Debt Ceiling Endgame

It’s Christmas time in Washington,
The Democrats rehearse
Gettin’ into gear for four more years
Of things not gettin’ worse.

~ Steve Earle, “Christmas In Washington”

I see at least one fairly prominent left-ish blogger has started to point out that Republicans have essentially won the debt ceiling debate. By “won,” Ezra means essentially that the GOP has maneuvered the debate into a position where every proposal on the table now includes significant cuts in spending in return for cobbling together enough GOP votes to pass the debt ceiling increase:

Originally, the Democratic position was that we should simply raise the debt ceiling. Republicans said “no.” There would have to be a deal that reduced the deficit by at least $2.4 trillion — which is the size of the debt ceiling increase needed to get us into 2013.

Ezra is quite correct that the original Democratic position was that we ought to raise the debt ceiling without condition (a “clean” raise), instead of larding up the vote with conditions about future deficit reduction measures (spending cuts). And in that sense, he’s also correct that the GOP has “won” this argument – at least as far as what’s going to happen from here on out seems likely to play out. If the GOP can get Democrats in congress to sign off on a debt-ceiling raise bill that includes mostly – or exclusively – cuts in spending, especially if they can make some of those cuts immediate ones which will have a real bite into the economy immediately, then they will indeed have won.

There’s been a lot of proposals floated around regarding this, from House Republicans, from the Senate GOP, from Harry Reid, from President Obama…but most of it has been simply debating, trial balloons, and testing the resolve of the other side. Obama supporters are hailing his abilities as a “poker player,” without acknowledging that truly excellent poker players know enough never to gamble with the rent money. Especially when you’re bluffing, you do NOT bluff with money you can’t afford to lose. And if the debt-ceiling negotiations have been a poker game, then Barack Obama should never have put “the big three” (Social Security, Medicare and Medicaid) on the table as a bluff…unless, of course, he really was ready to have the GOP call that bluff. Because you never know exactly what your opponent will do, no matter how well you may think you have them pegged.

The “brilliant chess/poker player” explanation for Obama’s moves also falls terribly short if one glances back at the negotiation history of this President. This is a President, remember, who explicitly said last December that, while it might be tempting to take the “we don’t negotiate with hostage-takers” line with the GOP (at that time, over the extension of unemployment benefits), he chose not to take such a line because (in his words) if the hostage-taker is willing to shoot the hostages, then people would “question the wisdom of that strategy.” In other words, Obama said flat-out, in front of cameras and microphones, that if the GOP just seems crazy enough and willing to do enough damage, then he (Obama) will accede to most of their demands.

In the current debate over the debt ceiling, it’s anyone’s guess whether the GOP actually would let the country default on its financial obligations. It may not even be in John Boehner’s or Eric Cantor’s hands to say for certain whether they would anymore — if indeed, it ever was in their hands. The tea party wing of the GOP (mostly freshmen) seem genuinely “invincibly ignorant,” to quote a phrase I’ve heard several pundits use now to describe the tea party caucus’ “default-wouldn’t-really-be-so-bad” position. It may be that they are, and always have been, bound and determined to consciously default on the debt ceiling, regardless of whatever sweeteners either their own party leaders or the Democrats and the President were willing to throw into the pot. Only time will tell for certain.

However, as I’ve pointed out previously, there are a number of other factors at work here besides just tea party intransigence, the biggest among them being that Wall Street – who pretty much OWN the GOP – really, REALLY don’t want a default. As things have grown closer and closer to the possibility that such a previously-unthinkable thing might actually happen, the pressure from Wall Street on Boehner & McConnell has grown in direct proportion. And it’s a parabolic curve: the closer they get, the more quickly that pressure gets stronger. The pressure is quite strong indeed now, to put it mildly. Both Boehner and McConnell also understand (each has said as much) that if a default actually occurs because the tea party simply puts their foot down and childishly says no to everything, it will reflect far worse upon the GOP than it will upon anyone else, including the President. So you can bet that the two of them are wracking their brains in an attempt to come up with a plan that the tea party will accept.

However, as much of a pickle as that puts the GOP leadership in, they still have leverage over Obama and the Democrats. How? Because they know that he won’t allow them to “shoot the hostages.” He’s already said as much, and backed up his words with actions. Ergo, he can likely be forced or convinced to do so again. The best thing for the country and for the Democrats to have happen right now would be if a “clean” debt-ceiling vote could pass. That’s almost certainly not going to happen, partly because such a vote is the least-palatable option of all to the tea party wing, and partly because both Boehner and McConnell understand that the very thing which might tempt tea party representatives in the House to vote for a debt-ceiling raise (coupling it to massive spending cuts) is the exact thing they (Republican leadership) have also wanted all along: decimating government by slashing spending, and the exact thing they can use as leverage with the President and congressional Democrats.

