The Obamacare Fight May Not Be Over

October 15, 2013Danny Vinik Leave a comment

Yesterday, Steve Benen wrote a post titled, “ACA repeal crusade over, ‘delusional folks notwithstanding’.” Here’s part of it:

Last year, Republican officials up and down the ballot argued the 2012 elections were the party’s last chance to derail the Affordable Care Act. Once they lost those elections, Republican officials declared, “Never mind what we said before; this budget fight really is our last chance to derail the Affordable Care Act.” And now they’ve lost this round, too.

There won’t be a third. The repeal crusade was a flop.

Sure, it’s possible congressional Republicans will vote a few more times to gut the law — at last count, I think we’re up to 46 repeal votes in the House — but it’s slowly dawning on the party that their dream will not be realized.

They can try to go through the motions in the months and years ahead, but it’s more likely to create eye-rolling than results.

I’m so tempted to agree with Benen. The law has been through so many challenges the past couple of years that it is just about set in stone. But I see one more possibility for how Republicans could derail it:

We’re two weeks into the open-enrollment period for Obamacare. This period lasts until March 31 and it’s the time when individuals can sign up for health insurance on the exchanges. On January 1st, Obamacare goes live and those health plans kick in. That’s when the law really starts. Right now, we’re still in the sign-up phase. So far, that sign-up phase has been an unmitigated disaster. If you’re an Obamacare supporter, you should be very, very concerned. By all accounts, the flaws in the online exchanges aren’t a result of traffic overload or glitches. They are much more systemic and widespread and will require a huge amount of work to get them operating properly. The Administration still has a lot of work to do.

In addition, the government shutdown has masked these problem. Some people think the problems are actually a result of the shutdown, which isn’t true. Once we’re past these fiscal fights, the media’s attention will turn to the mass problems with the exchanges. People will start realizing that there are serious issues here.

The question is how long they will last. If December comes and there are still issues, the Administration should become very worried that people will start seriously turning against the law. Of course, it will have nothing to do with the policy behind Obamacare, but a technical failure can still switch public opinion fast. If people lose faith that the government has the capability to implement it. they may give up. Imagine January 1st coming and people still having trouble signing up on healthcare.gov. That would be a colossal failure.

Two weeks after that, the continuing resolution in the Reid-McConnell plan expires. This would give Cruz and Co. yet another chance to try to spur grassroots support and demand a delay in Obamacare in exchange for funding the government. That plan blew up in their faces the last couple of weeks, but the Tea Party would have a lot more support this time around. Independents may start looking at those demand as reasonable if the exchanges are still having major troubles.

This is the final challenge for Obamacare: does it work? For months, the focus has been on rate-shock and whether the policy would help most Americans. Few people wondered whether the exchanges would actually function correctly. Now, that question is at the forefront of the debate. Under normal circumstances, a Democratic president and Democratic Senate would ensure that the law has plenty of time to work out its kinks, well past January 1st if necessary. They would accept the bad media coverage and keep working on healthcare.gov until they got it right. But the McConnell-Reid deal presents a potential opportunity for Cruz and the Tea Party to mount a grassroots effort that really could force the president to reexamine his greatest legislative achievement. It’s timed perfectly for Republicans to mount a serious challenge to defund or delay the law on legitimate grounds. The Administration ultimately controls the viability of this challenge, but the McConnell-Reid makes it possible. The Obamacare battles never seem to end.

Rand Paul is Willing To Breach the Debt Ceiling

September 25, 2013Danny Vinik 1 Comment

Republican Senator Rand Paul (R-KY) has been a rising star in the GOP the past couple of months, particularly after his drone filibuster. He’s been the leading libertarian voice, following in his father’s footsteps, but with a more populist tone that could give him a legitimate shot at the Republican nomination in 2016. However, he is very, very confused about how harmful breaching the debt ceiling would be. Here’s what Paul said on Glenn Beck’s radio show this afternoon:

With the debt ceiling, I’ve always been willing to go through the deadline. I’m willing to go a month, two months, three months, as long as it takes. And I think we could use that leverage to bring the Democrats to the negotiating table.

