Republican Quandary: Is 'No' Still the Way to Go? -- In U.S. politics the two parties take turns overplaying their hands.

GOP leaders John Boehner and Mitch McConnell

Gerald F. Seib writes in The Wall Street Journal:

Being "the party of no" has worked out quite nicely for Republicans, but that position is about to undergo its own stress test.

By linking arms to oppose the recently passed health-care overhaul and the economic-stimulus package before that, Republicans have been rewarded with higher approval ratings and enhanced midterm-election prospects.

In fact, Sarah Palin last week declared that, rather than shrink from the party-of-no label that Democrats have slapped on them, Republicans should wear it as a badge of honor: "We're the party of hell no," she declared to a gathering of Southern Republicans, who roared their agreement.

But just ahead on the road to the 2010 midterm elections lie three big issues—financial regulatory reform, a Supreme Court pick and an arms-reduction treaty—where it's much less clear that presenting a solid wall of opposition to President Barack Obama and his Democrats makes similarly good political sense. The risk for Republicans is that the image they have cultivated as a party taking principled stands can morph—or, more precisely, be morphed by Democrats—into an image of a party of obstructionists.

"The people who still decide elections in this country expect progress and don't expect obstruction," says Jim Jordan, a leading Democratic strategist. "This sort of monolithic obstruction to everything just doesn't work with swing voters."

Republicans insist they can avoid that trap. "It depends how it's defined," says Republican strategist Frank Luntz. He wrote a memo in January to Republican leaders on the language to use in opposing Democratic bills rewriting the rules of Wall Street regulation that has gone a long way toward framing the party's public posture.

On financial regulation, Mr. Luntz argues, the key is to remember that Washington is more loathed than is Wall Street: "The danger for Republicans is to be seen as defending Wall Street," he says. "The danger for Democrats is to be seen as expanding Washington. Right now Democrats are losing their battle."

In any case, it's clear the two parties have reached an important inflection point. One way of looking at U.S. politics is to see it as an endless cycle of the two parties taking turns overplaying their hands. It's pretty clear Democrats overplayed their hand after the 2008 election, reading into the results a bigger mandate than they got and paying a price.

Now the question is whether Republicans are about to make a similar mistake. The question arises in large measure because two of the issues ahead—ratification of an arms-reduction agreement with Russia and confirmation of a Supreme Court nomination—have traditionally produced shows of bipartisanship.

But the most immediate issue is Wall Street regulation, a topic that once seemed more likely to produce consensus rather than the big fight that is developing. Republicans' stated opposition to the Democrats' Senate proposal is that it amounts to a "bailout bill" because a provision allowing the government to oversee the shutdown of big financial firms that hit the rocks will only provide a new safety net for companies making risky investments.

Their quieter objection—one harder to sell politically—is that provisions restricting trading in derivatives and establishing a consumer protection agency will handcuff financial markets.