With the re-election of Gov. Chris Gregoire, and the continuation of huge Democratic majorities in both houses of the Legislature, Olympia’s cadre of business lobbyists approached the start of the 2009 legislative session with trepidation. By the end, they were quietly congratulating each other, while their counterparts in the labor and environmental camps were fuming at their inability to pass major pieces of their agenda. What happened?

Clearly, the economy, and I-960, which (this year only) prevented Democrats from raising taxes with a simple majority, each played a part in stalling a liberal agenda. What may prove more significant, however, is the rise of the suburban moderate Democrats. Are the Ds a victim of their own success, and is this good for the State of Washington?

Liberal interest groups came to Olympia with an ambitious agenda. For years they had waited while the Democratic majorities grew, and the threat of Dino Rossi as Governor passed. Now was their time. But little of their agenda became law, and on many issues labor and environmentalists were forced onto the defensive.

Labor’s top priority, a bill on “worker privacy,” stalled, then crashed and burned over an indiscreet e-mail. A session-long battle over unemployment insurance rates ended with a minor advantage to the business side. For years business has feared proposals to require retailers like Wal Mart to provide health insurance to employees, and to expand the state’s new Health Insurance Partnership into a Massachusetts-style system of mandates, subsidies, and payroll taxes. Neither health care proposal generated any traction this year.

Environmentalists saw three of their four top priorities fail, including the Governor’s proposal for a cap and trade system, then were forced to fight a rear-guard action to prevent amendments to their “clean energy” initiative. The Washington Education Association (WEA) lost a highly public brawl with the business community and the rest of the education community over a bill to massively overhaul the state education funding system. (Disclosure moment: I am now a part-time special assistant to the Office of Public Instruction and a consultant to the Public Schools Employees of Washington, which pushed for the education reforms.) Lastly, state employees, unions, and the education community were forced accept a painful all-cuts budget because the votes weren’t there to place long-shot tax increase referendums on the ballot.

As unemployment rises, no one wants to be accused of worsening the business climate, and Initiative 960 made tax increases impossible this year. But those factors are temporary. The business cycle roller coaster will come out of this trough, and the Legislature has shown no hesitation in amending or suspending voter-approved initiatives after their two years of protection lapse. (Remember I-601?)

But when time erodes those constraints, the liberals will still face a new and potent factor: the rise of the suburban moderate Democrats. Democrats enjoy their huge majorities because they have taken suburban seats from Republicans in the Puget Sound and Spokane suburbs. There are now slightly more Democratic lawmakers from these new suburban seats then there are from Seattle.

Suburban voters may be voting for Democrats, but they haven’t changed. They are still moderate, tolerant on social issues, pro-education, pro-environment, but also pro-free enterprise, and against higher taxes. These folks are predominantly high-tech professionals rather than blue collar union workers.

The new Democrats they elected came from their local city governments, and they ran as pro-business moderates who wouldn’t raise taxes. Apparently many of them meant it. Now, many of these Democrats, such as Rep. Tammy Green, (Lakewood), Sen. Rodney Tom (Bellevue), Rep. Pat Sullivan (Covington), and Rep. Ross Hunter (Bellevue) are rising in seniority and leadership.

Unless you are behind Olympia’s closed doors and in the caucus meetings you really can’t be sure of what is driving decisions made by the two parties. Still, it seems safe to assume that the influence of these new suburban Democrats is rising, and that they are more willing to question the desires of Seattle liberals and traditional Democratic interest groups. This past session certainly provided evidence for their clout.

It is good to be careful about what you wish for, because you may get it. The Democrats have captured the suburbs; now they own its middle-of-the-road politics. Accordingly, this session that turned out to be a good thing for the business community. Ironically, it may not turn out to be such a good thing for Republicans. No tax increase and no radical moves on health care probably mean no 1994-style backlash. Given the cyclical nature of politics Republicans will likely gain some seats back in 2010, but at least right now a tidal shift appears unlikely.

But is this state of affairs good for the state of Washington? No one seems to be happy. Business dodged a lot of bullets this year, but they still believe taxes and regulations are driving jobs (and perhaps Boeing) out of the state. Labor and environmentalists made little progress, while teachers and education support staff face layoffs, and higher education took the biggest hit of all. School districts will cut budgets, thousands will lose their health care, our universities may tumble in national rankings, yet business leaders continue to warn us that manufacturing jobs may become a thing of the past here.

It seems that Washington is neither moving left nor right, but rather backwards and down. Elections are supposed to create a mandate to govern. Eventually one side has to win, implement its agenda, and submit the results to the judgment of the people. Not in this state: We are stuck in neutral.