Since 2008, the most disruptive force in American politics has been the collapse of confidence in business and government. Both parties continue to stumble in its wake.
President Obama's central political gamble has been his bet that after the financial markets' catastrophic meltdown, Americans would welcome a greater government role in managing the economy. It's easy to see how Obama reached that conclusion after his sweeping victory. But it's now clear that government's failure to police the irresponsibility on Wall Street discredited Washington much more than he realized.
Obama's stimulus plan may have averted disaster, but its inability to ignite a more vigorous recovery has further compounded people's doubts. The result is that Obama is pushing an activist agenda against the headwind of profound public skepticism about government. The president has privately complained that left-leaning critics who charge that he hasn't fought hard enough for more stimulus spending and a public health care option are ignoring this powerful dynamic.
But if Obama overestimated the public's trust in government, Republicans persist in the opposite mistake. The firestorm that erupted after Rep. Joe Barton, R-Texas, last week apologized to BP for Obama's "shakedown" of the company dramatized the risk to Republicans who confuse the public's doubts about government with faith in Big Business. For many Americans, unshackling business remains at least as unattractive as engorging government. "We have a downside on the too-big-government argument," one senior White House official says. "But they have a downside of cozying up to special interests." It is as if each party, bound to either government or business, is tied to the mast of a sinking ship.
The Democratic ship appears to be sinking faster. So far, public hostility to government is shaping the midterm election far more than alienation from business. With economic recovery still slow, polls show that Republicans have convinced many Americans that Obama's agenda has failed because it stifled job-creating innovation under government spending, regulation, and excessive intervention in the free market. Barton expressed that last point with undiplomatic candor, but he reflected the widespread (if overheated) conservative belief that Obama is steering America toward sluggish European-style social democracy.
The paradox is that while the Right considers Obama a closet socialist, some liberals view him as virtually a corporate sellout. They bridle at the deal he struck with drugmakers on health care reform, his attempt to advance climate legislation by offering oil companies expanded offshore drilling, and -- above all -- his resistance to breaking up the massive financial institutions that accepted public lifelines from the Troubled Asset Relief Program. "Contrary to the Republican hysteria that this is Lenin in Ivy League clothing, the administration has [often] decided that the better part of valor is to cut deals with big interests to keep them from opposing reform," veteran liberal activist Robert Borosage says.
The dissonance between the Left's and Right's portrayals captures a defining duality in Obama. Ideologically, he is drawn toward an aggressive role for Washington. But, temperamentally, he is a deal-maker who likes to forge agreements with broad coalitions that include business interests. The tension between those instincts shapes Obama's record of activism tempered by pragmatism. His problem is that conservatives are enraged by the former and many prominent liberals are disillusioned by the latter.
Republicans eventually could face their own contradictions. They have been most effective when they can argue that Big Government and Big Business are colluding against average Americans (as they've done on TARP, despite their substantial initial support for it). But, as Barton's misstep shows, Republicans' anti-government tendencies can sting them when they oppose oversight of business sectors that most Americans distrust. Republicans "can't be perceived as simply... defending some interest the administration is [criticizing]," says GOP policy thinker Douglas Holtz-Eakin. This fall, Obama will likely target that vulnerability by touting his moves to toughen regulation of Wall Street bankers, health insurers, and offshore drillers while portraying Republicans as their defenders.
That effort will take the president only so far: The midterm election inevitably will turn on evaluations of his administration more than on the GOP's agenda. But the Republican inclination to unfetter business will likely attract greater attention in the 2012 presidential campaign -- and sooner if the GOP captures one or both chambers of Congress in November. At that point, Republicans' desire to retrench government could prove just as controversial as Obama's efforts to expand it.
This article appears in the June 26, 2010, edition of National Journal.