U.S. Party Politics Mask Real Battle Lines

From Chrystia Freeland, at Globe and Mail (via Theo Spark):

A favourite theme of American business and political elites at the moment is that authoritarian regimes – i.e. China – may be better at making hard, long-term economic decisions than are querulous democracies – i.e. the United States. There is plenty of academic research to suggest that, over the long term, this view is wrong. But in the shorter term, this week in fact, the U.S. itself offered a case study of this scary theory.

Consider: On Tuesday, Americans swung sharply to the right, giving their Democratic President a shellacking and handing control of the House of Representatives to the Republicans. The country’s most powerful elected Republican, John Boehner, who will be the new Speaker, immediately declared it was a vote for “cutting spending” and “smaller, less costly government.” Most analysts, including happy ones on Wall Street (who are often most cheerful when the country’s elected officials are least active), decided it was a vote for gridlock, thanks to the Democrats’ continued control of both the Senate and the White House.

Then, on Wednesday, the most powerful unelected Republican, Ben Bernanke, chairman of the Federal Reserve, swooped in with massive government action, announcing a plan to pump $600-billion (U.S.) into the economy over the next two years. That is not much smaller than two of the big government interventions that earned the Democrats their shellacking – the $700-billion TARP program (never mind the pesky fact that it was actually a Republican Secretary of the Treasury who invented it) and the $787-billion stimulus.

The timing of the Fed’s move underlined one of the most important takeaways from the midterm election campaign. Watch cable news or surf the Web and you are likely to conclude that the United States is a deeply divided nation, split between fiercely partisan hardliners on the left and on the right. That’s one version of the political battle. But another one is that the division isn’t between liberals and conservatives, it’s between the hoi polloi and the elite.

The split between the mandarins and the public explains how you get a popular vote for government inaction the day before the bipartisan, Republican-led technocrats at the Fed, with only one dissenting vote, endorse massive government intervention. The economic battle today isn’t just between the Republicans and the Democrats, it is between the technocrats and the populists – and in the latter contest, the Bush-nominee who runs the Fed probably has more in common with the beaten-up Democratic President than he does with the victorious leaders of his own party.

More at the link.