AHHHHHHH. I honestly don’t understand how Paul can think this. By all accounts, he’s a smart, hard-working guy who believes in what he says. But he can’t possibly think that breaching the debt ceiling for three months would be acceptable? That would be a disaster of unheard of proportions. Our interest rates would rise significantly, increasing the cost of our debt by trillions of dollars in the long-term. Vital government services that keep the country going would stop. Three months of that could lead to anarchy.

And this was all after Paul said that he doesn’t want a government shutdown, because it would be bad for the Republican Party. Undoubtedly, Paul understands that a government shutdown would be bad for the country as well. But does he really think that breaching the debt ceiling for 90 days is more acceptable than a government shutdown?

Maybe Paul is bluffing here so that Republicans will be in a better position to extort the President. Maybe he is trying to shore up support from the base. I don’t know. But the casualness with which Paul speaks about breaching the debt ceiling and causing an international financial crisis is alarming. I truly hope he doesn’t believe what he’s saying.

Debt Ceiling Extortion

September 24, 2013Danny Vinik 7 Comments

I have no doubt that Congress will raise the debt ceiling. Republicans simply have no choice, but to accept defeat and move on. The United States government pays its bills. Period.

Beyond that though, it’s remarkable how idiotic this argument has become.

Republicans cannot hold the debt ceiling hostage.

In 2011, the last time debt ceiling brinksmanship almost caused an international financial crisis, Republicans were screaming that any debt ceiling increase must be offset by equal spending cuts. The entire goal was to reduce the deficit. While playing chicken with the debt ceiling was irresponsible then, there was at least a bit of logic in terms what Republicans were holding hostage and their ransom demands.

This time though, Republicans are holding the debt ceiling hostage while demanding a one-year delay in Obamacare. There is no connection between the two. Republicans are using the debt ceiling to extort the President. Worse, some Republicans seem ready to breach the debt ceiling if Obama does not back down and agrees to delay his signature legislative achievement. This is where things get absurd.

If we do breach the debt ceiling, it will likely have a significant, long-term negative impact on our debt. Rates on U.S. Treasury notes are lower than any other bond because investors are 100% confident that the U.S. will repay its creditors. The chance that a debtor doesn’t pay its creditor is called credit risk. Companies and countries close to bankruptcy have high credit risks. But the United States is never close to bankruptcy because the dollar is the world’s reserve currency and the U.S. can print its own money. It can always pay back its creditors. That’s why interest rates on Treasury bills are so low. But, if we breach the debt ceiling, that non-zero credit risk rises substantially. Suddenly, it becomes a very real possibility that the U.S. could not pay its creditors. Even if Treasury prioritizes bond payments so it does not technically default on its debts, the act of breaching the debt ceiling will likely shock investors and force them to increase the risk assessment of Treasury notes. That means considerably higher-interest rates for the U.S. in the long-term and thus higher interest payments.

In 2011, J.P. Morgan estimated that rates on Treasury Bills would rise 50 basis points if we breached the debt ceiling. They predicted that it in the long-term, that would add $75 billion per year to the deficit. Compare that to the sequester, which was the result of the 2011 debt ceiling deal. It cut spending by $1.1 trillion over 10 years. Breaching the debt ceiling would effectively undo nearly three-quarters of those cuts in the form of increased interest payments.

So, in 2011, Republicans were so concerned about the deficit that they took the debt ceiling hostage to extract $1.1 trillion in spending cuts.
Now, Republicans are so concerned about Obamacare that they’ve taken the debt ceiling hostage and risked adding $750 billion to our long-term debt.

If Republicans were so worried our long-term debt two years ago, why are they willing to undo most of those spending cuts this time? Does that seem like Republicans actually care about our debt and are using the debt ceiling as a principle to get our fiscal house under control? Or does it seem more like an irresponsible, reckless party risking a global financial collapse in order to extort the President?

That’s why President Obama and Senate Democrats cannot and will not negotiate on the debt ceiling. There is nothing principled about Republican arguments here. The debt ceiling is simply a mechanism to hold the President hostage and force his hand. That’s unacceptable. Enough with debt-ceiling histrionics. Our democracy does not work that way.