congressional districts supported extending the Bush tax cuts only for families earning under $250K a year.



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Come January, our politics will be at one of those watershed moments. With the tax-cut issue looming large along with the forthcoming debate on lifting the federal debt ceiling (which the Tea Party axis has uniformly opposed) and the debate that shouldn’t be one — over Senate ratification of the START treaty with Russia (currently held hostage by the objection of Jon Kyl, senator of the Arizona Territory) — the Republican majority in the House and the new additions of their ranks in the Senate are about to face a gut check.

It’s a test of what their principles are (separate and distinct, or not, from the “marching orders” soon to be issued to them by their leaderships in the House and Senate). This will be the first test of how well the Tea Party Republicans, a frosh class flush with victory and a righteous philosophical intransigence, grapples with the brutal reality of getting things done in the bureaucracy’s bureaucracy of Washington, D.C.

What’s facing the Obama White House and the 112th Congress generally, of course, is pursuit of the process of negotiation that’s built into our system of government. And make no mistake, the White House confronts its own callout of intestinal fortitude, with progressives and mainstream Democrats demanding that President Obama stand firm on not renewing the Bush tax cuts.

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But what’s facing the Tea Party Republicans is more important, more elemental: it’s the matter of their willingness to even acknowledge the process of negotiation, its place in American governance, and its role in how a variety of interparty disputes can be successfully navigated. Whether anything gets done in the 700-odd days until the 2012 election depends heavily on whether they get that.

The incoming conservative class of 2010 has pretty much mastered the stagecraft and rhetoric of campaigning; they wouldn’t be in that class if that weren’t true. Now comes the hard part, learning the mechanics of legislating policy, of governing. That’s not done in an ideological vacuum; there’s no bell jar to conduct that experiment in. It’s done out loud, on the floor, over the Internet, on cable, in the 24-hour light of day.

And on any number of issues, from tax cuts to the debt ceiling, from making arms deals with the Russians to making no deals with the dictators of Wall Street, the young guns in Congress will soon find out that having the fire in the belly to run for office is one thing; what really matters is having the stomach to negotiate when you take office. On Capitol Hill, my-way-or-the-highway thinking hits the highway itself soon enough.

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In an interview on MSNBC a week after the election, Anthony Weiner, the refreshingly forthright Democratic New York congressman, threw down the gauntlet as only he can.

“You know,” he said, “when you have a party and a caucus, the Republican Party and the Republican Caucus, who has defined themselves by how great they are at saying no to things, I wouldn’t even know where to start. I don’t know what it is they’re in favor of.

“You know, about 45 of their proposals were included in the health care bill. They voted no on health care. We put a middle-class tax cut, one of the biggest in the American history, in the stimulus bill. They voted no on that.

“I have no idea what it is that these guys want. So a conversation about compromise has to at least start with someone sitting at the table. And so far there are no Republicans sitting there.”

One way or another, that's about to change. The Tea Party Republicans used to rail about Washington. Now they are Washington. We’ll see how this changey thing is workin’ out, next year.

Image credits: Loch Capital raid: Brian Snyder/Reuters. Dollars: via The Huffington Post. Madoff: booking photo, Justice Department. Freshmen of 112th Congress: Mark Wilson/Getty Images.

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