Michael Grunwald is a senior staff writer for Politico Magazine.

The partisan showdown over the government shutdown, like so many similar battles in the last seven years, is a fight neither side wants to lose. But as Democrats learned at the start of this cycle of fiscal warfare, winning can have downsides, too.

As President Donald Trump and congressional leaders strategize and demonize in pursuit of all-out political victory in 2018, they might want to remember what happened after President Barack Obama struck a lopsided deal with Republican leaders in 2011, amid a fight over spending. At first, Democrats celebrated their fleecing of the GOP. But the humiliating defeat ended up hardening Republican positions before the next battle, which nearly produced an economic catastrophe on Obama’s watch, and set the stage for the recurring crises that have driven budget policy every year since.


In retrospect, some Obama aides wish they had struck a more balanced deal, or maybe no deal at all. Victory, they found, can be ultimately counterproductive, firing up the losing team—and, just as important, the losing team’s political base.

“As long as it’s the last deal you have to make, you can take everything,” says Scott Lilly, a former Democratic budget staffer who is now at the Center for American Progress. “In this town, however, you usually need at least one more deal.”

The deal Obama cut with Republicans in April 2011 was the first product of divided government after the GOP took back the House in the 2010 midterms, riding a Tea Party wave that emphasized hostility to Obama, his health-care policies and government spending. The new House majority had passed a budget bill with $61 billion in proposed spending cuts, arguing that the public had rejected Obama’s big-government approach. But Obama and Senate Democrats, mindful of Keynesian economic theory, were anxious to avoid any spending cuts while the country was still digging out from the financial crisis of 2008. The federal government seemed to be careening towards its first shutdown since similar stalemates between President Bill Clinton and Republicans in the mid-1990s.

At the last minute, though, Obama and then-Senate Majority Leader Harry Reid worked out an agreement with then-House Speaker John Boehner that was initially announced as a $38 billion cut in spending—not as large as Republicans wanted, but still the largest in history. “Both sides have had to make tough choices,” Reid explained at the time. “But tough choices are what this job’s all about.” The Washington Post concluded, “[A]n ascendant Republican Party has managed to impose its small-government agenda on a town still largely controlled by Democrats.”

But as budget analysts began to scrutinize the fine print, it became obvious that most of the deal’s spending cuts were gimmicky or imaginary. For example, it included a $6 billion reduction for the Census Bureau from its 2010 levels, but that was because the Census Bureau was no longer conducting the 2010 census. It eliminated unused highway funds, a one-time expenditure to compensate dairy farmers for low prices, and anti-poverty aid that was no longer needed because the economy was improving. A Congressional Budget Office report on the eve of the vote found that the actual reductions for the next year would be just $352 million. Tea Party activists howled, 59 House Republicans voted against the deal, and Republican candidates for president raced to distance themselves from the compromise. “Wholly unacceptable,” declared then-Gov. Tim Pawlenty of Minnesota.

Boehner scrambled to defend the deal as “moving in the right direction” and “throwing the car in reverse,” but the Tea Party insurgents in his caucus vowed that they would not get rolled again. So that fall, when Obama needed House Republican support to raise the federal debt ceiling, he faced a much more intransigent opposition, and Boehner felt much more pressure to resist a deal. The resulting brinksmanship led to a full-blown debt crisis as well as a downgrade of the government’s credit rating. Obama and Boehner barely managed to avert a catastrophic default on the Treasury’s obligations, which could have destroyed the full faith and credit of the United States, and their final deal included significant long-term spending cuts that, to this day, neither party is particularly happy about.

“We should have let them shut down the government the first time, let them get it out of their system,” one former Obama aide recalls. “We beat them too badly.”

In fact, the dynamic set in motion by that April 2011 battle has continued into the present, with partisan standoffs every time the government approaches a deadline to extend its authority to spend or borrow more money. Boehner’s deputy, Eric Cantor, was even more intransigent in his dealings with Obama, but Cantor ended up losing a primary to a bomb-thrower who argued that he wasn’t intransigent enough. And Boehner quit in 2015, tired of the bomb-throwers in the “Freedom Caucus” wing of his conference.

One of those bomb-throwers, Mick Mulvaney, is now President Trump’s budget director, and has pushed for even more draconian spending cuts. And last spring, after congressional leaders flatly rejected Mulvaney’s list of proposed cuts to popular agencies like the National Institutes of Health—and the media portrayed the resulting “omnibus” budget as a huge defeat for Trump—the angry president began making the kind of threats that help explain Washington’s current quandary. “Our country needs a good ‘shutdown’ in September to fix mess!” he tweeted at the time.

Congress managed to delay that shutdown after the hurricanes in September, but now it has arrived, and both parties are under pressure from their bases to hold out for total victory. It will be politically difficult for Democrats to accept a compromise that does not protect undocumented Dreamers who have been living in America since they were kids. And it has become politically difficult for Republicans to accept any compromises with Democrats. But if Senate Democrats do go for something like the bargain Senate Majority Leader Mitch McConnell is currently offering—allowing passage of a short-term spending bill in exchange for a vague promise to allow a vote on legislation to protect some Dreamers from deportation—liberal activists will demand a harder line next time around.

They won’t have to wait long: Congress and the president will need to cut a deal to raise the federal debt limit this spring, maybe as soon as March. Or they can continue their stalemate, and maybe create a global economic meltdown.

