The GOP Leadership’s Strange Obsession with the Medical Device Tax

John Boehner and the rest of the Republican leadership are searching for any possible Obamacare-related concession that the Tea Party will see as substantial and President Obama won’t. Defunding or delaying the entire bill meets that first condition, but not the second. A clean debt ceiling increase does the opposite. The problem is, as Greg Sargent points out, there is no middle ground here. Whatever the Tea Party would accept,

Why so much focus on repealing the medical device tax?

Why so much focus on the medical device tax?

President Obama won’t accept and vice versa. Instead, Boehner and Co. have settled on the repeal of the medical device tax, which does just about nothing to substantially undermine Obamacare, but is still supposed to appease the Tea Party. It’s not going to work.

The Tea Party is happy to dismantle any part of the law, so on its own, they support repealing the medical device tax, but they are looking for much, much more out of these fiscal fights. This small gesture doesn’t cut it. The reason it doesn’t cut it though is more complicated than it being only a minor concession. It’s also because it’s a minor concession that helps corporate welfare and does nothing to help those afflicted by the law.

Put yourself in the mind of a Tea Party supporter. You want your representatives to do everything in their power to stop Obamacare – including shutting down the government and risking a possible default. You don’t care about the potential negative side effects; stopping Obamacare is what matters. You also probably think Boehner has no backbone and will eventually cut a terrible deal. You continue to pressure your representative and go to rallies to show that you really care about this, but you know Boehner will probably cave and all you’ll get is a minor concession. Now, you find out that the minor concession you receive is the repeal of a tax on an industry that will significantly benefit from Obamacare. You expected to get very little out of this standoff, but that’s still a terrible outcome. You want small government, but you are also sick of K Street and big business using their money to rig government in their favor. Repealing the medical device tax is a continuation of that. Lobbyists are using grassroots anger to help pad the pockets of big business. You don’t like the medical device tax and understand that repealing it helps unwind a bit of Obamacare, but it does nothing to help main street America. That’s what you really want.

That’s what’s so interesting about the repeal of the medical device tax. It’s a fig leaf to the Tea Party, but it disregards what they really want. Yet, House Republican leaders have settled on it, because they want some concession from the president that relates to Obamacare and Obama signaled an openness to it. But this will not satisfy the Tea Party in any way.

Now, there may not be any concession that Obama would accept that the Tea Party would deem to help everyday Americans. He’s not signing any bill that limits or repeals the Independent Payment Advisory Board, a longtime Tea Party fixation. He’s not going to delay the individual mandate. The Vitter amendment may be the closest thing that would make Tea Party conservatives happy and Obama would sign. Of course, it’s a horrible idea and would quickly lead to an exodus of hill staffers to K Street. But Republicans have spun it as a bill that would eliminate an exemption for lawmakers and their aides at the expense of ordinary Americans. That’s what the Tea Party is looking for if they are going to receive just a minor concession from these fiscal fights. Instead, House Republican leaders are infatuated with repealing a tax on big business. That’s fundamentally misaligned with the Tea Party’s goals regarding Obamacare and yet it has become the GOP’s top demand.

Ban Extraordinary Measures

The past 24 hours have seen a mini-breakthrough in the stalemate over the government shutdown and debt ceiling  with House Republicans looking to pass a six-week debt ceiling hike in return for formal negotiations on the budget and a permanent ban on the Treasury Department’s use of extraordinary measures to extend the debt ceiling. President Obama has already come out against the condition of formal negotiations on the budget so this deal is a non-starter. But Boehner could easily downgrade the “formal negotiations” to a mere resolution seeking Democrats to negotiate, something non-binding and not a substantial concession. In that scenario, would Democrats accept a permanent ban on extraordinary measures? I hope so, not just because it will get us closer to a solution to both crises, but also because it makes policy-sense as well.

A quick recap: We actually hit the debt ceiling of $16.999 trillion in May, but the Treasury Department has been using some strange budgetary gimmicks to extend our borrowing authority. However, those gimmicks, known as extraordinary measures, have a limit and we’ll hit that limit next Thursday. After that, we default. An example of these extraordinary measures including delaying payments for public employee pension funds (more info here). That’s what Republicans want to permanently ban.

This makes a lot of sense. The only thing that using extraordinary measures accomplishes is delaying us from officially breaching the debt limit. But the only time Treasury actually has to use them are when one political party is looking to fight over raising the debt ceiling. Extraordinary measures delays that fight a couple of months. Think about it this way: why is having the debt ceiling fight now better than having it this past May? There never is a good time for these fights (and the debt ceiling should be abolished), but extending them for an undetermined period of time is pointless.

Since Republicans have not put forward an official proposal, Democrats haven’t commented on the idea of banning extraordinary measures. Wonkblog’s Neil Irwin offers one possible reason for White House opposition:

Such a step would give this and future administrations less leeway to influence when the debt ceiling becomes a binding constraint, so it won’t be shocking if the Obama administration opposes the idea.

One of the dirty secrets of the Treasury’s cash management function is that very few people on earth understand how it really works, and almost all of those people work for the Treasury. So Republicans on Capitol Hill have felt that they don’t have reliable information on when exactly they really, really need to raise the debt ceiling and when Jack Lew & Co. have more tools in their bag of cash management tricks.

That’s all true, but that doesn’t seem like a good reason to keep extraordinary measures. The minority party should never use the debt ceiling as a hostage, but if they are, it’s better for everyone that they have reliable information on when they need to raise the debt ceiling. If House Republicans want to wait until the last second to strike a deal, they really need to know when that last second is. Otherwise, there is a (small) risk we accidentally default. That’s a risk we don’t need to take.

In addition, it’s much easier for journalists and politicians to explain to the public when we hit the debt limit, instead of when Treasury can no longer use extraordinary measures to stop us from breaching it. It’s an unnecessary complication that confuses the public and simply delays a nasty fight with no real benefits. Let’s get rid of it.

Did the Government Shutdown Stop Us From Defaulting?

Ezra Klein thinks so:

But whatever the endgame, the fight now is over a government shutdown. That’s bad. But it’s not nearly as bad as a fight over the debt ceiling. It’s evidence of how far into dysfunction American politics has fallen that this can or should be said, but thank God for the government shutdown. It might just have saved the country.

Hmm I’m not so convinced.

Here’s what the odds of a default would’ve been without a government shutdown: 0%.
And here’s what they are with a government shutdown: 0%.

I’ve held this view for a while. Under no circumstance would Boehner allow us to breach the debt ceiling. It helps his negotiating position to try to convince journalists that he is crazy enough to breach it, but when push comes to shove, Boehner understands the catastrophic consequences of a default. He also understands that he single-handedly has the power to stop us from defaulting. History would not look on him kindly if he had that power and chose not to exercise it.

That doesn’t mean the government shutdown didn’t help him out. On the contrary, Klein is exactly right that it gave the Tea Party a chance to vent their anger. Thus, it gave Boehner political cover. He can choose to fight on the government shutdown instead of the debt ceiling. But don’t think that means that the government shutdown actually helped prevent a default. Boehner was always going to raise the debt ceiling.