All the GOP has to do is make sure they can get enough GOP votes for some omnibus vote to raise the debt ceiling AND make massive cuts in spending…and they can use that as the perfect tool to force Democratic (and Presidential) compliance. Obama and congressional Democrats simply are not willing to let the US default, and Boehner and McConnell know it. Obama likely knows that Boehner and McConnell aren’t about to let the country default, either…but if the GOP leadership can go to the President and prove to him that a package of large cuts and few if any tax increases (and a debt-ceiling raise) can pass the House, but a clean debt-ceiling bill can’t, then Obama and the Democrats will take it. This is the exact plan, in fact, that the McConnell/Reid proposal is: large cuts in spending, NO tax increases, and a debt-ceiling raise.

If this happens, you will hear so much spinning out of the corner where the Obama fans hail from that it will risk generating another massive sandstorm in the southwest from all the wind being let loose at one time. You’ll hear (as you did in health care) that this is the best possible deal the Democrats could have negotiated, that you have to negotiate with hostage takers if they’re willing to shoot the hostages, and that this will ensure that the unthinkable (default) did not happen. And, again like health care, all such post-facto rationalizations will be USDA grade A bologna. Right now, the Obama supporters/fans are claiming (many of them, anyway) that the President only put Medicare and Social Security on the table because he knew – KNEW – that the GOP wouldn’t take the deal (so it was therefore risk-free to do so). I would refer them to my earlier point about truly professional poker players knowing enough not to gamble with money they absolutely cannot afford to lose. What if your opponent DOES take you up on it? Then you’re stuck in the unenviable (to say the least) position, as a Democratic President, of doing what no Republican President ever managed: making significant cuts to the big three – and the further ancillary damage of proving indelibly to all observers that those three are¬†neither¬†sacred nor secure, and that it can never again be said that Democrats will always defend them. That doesn’t sound like much of a win to me, yet Obama fans are claiming that Obama has decisively, definitively won this debt-ceiling fight in the arena of public opinion, and that he’s now a lock for re-election in 2012.

Don’t believe it.

It may well be that Obama will be difficult or impossible to beat in 2012, but if so, that certainly won’t be due to any sort of “masterful performance” in this debt-ceiling debate. If anything, it will have been in spite of Obama’s performance in recent weeks, and due in the greatest part to the fact that Republicans are genuinely nuts, and therefore unpalatable to a broad swath of non-hard-core Republicans and libertarian hangers-on. What such premature crowing about Obama’s masterful poker playing skills fails to take into account, however, is that this debt-ceiling debate isn’t actually over yet. If the GOP leadership figures out a way to craft a plan that has anywhere between 1.5 and 3 trillion in spending cuts only (with or without Harry Reid’s help), and can sell it to enough tea-party members that it will pass the House, then the Democrats and President Obama will take it. They will take it because that’s what they do: negotiate with people who seem crazy enough to shoot hostages, and because even a horrible deal like that would still be better than the likely consequences of default. They – Obama and congressional Democrats as well as the Obama fans – will call it a victory on that basis as well. And it may even seem for a brief while that it IS a victory. But it’s the weakest form of victory imaginable: the victory of having narrowly avoided the absolute worst thing that could have happened.

And even that sense of victory will be short-lived. For one thing, it will begin to dawn on people – pundits and voters alike – that, in the end, after all the talk of Grand Bargains and default and everything else has blown over – the actual tangible results are that the GOP got Democrats to agree to massive cuts in entitlement spending in “exchange” for simply raising the nation’s debt limit. It will dawn on both voters and, eventually, Washington pundits, that such a vote – to raise the debt limit again – will have to be taken within a year or two at most. They will begin to wonder – as they should – what sort of conditions the GOP will force Democrats to accept THEN, as well…though they probably won’t spend much time wondering if Democrats will agree to those demands. They agreed to these, after all…

Perhaps most importantly of all, if the Democrats agree to such spending cuts, it will have real and immediate negative effects on real Americans. Spending cuts of that size will by definition include some cuts which take effect immediately, even if the big three are left out of the equation. There simply aren’t enough cuts that can be put delayed in their implementation until some future date to add up to two or two and a half trillion – certainly not to three or four. And that means real cuts, right now, as soon as such a measure goes into effect. Heck, as it stands today, without ANY cuts to spending (or taxes), corporations are already hoarding cash at unprecedented levels instead of hiring. Unemployment remains over 9%, and our economy teeters on the brink of going into the feared “double-dip recession.” That’s not what things might look like if Democrats agree to big spending cuts, that’ what the picture is already, TODAY. Anyone who thinks that outlook is going to improve if Democrats and Republicans jointly agree to massive, immediate spending cuts is smoking something stronger than tobacco.

