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.

Being Honest with the Tea Party Doesn’t Work

One of the main criticisms of House Republican leaders, particularly Speaker John Boehner (R-OH), the past two weeks is that they lied to the Tea Party about what they could actually accomplish during these fiscal fights. It’s not particularly surprising that Obama isn’t negotiating or that Republicans are being overwhelmingly blamed for the shutdown. The thinking goes that if only Boehner had informed his members at the beginning that they had no chance in these fiscal fights, then it would be easy to cut a deal right now. But why?

What makes anyone think that the Tea Party would be less intransigent if Boehner and Co. hadn’t overpromised at the beginning?

Here’s a counterfactual: On September 28, Boehner holds a meeting with all his members and tells them the truth. President Obama really isn’t going to budge. He’ll allow a government shutdown and may even allow a default if necessary, because he believes these fights are about more than Obamacare. He believes they are about not setting the precedent for the minority party to use the budget and debt ceiling as leverage to extract policy concessions from the majority. Boehner says he doesn’t agree, but that’s the president’s stance and he’s not going to budge. He also tells them that it’s highly likely that Americans will blame Republicans for any shutdown or default and it could potentially risk their House majority in the midterm elections. Boehner even tells them that a default would be catastrophic and they can’t allow it to happen.

How do the Tea Party members react to that? Do they listen, synthesize everything the speaker said and agree to fight another day? Not at all.

That’s because, as Business Insider’s Josh Barro put it, they are living on another planet. Polling doesn’t mean anything. Breaching the debt ceiling wouldn’t be that bad. President Obama caved in 2011 so he’s bound to this time too.

Wrong. Wrong. Wrong. But these conservative members don’t care. They are on a blind crusade against Obamacare and will do everything in their power to stop it. It doesn’t matter what Boehner tells them. His words affect their mood, not their perception of reality.

If Boehner says that the president will cave and they have a real shot at taking down Obamacare, they cheer and support the speaker. That’s exactly what they want to hear.

If he tells them the truth like I outlined above, they sit in silence and find ways to undermine him. They simply won’t believe what the speaker says.

Being honest with these conservative members doesn’t work, because they simply don’t believe it.

Some journalists think that Boehner raised their expectations over these fiscal fights and that the intense Tea Party opposition is a result of their expectations not being met. But the Tea Party expected to stop Obamacare, no matter what the speaker said. Boehner just convinced them that he believed that they could stop Obamacare. That may have stoked their enthusiasm, but it didn’t change their expectations or their willingness to do anything to stop the law.

From Boehner’s perspective, this lie kept his party unified for a little bit longer while he searched for any way out. The Tea Party was always going to be furious by whatever deal he cuts, because it won’t substantially undermine Obamacare. If he had told them that at the beginning, he would’ve immediately split his party in half and put himself in an even worse negotiating position. Lying to them kept his members united and gave him time to work out a deal. It didn’t stoke their anger or increase their opposition to the eventual deal. That was coming no matter what.

Would Democrats Support a Six-Month Clean CR?

It seems like we are slowly inching towards a compromise between Senate Democrats and Senate Republicans. Majority Leader Harry Reid (D-NV) has issued a new offer that includes a nine-month debt ceiling hike, a six-week clean continuing resolution, a delay of the medical device tax, greater income verification for Obamacare subsidies, a formal budget process and a yet-to-be-decided Republican concession. It’s unclear what that concession will be. But if you take the Democrat’s position that they will not negotiate over the debt ceiling or a clean CR, here’s what the deal looks like from their perspective:

Republicans get:                                                           Democrats Get:

  • Delay of medical device tax                                        •  Unknown Concession
  • Greater income verification
  • Formal budget process

The clean CR and debt ceiling increase are not part of the deal as they were never negotiated upon (although Republicans can return to their constituents and say they broke Obama’s promise not to negotiate on the debt ceiling, even if it isn’t actually true). John Boehner will break the Hastert Rule and allow something like this to pass, because he knows we can’t default. That’s how Democrats envision the final deal, at the moment.

But Republicans are upset. They think that Democrats are moving the goal posts on them by demanding a six-week, instead of a six-month, CR. Here’s Sen. Lindsey Graham:

You can blame us, we’ve overplayed our hand, that’s for damn sure. But their response, where the president and [Senate Majority Leader Harry Reid] basically shutting everybody out, and when you try to negotiate, they keep changing the terms of the deal … it’s very frustrating.

So, what terms of the deal does Graham think Democrats changed? He doesn’t specify, but I think this all comes down to what Democrats thought they meant when they said they wanted a clean CR. They meant a CR that lasted six-weeks, or at least they are saying that’s what they meant. Republicans think Democrats meant that they would support a clean CR for any period of time. This is how Reid’s offer looks to them:

Republicans get:                                                           Democrats Get:

  • Delay of medical device tax                                       •  Six-week clean CR
  • Greater income verification                                        •  Unknown Concession
  • Formal budget process

This is the main sticking point right now. Republicans see the six-month CR as something Democrats said they would agree to by itself. Thus, the six-week continuing resolution is a concession for them. Meanwhile, Democrats see the opposite. The six-month clean CR would be a concession. When Democrats originally were calling for Republicans to open government, they didn’t say for how long. The House continually passed bills for six-week CRs that had absurd conditions on them. Democrats may have assumed that any CR would last for six weeks – but they never said so publicly (at least that I can find). Instead, they hammered the Republicans by telling them to pass a clean CR and reopen government, without any time horizon on those demands. Republicans want that clean CR to last six-months to lock in sequestration for longer. Democrats, of course, don’t.

There’s an easy way to figure out what Democrats would accept: Boehner could bring up a clean six-month CR in the House. Would Senate Democrats reject it? If so, it would contradict everything they have said about wanting Republicans to pass a clean CR. If they passed it, it would lock-in the cuts, a current goal of Senate Minority Leader Mitch McConnell. Unfortunately for him, Boehner won’t bring such a bill to the floor due to the internal political dynamics of House Republicans.

Instead, McConnell has limited power to achieve a six-month CR. Americans overwhelmingly blame Republicans for the shutdown and the October 17 debt ceiling deadline is a few days away. He must make a deal and has limited leverage to do so. Meanwhile, Harry Reid truly believes that a six-month CR is not what Democrats meant when they said they’d support a clean CR. If he agreed to a deal with a six-month CR instead of a six-week one, this is how it would look to him and Senate Democrats:

Republicans get:                                                           Democrats Get:

  • Six-month clean CR                                                      •  Unknown Concession
  • Delay of medical device tax
  • Greater income verification
  • Formal budget process

That’s not acceptable to them. That’s the impasse we’re at now. It has nothing to do with Obamacare. Instead, it’s all about how long the clean CR should be and what Democrats meant when they said they wanted a clean CR. And the only person who can force Democrats to answer that question has his hands tied by extremists in his caucus. All as the clock slowly ticks towards a self-inflicted financial crisis.