The Echoes of TARP: Vote on Tax Cuts Could Reverberate Through the Next Election

It's ironic. But the Democrats' grip on the House of Representatives started to loosen even before the 2008 election.

That's the election where Democrats rode President Obama's coattails and padded their Congressional majority, pocketing 21 additional House seats in places like Ohio, Florida, Connecticut, Virginia, Alabama and Mississippi.

The beginning of the end for House Democrats came on September 29, 2008, a full five weeks before the election.

That's the day when a coalition of Congressional Democrats and Republicans teamed with the Bush Administration to bring the $787 billion Troubled Asset Relief Program to the House floor for a vote.

In the vernacular of Washington acronyms, the legislation became known as TARP.

But it was too late. The public already thought of it as a bailout.

After a bailout for AIG....

After the bailout for Lehman Brothers....

Amid talk of a bailout for the auto industry....

You get the picture.

Democrats didn't want to bring TARP to the floor. Republicans didn't want to bring it to the floor. House Minority Leader John Boehner (R-OH) described it as a "mud sandwich." But there the TARP bill lay. As the world's economy swung in the balance.

Had the measure failed, it's likely the credit markets would have dried up, initiating global, financial shockwaves and tanking markets worldwide.

The majority party felt it had no choice. Leaders hustled the legislation to the calendar, confident they could cobble together a coalition of Democrats and some Republicans to pass the bill.

The vote disintegrated on the House floor. Concurrently, the Dow cratered 777 points, the largest single-day drop in history.

Conservatives reveled in the defeat, arguing that legislation was a colossal overreach of the federal government.

"The market may be down," exclaimed Rep. Virginia Foxx (R-NC), "But the Constitution is up."

Later that week, the Senate overwhelmingly passed the TARP bill, with then-presidential contenders Barack Obama and John McCain jetting back to Washington from the campaign trail to vote. House leaders scrambled and finally forged enough votes to drag the beleaguered legislation across the finish line.

In November, voters elected Mr. Obama and rewarded Democrats with a burgeoning majority in both bodies of Congress.

But the damage was already done with TARP.

A few months later, President Obama authored a $700 billion stimulus package designed to jumpstart the feeble economy. Many of the Democrats just elected in the fall elections voted for it. And nary a Republican backed it in the House, bucking the wave.

Republicans refused to be cowed by the new president. And the unanimous Republican opposition enabled House GOPers to contrast themselves to the Democrats, many of them representing vulnerable seats, in only their first or second term.

Then came the climate bill. Followed by health care reform. Only opponents of the legislation didn't describe it as health care reform.

They called it "Obamacare."

The health care bill was the final nail in the Democrats' coffin, started by TARP. A Republican Administration drafted TARP. But who originated it didn't matter any more. The size of government grew exponentially. Spending skyrocketed. And the sheer size and audacity of TARP offended millions of Americans.

"Why should Wall Street fat cats get a bailout when we're just struggling to make ends meet here in rustbelt Ohio?" they'd ask.

Democrats may have bought the farm with health care and cap-and-trade. But TARP was the prime mover. And the word "bailout" became synonymous with many of the Democrats' policies, even though Boehner and Minority Whip Eric Cantor (R-VA) voted for TARP.

Perception is reality in politics. And TARP already molded the narrative. Voters quickly presumed Democrats were exploding the deficit, were stymied by the economy and were frittering precious time on frivolous issues.

It was almost all too easy for Republicans. Boehner repeatedly drove home his mantra "Where are the jobs?" And as spending ballooned, Cantor crafted YouCut, a populist, online effort that invited citizens to vote on which government initiative they'd like to see face the chopping block.

The problem for Democrats is that they maxed out the electoral map in the 2006 and 2008 elections. In other words, if there was a House seat that Democrats had a remote chance of winning, they did so. Look at the gain in Iowa as Rep. Dave Loebsack (D-IA) unseated 30-year, moderate Rep. Jim Leach (R-IA) in 2006. Check out how Rep. Steve Driehaus (D-OH) dislodged Rep. Steve Chabot (R-OH) in 2008. Try the 2008 victory by Rep. Michael McMahon (D-NY) after Republicans dominated that Staten Island seat for decades.

Over the past 20 years, state apportionment boards have drafted Congressional districts in such a way that there are only so many seats that CAN EVER be in play. The overwhelming majority of seats are either safe Democratic or safe Republican seats. But in the 2006 and 2008 election cycles, Democrats successfully exploited every GOP weakness in any marginal seat held by a Republican. And largely won.

Fast-forward to the 2010 midterm elections. That meant Democrats had by far the most to lose this year. They held tenuous grasps on those seats that they flipped to Democratic control during the past two cycles. So in order to maintain those seats, those Democrats had to be careful with their votes.

"I told everyone we would be fine if we just focused on jobs, jobs, jobs for two years," conceded one senior Democratic aide. "What did we go out and do? Health care and climate change."

By the same token, such an overwhelming Democratic majority gave President Obama and House Speaker Nancy Pelosi (D-CA) a unique opportunity to legislate some big ticket items. Parties and presidents aren't awarded these monumental majorities in Congress just to protect them for the next election cycle. So they went for broke. And in the Democrats' playbook, that was health care reform and cap and trade. Democrats got health care. And nearly secured cap and trade.

But of course, the dye was already cast after TARP. To trot out health care reform and cap and trade further imperiled the Democratic majority. And it allowed House Republicans to nationalize what are usually localized elections.

It was this simple: who's the new sheriff in town? Barack Obama. Who's his partner in crime? Liberal Speaker of the House from San Francisco. The TARP "bailout" was already on the books. But most voters don't pay close enough attention to track whose watch that came on. So what do they want to do about health care? And what about this "job-killing" climate bill? And by the way, how much take home pay do you have in your wallet?

Pretty easy to nationalize all of that, saying the president and Pelosi are the problem. And then break it back down, state to state, region to region, district to district.

In the end, the politics was both national AND local.

Which is why lawmakers like freshman Rep. John Boccieri (D-OH) didn't survive, after winning a district that had been in Republican hands for years. It explains how Republicans could wipe out veteran lawmakers like Reps. Ike Skelton (D-MO), John Spratt (D-SC), Jim Oberstar (D-MN) and Rick Boucher (D-VA). Or even Rep. Chet Edwards (D-TX), a moderate Democrat whose survived a litany of previous Republican challenges with harsh political winds blowing against him.

There were four, quintessential votes in the past 27 months for House Democrats: TARP, the stimulus, climate change and health care. Democrats didn't even have to vote for all of them for Republicans to imperil them. This was the agenda. And voters didn't like it.

And it all started with TARP the fall of 2008. An issue that was not even voted on during this Congress or by many of the people who lost this year. They weren't even in office yet on which to cast a vote on TARP.

Lawmakers are now waging a battle royale on Capitol Hill over renewing the Bush-era tax cuts. It's likely that votes on this issue will happen this month, long before the gigantic freshman class is sworn-in January 5.

No one quite understands the endgame for this skirmish. But it's a pivotal struggle that defines both parties. Republicans advocate lower taxes across the board. Democrats want more narrow tax cuts and will blame the GOP for slashing taxes for the wealthy.

Like TARP two years ago, it's an issue playing out even before the new class assumes office. Yet the vote on tax cuts is likely to echo well into the next election cycle.