The End of Debt-Ceiling Hostage Taking

Greg Sargent had a good post yesterday explaining why Democrats are so adamant that they will not give any concessions for raising the debt ceiling:

Democrats, by contrast, don’t believe this constitutes acceptable governing. They don’t believe budget negotiations should proceed under these conditions. They are not making an argument about what the House majority can legally or Constitutionally do; they are making an argument about what they believe the House majority should and shouldn’t do, about what does and doesn’t constitute good governing. They are making an argument about governing norms. The Dem argument is that this practice should be renounced by both sides. Dems believe making concessions under these conditions now will legitimize the GOP demand for negotiations to happen under them, making default later all but certain, because this sort of standoff will happen again and again, ultimately leading to miscalculation and disaster.

Bingo. The key here is that Republicans only have leverage to extract concessions out of Democrats if they really are OK with breaching the debt limit. There are some who are, but the House GOP leadership isn’t. That’s been abundantly clear for weeks now as Boehner has repeatedly commented that the U.S. cannot default on its debts. It’s even clearer if you look at how House Republicans have ramped down their demands.

After Boehner’s plan fell apart in the House yesterday, Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell stepped back in and quickly brokered a deal that would stave off a default. It funds the government until January 7 and raises the debt ceiling until February 15 while strengthening the income verification requirements in Obamacare. It does not include a delay of the reinsurance fee, of the medical device tax or a ban on the Treasury Department’s use of extraordinary measures. It also sets up a bicameral conference committee with the goal of coming to a budget agreement by December 13.  Make no mistake: this is a Republican surrender. The income verification condition is simply an enforcement of current law. The rest is a clean CR and clean debt ceiling hike, exactly what President Obama and Democrats have been calling for the past month.

Due to parliamentary rules, a single senator (cough Ted Cruz cough) could drag out the Senate bill so a vote doesn’t take place until Saturday or Sunday. If all senators agree by unanimous consent to forego debate on the bill, it can be voted on today and head to the House, but that requires the agreement of all senators. If the bill originates in the House and is passed, the Senate can take it up and vote on it soon after. Thus, House Minority Leader Nancy Pelosi is pushing Boehner to bring it to the floor to speed up this entire process. No matter what though, it looks like the speaker will allow a vote on the bill, which will then pass with mostly Democratic support.

There is a more important point here: This is the end of debt-ceiling hostage taking.

It’s over. Boehner and Co. capitulated completely, because their entire strategy was a bluff. This deal proves that Republicans aren’t willing to breach the debt limit. If Boehner ever threatens to do so again in the future, no one should take it seriously. He no longer has the credibility to make those threats. The debt limit is not an extortion device. A minority party cannot use it to extract a policy concession from the majority. This is the new governing norm.

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.

Path Set for Ultimate Battle Between Boehner and the Tea Party

There’s an interesting dynamic developing in the Republican party over John Boehner’s proposal for a six-week debt ceiling increase. The Tea Party has hesitantly accepted the idea, arguing that it would separate out the debt ceiling and government shutdown fights. They want to use the government shutdown to stop Obamacare and the debt ceiling to enact entitlement reform. For them, keeping the two crises separate is vital and the short-term deal accomplishes that. Here’s how Sen. Ted Cruz described it on KYFO radio:

My understanding is that this is being driven by House conservatives who are quite reasonably saying listen, let’s focus on Obamacare, on winning the fight on Obamacare, on helping remedy the enormous harms Obamacare is inflicting on millions of Americans, and let’s push the debt ceiling a little further down the road so that it doesn’t distract us from the fight we’re right in the middle of now.

What’s amazing is that Boehner and Republican leadership want the short-term extension for precisely the opposite reason that Cruz and Co. want it. Boehner wants to make a larger deal that includes a continuing resolution and longer debt ceiling increase in return for concessions from the president. President Obama says he won’t negotiate until Republicans reopen the government and raise the debt ceiling, but if Boehner offers a deal with few concessions (repealing the medical device tax or a promise to focus on tax reform, for instance), the president will likely accept it. Boehner, thus, needs time to craft an agreement and rally support for such a deal. That’s why he’s proposed this short-term extension. From Robert Costa yesterday:

But the quiet acceptance of a short-term extension among rank-and-file Republicans gives Speaker John Boehner, who heads to the White House later today, a chance to avert default and eventually craft a larger fiscal bargain. “We’re telling folks, help us here, and we’ll work together moving forward,” says a veteran House Republican. “We know this isn’t perfect, but we’re not living in fantasyland, thinking we can get everything we want before the deadline.”

Rep. Cathy McMorris Rogers, #4 in the House Republican leadership, further emphasized that the six-week deal would give Republican leaders time to “continue this conversation.

This is going to set up a major battle between Boehner and the Tea Party in the next couple of weeks. I argued yesterday that Boehner’s pivot from demanding a stop to Obamacare to demanding a fiscal concession was a major victory for the speaker. I seem to have spoken to early. This short-term deal gives Boehner much-needed time, but when the Tea Party realizes that he’s using it to craft a larger deal on both the budget and debt ceiling, they are going to be livid. How Boehner then attempts to calm them and pass whatever deal he comes to is his next challenge.