While it may not seem like it, President Obama is actually in an excellent bargaining position with Congress. Sure, he's facing solid Republican majorities in both houses. In January, every committee will have Republicans chairing them, which means that almost certainly no bills authored by Democrats will ever see the floor of either house for a vote. Especially if Obama supports that bill. But he still has something Republicans don't have. Veto power, or the power to sign a bill into law.
Unfortunately for the Republicans, they still have to show that they're making a good faith effort to negotiate with the president (they haven't). They will also have to show the nation that president is not playing ball (they haven't). Once Obama casts the Republicans as extreme, unreasonable and offering completely unpalatable and unworkable solutions, just to tease the president, life could get really unhappy at the next major election for the Republicans. Of course, people would have to take time out of their very busy day to notice what's going on.
Republicans may think they have the upper hand in the debate on the economy, but they sure have a hard time explaining what happened to the loss of more than $900 billion in annual economic demand since 2008. Republicans have been keen to point out problems in the economy, but have failed to account for the improvements since the start of Obama's term. Perhaps they aren't as focused on inequality as Obama is.
Some pundits are saying that Obama now has nothing to lose as a lame duck president. While that may seem apparent, he is acutely aware of the prospects for his colleagues in the Democratic Party and is doing what he can to improve them. But he won't have the cooperation of the majority Congress to do it. Who can he turn to for help?
I would say that his biggest ally is his pick for chairman of the Federal Reserve, Janet Yellen. Yellen is, by many accounts, more concerned with unemployment than with inflation compared to her predecessors, Alan Greenspan and Ben Bernanke. She is a Keynesian economist and seems to understand that when demand falls, government can take up the slack and make up demand in the form of government spending. She would be in direct opposition to the position held by many conservative members of Congress: that when government gets out of the way, the private sector will create demand.
Anyone familiar with the history of this country since the Reagan Administrations, can see that the empirical evidence simply isn't there to support the majority in Congress. We've tried their neoliberalism for more than 30 years and it simply hasn't worked. All it has done is given us a bubble economy where wages remain flat for workers while income rises for professionals and capitalists (the people who own most of the capital). If conservatives were right, the wealthiest of us would be spending money to enjoy their wealth and that would increase employment. But that is not what happened now, did it?
There are some economists who have figured out that biggest problem to solve is the trade deficit, not the federal budget deficit. They may have even noticed that China buys our debt to support the dollar, and to support the trade deficit we are running with China. At least one economist has noticed that bringing the value of the dollar more in line with other currencies, to the point that the trade deficit disappears, will bring home about 6-7 million jobs. That is probably enough to fill the $900 billion hole left by the collapse of the housing bubble in 2008.
Obama can change the terms of the debate by showing us how all of this fits together. He can work with Yellen to show how the trade deficit works to send jobs overseas, keeps wages flat and allows CEOs to profit from the delta between the dollar and currencies around the world. Together they can show us that diminishing or eliminating the trade deficit by cutting the value of the dollar will bring jobs back home and increase demand here, at home.
I believe that Yellen is well positioned to act on such a strategy. When demand returns, unemployment falls, and when unemployment falls, employers have to pay more to keep workers around. When unemployment hits 4%, the lowest paid workers will get a raise, whether employers like it or not. You see, I don't think the debate in the minds of Republicans is so much about keeping what you earn. I believe it's about keeping or increasing the distance between the 1% and everyone else.
Once trade balance is restored, if they act on the plan described above, all that Obama has to do is point to a do-nothing-Congress full of Tea Party conservatives who exhibit nary a concern for unemployment, but who will protest, gnash their teeth and whine about how their plan would have worked if we had just given it a try. We did that for more than 30 years. It's time to go the other way. Obama could lead the way in that direction, toward even trade and full employment. Without the help of Congress.