US Political Crisis – Republican Civil War

As suggested in previous posts, the defeat of the Republicans, over the budget and debt ceiling, has opened up a civil war in the party. On the one hand, the Tea Party Taliban have been strengthened in their belief that Obama is a socialist dictator who must be confronted by all means, at every stage, and that the Republican establishment, are little better, a bunch of spineless appeasers who must be removed. The Tea Party are stepping up their campaign to “primary” those Republican Senators and representatives who voted to re-open the government, and raise the debt ceiling. Meanwhile, big business seems to have had enough of them, and is wading into the fight itself.

“Most business PACs have assumed that any Republican is generally acceptable on business issues,” said David French, senior vice president for government relations at the Washington-based National Retail Federation. “That’s an assumption we are reconsidering.”

“The current situation is being made more challenging by a handful of Republican candidates in the House. We’re going to look at a handful of races where we might be able to make a difference,” French added. (Source: Bloomberg)

But, a problem for the Republican establishment is the degree of rank and file support, in particular areas, for the Tea Party. It is a similar problem as that faced by the Egyptian military junta with the Muslim Brotherhood. The Brotherhood still have the support of perhaps 30% of the Egyptian population, so that in any free and fair election, they are likely to come out as the largest single group. Similarly, although Tea Party support, along with Republican support in general, has been damaged as a result of the debt ceiling fight, according to a Pew Research poll, 30% of respondents still had a favourable opinion of them.

The answer for the Egyptian military is to make the MB illegal, the answer for the Republican establishment will have to be something similar, i.e. they will have to split the party, and isolate the Tea Party. If the Tea Party had to stand in their own name, its likely they would not do so well as standing under the Republican banner. According to another piece of research recently, incumbents in US elections have an extraordinary high chance of being re-elected. In 2006, 87 percent of House incumbents and 79 percent of senators won re-election. In 2010, the numbers rose to 91 percent in the House and 84 percent in the Senate, according to the Brookings Institution in Washington.

The civil war in the Republican ranks is only likely to intensify as not only do establishment figures come under fire in safe Republican areas, but other Republican politicians risk losing to Democrats in less safe areas. According to the Cook Political Report, which tracks races between candidates in Congress, the balance has shifted from the Republicans to Democrats in 14 out of 15 seats it was monitoring. Democrats only need to pick up 17 seats in the House of representatives next year to win a majority there, and they are likely to increase their majority in the Senate. That will leave the Republican Party in a very bad place for two years ahead of the next Presidential elections.

Consequently, on the one hand some business groups that currently support the Tea Party are looking to back them in further challenges of sitting Republicans, whilst its not just the National Retail Federation that is concerned about the role of the Tea Party. “We are going to get engaged,” said Scott Reed, senior political strategist for the U.S. Chamber of Commerce. “The need is now more than ever to elect people who understand the free market and not silliness.” (Bloomberg)

The Republican leadership may have made things worse for themselves by pushing for a deal, which only extends the fuse on the financial time bomb until February. On the one hand they are seen as having won nothing for having created all of the disruption, and taking the US to the brink. Even Lyndsey Graham, who now himself faces a Tea Party threat, admitted they had won nothing, and gone too far, and appealed to the Democrats to help them get out of the tight spot they have put themselves in. Now, uncertainty will continue in the markets and the economy for another 3 months, limiting investment decisions, for example. Its likely that the Federal Reserve will now hold off tapering until at least March next year, with some Board members already concerned that its Balance Sheet has ballooned up to unsustainable and dangerous levels. But, in the meantime, the Tea Party will continue to press their case within the Republican Party, holding burning coals to the feet of the establishment.

It will probably take a big defeat of Republicans in next year's elections for the Republican establishment to take the measures needed to deal with the Tea Party, which will also probably require changes to electoral districts. Such a defeat seems increasingly likely.