The focus of the Dems and President Obama, all along, should and could have been jobs, not deficit-reducing austerity measures. Here’s a good example script of how things could have gone, when last month’s truly abysmal jobs report came out in the first week of July. Instead, by acceding to the GOP’s framing of the deficit as not only something that needs to be addressed nownownow, but also to the Republican notion that reducing the deficit through spending cuts is the “prize” that Democrats “win” in exchange for enough Republican votes to raise the nation’s debt limit, Dems (and Obama) have ensured that when the impact of those spending cuts (whatever they turn out to be) begin to bite into the economy (as they unavoidably will), as they begin to cost the economy even more jobs – all of which will happen towards the end of this year and on into the 2012 election cycle – the pundits and voters will begin to realize that it was this focus on spending cuts instead of jobs which brought us back into recession (or worse). And while they won’t look kindly on Republicans for having insisted on those cuts so stridently, neither will they look kindly on Democrats for having acceded to the GOP’s threats. Voters will either take a “pox on both your houses” approach at the ballot box (as Nate Silver seems to be suggesting is possible lately), or they’ll do what Obama’s supporters already accuse the left of having done in the 2010 midterms: stay home.

As we all learned recently, any election in which not just disenchanted lefty political junkies but also average, lower information swing and independent voters stay home out of frustration that no one is doing what really needs to be done while the economy burns – or possibly isn’t even listening to their entreaties – is one in which the playing field will tilt even farther right. It may tilt far enough right to cost Obama the White House; it CERTAINLY will cost Democrats more seats in the Senate and possibly the House as well. The best Democrats could hope for in such a scenario would be a wash: a situation where voters in particular districts might be mad enough at their specific GOP rep that the GOP winds up losing as many seats as they gain. But I’m not sure how anyone on the left can classify that as a “win,” though. What I AM sure of, however, is that Obama fans will try to figure out a way to cast it as one.

As awful as it is to even contemplate (let alone say out loud), from a purely political standpoint, it might actually be better for Democrats and President Obama if Boehner and McConnell simply can’t line up enough tea party votes to pass any debt-ceiling raise, no matter how it’s structured or what kind of GOP wish-list items it contains, than it would be for Obama and congressional Dems to sign on to an austerity package which is virtually certain to further tank the economy…and leave Democratic fingerprints on the tanking right alongside Republican ones. Let me be 100% clear here for a moment: I am NOT advocating for default, and I think the aggregate effect of such a thing would be much, much worse if we were indeed to default on our obligations. If it comes to that, I frankly think President Obama should try pursuing the “constitutional option” to raise the limit himself, unilaterally, without congressional approval. I don’t know if that would be possible, but it would certainly be worth trying.

But if things go all Titanic on us and the tea tantrumers really are hell-bent on tanking the economy rather than raising the debt ceiling, at least in such a case, it would be quite clear to everyone, even the dimmest, most knee-jerk of Washington’s commentariat (let alone to average voters) that it was the GOP who drove us off the cliff. Mitch McConnell was right when he said it would damage the GOP brand for a decade in such a case. I actually think he underestimates it: I think it would be more like a generation’s worth of damage; the generation that has to grow up and try to start a life under such adverse circumstances. But it would be, cleanly and clearly, a Republican-only debacle. If Boehner and/or McConnell can keep it together enough to get the votes they need for a package of big spending cuts and a debt ceiling raise, and Obama and Dems sign on to it – which they would/will – then it will be an irrevocably “bipartisan” cock-up. Voters (and not just the liberal, activist ones) won’t “give Obama credit” for having staved off a much-worse crisis in the form of a default, because they won’t have had to witness what the effects of a default would have been like. Instead, they’ll take out their frustrations at whoever’s in power, because both parties had their fingerprints all over the disastrous “deal” which led to the re-crashing of the economy. They may think “man, those Republicans sure were obstinate jerks – and WRONG, to boot,” but they’ll also be thinking “Damn! Can’t ANYONE do ANYTHING about them? ‘Cause these Democrats sure can’t – or won’t.”

Leaving aside the effects on the economy, I don’t see how voters thinking THAT, heading into an election, can possibly be a good thing. If I sound gloomy, well, I am. Because those are essentially the realistic choices as of today, gang: either the GOP cobbles together enough votes to convince congressional Dems (and Obama) to sign off on a massive spending-cut bill which will seriously damage the economy and cause voters to revile BOTH parties…or the tea tantrumers “hold strong” (and stupid), and we have our first-ever default in the history of the United States, which would be even worse. I think the chances for either a “grand bargain” that includes significant revenue increases OR a “clean” debt-ceiling vote are becoming more remote with every passing day. And at this late stage of the game, about the only thing we can hope for – ironically – is that Wall Street still has more influence over the Republican party than the tea party has stubbornness. Heaven help us. :-/