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.

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.

Wall Street Isn’t Falling For The GOP’s False Debt Ceiling Premise

The Washington Post’s Greg Sargent has a great post today on the inherent contradiction of the Republican Party’s debt ceiling position. On the one hand, Republican leadership has said that the debt ceiling must be raised. The U.S. cannot default. On the other hand, they are demanding concessions from the president for doing something they know they have to do. As Sargent said on Twitter, “if Rs concede debt limit MUST go up to avert econ disaster for all, why are they entitled to something in return for it?” The answer is that they aren’t entitled to something in return. Here’s Sargent:

The second argument made by Republican sympathizers is that, okay, Republicans will raise the debt limit in the end, but they don’t want to, so it’s still a concession on their part. But why don’t they want to raise it, if they know it must happen to avert economic disaster? The only conceivable answer is that staking out a posture of reluctance to raise it gives them leverage to extract concessions.

This gets to the core truth about this debate: As long as it’s an open question whether Republicans are prepared to allow default, the claim that Republicans are threatening to do extensive harm to the country in order to extort concessions from Dems that a radical faction of their party is demanding is 100 percent right.

On the other hand, if it is not an open question that Republicans are prepared to allow default — that in the end, John Boehner will definitely raise the debt limit with support from Democrats when it comes down to it, because he knows it must happen — then why are we even having this discussion at all?

These are very important points. The media is fueling Boehner’s negotiating strategy by buying into the premise that Republicans are actually willing to breach the debt ceiling. It’s unclear how many House Republicans fall into that camp, but we know that Boehner isn’t one of them. As the speaker of the House, he can bring a bill to the floor that will raise the debt ceiling and it will pass with plenty of Democratic support. If Boehner holds true to what he said, there is no story here. The House will raise the debt ceiling. Period. Any talk about concessions or negotiations supports the House Republican’s false premise that we could actually breach the debt ceiling.

While the media may be falling for Boehner’s trick here, Wall Street isn’t. There’s been a lot of reporting on the fact that the bond markets are calm and investors don’t seem particularly worried about a default. That’s because they understand that Boehner will raise the debt ceiling. They read the coverage of the debt ceiling. They see Ezra Klein write that he’s “scared of the debt ceiling” and Jonathan Chait say that the “debt-ceiling showdown is the fight of Obama’s life.” They see congressmen worry that they don’t know how this will end. They see and read all of this.

And they don’t care.

They know there won’t be any negotiations and that Boehner will raise the debt ceiling eventually. There isn’t a freak out in the markets, because there is nothing to freak out about. Unlike the media, the market isn’t buying into this false Republican premise.