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The Jehoshua Novels


The Next Fiscal Battle

Already, some Republicans are threatening to hold the American people hostage to their mania for spending cuts when the debt ceiling battle begins next month:

Sen. Pat Toomey (R-Pa.) on Wednesday called for Republicans to be ready to shut down the government to gain spending cuts in exchange for raising the nation’s debt-limit.

[...]

The Treasury said Monday that the U.S. had reached its $16.4 trillion borrowing limit. Secretary Geithner said the department had begun instituting “extraordinary measures” to avoid default.

Toomey said that markets would suffer less from the “temporary disruption” of a government shutdown than from Washington showing an unwillingness to tackle its deficit woes.

“We Republicans need to be willing to tolerate a temporary, partial government shutdown,” he said on MSNBC’s “Morning Joe.”

Of course we already knew Republicans in Congress would try to do that, because from past experience we know that Republicans almost always refuse to back down from a position that they have promised not to back down from.

Democrats, on the other hand, often usually do back down from a position they have promised not to back down from, and then make a new promise to hold firm on the very same point, in the apparent expectation that anyone will believe they mean what they say. Thus, Pres. Obama’s response to Republican threats is simultaneously unsurprising, hilarious, and embarrassing:

President Obama has already warned Republicans, though, that he will not tolerate another extended debate over the debt ceiling. The negotiations over increasing the debt ceiling in summer 2011 resulted in an extended standoff between Obama and Republicans, a threat of a government shutdown, and a credit downgrade for the country. Obama said he would not allow that to happen again.

“While I will negotiate over many things, I will not have another debate with this Congress over whether or not they should pay the bills that they’ve already racked up through the laws that they passed,” he said on Tuesday night.

Come ON, man! Have a little self-respect! You only just got done folding on almost every vow you made in this “fiscal cliff” deal just completed! No one on God’s green earth takes your “I will not negotiate over the debt ceiling” seriously.

Noam Scheiber points out that Obama, by agreeing to put off the sequestration spending cuts for two months, has already effectively agreed to let Republicans use the debt ceiling as a bargaining chip:

Now it’s true that the president forcefully reiterated his refusal to negotiate over the debt limit in his statement after the House vote last night. And if raising the debt limit were the only deadline looming in March, that might count for something, since it’s harder to squeeze a guy for concessions if he won’t even take your calls. But, as a practical matter, this is just a semantic game. The White House will be negotiating hard over the next two months even if it says it’s not negotiating over the debt limit, since the bill that funds the government for this year expires in March, as does the two-month delay in the automatic spending cuts that Congress just approved. What difference does it make why you say you’re negotiating if in the end you’re still negotiating?

Ta-Nehisi Coates quotes Jonathan Chait on Obama’s weak negotiation skills:

Watching the president operate with a kind of political leverage he won’t soon again enjoy has not been a very encouraging experience:

So what we have is two more showdowns in which the parties disagree not just on the outcome but even on the parameters of an outcome. Obama thinks the debt ceiling needs to be raised, full stop, without becoming a bargaining chip in a fight that threatens the stability of the global economy. Republicans want to use that chip. Then there’s the sequester, which Obama thinks should be replaced with spending cuts and tax revenue, and Republicans think should be replaced with spending cuts and more spending cuts.

If Obama makes it through both these events without either accepting draconian social policy or triggering an economic meltdown, then today’s compromise will be seen as a clever first step. That’s not what I expect. I expect instead that his willingness to bargain away his strongest leverage, and the central theme of his reelection, will make the next rounds harder, and embolden Republicans further. I suspect he will wish he had ripped off the Band-Aid all at once, holding firm on tax cuts and daring House Republicans to defy public opinion.

[...]
Obama and his allies like to deride lefties as a group of softheads who don’t understand that negotiation is essential to government. But they don’t like to deal with a more stinging left-wing critique: Negotiation is a part of democracy and Barack Obama, whatever his many, many talents, is not very good at it.

Some of us thought that given the election results, and not having to stand for reelection, we might see a different Barack Obama. Probably not. There is no real reason for to take Obama’s claim that he won’t negotiate over the debt ceiling seriously. That goes for his enemies and his friends alike.

Ezra Klein reaches the same conclusion via a more wonkish path:

The question of who “won” the fiscal cliff won’t be answered till we know what happens when Congress reaches the debt ceiling. The White House says that there’ll be no negotiations over the debt ceiling, and that if Republicans want further spending cuts, their only chance is to hand over more tax revenue. If they’re right and they do manage to enforce a 1:1 ratio of tax hikes to spending cuts in the next deal, they’re going to look like geniuses.

Republicans swear they are crazy enough to push the country into default, and they promise that the White House isn’t strong enough to stand by and let it happen. If they’re right, and the White House agrees to big spending cuts absent significant tax increases in order to avert default, then Republicans will have held taxes far lower than anyone thought possible.

But both Republicans and Democrats can’t be right. If we take the lessons of this negotiation, here’s what will happen: The White House will negotiate over the debt ceiling. They’ll say they’re not negotiating over the debt ceiling, and in the end, they may well refuse to be held hostage over the debt ceiling, but the debt ceiling will be part of the pressure Republicans use to force the next deal. The White House fears default, and in the end, they always negotiate.

Paul Waldman at The American Prospect says the fact the debt ceiling issue was not resolved in the fiscal cliff legislation is a big win for Republicans:

The great Republican triumph of the current negotiation—and whether it came from hard-nosed negotiating or simple capitulation on the White House’s part, I’m not sure—is the fact that an end to the debt ceiling was not part of the deal worked out by Mitch McConnell and Joe Biden. Nor, for that matter, was the question of sequestration resolved; instead, it was simply put off for two months. That means we’ll be facing not one but two more crises, when we get to do this all over again. And when we do, the conditions will be very different.

On the debt ceiling, President Obama has said that it isn’t up for negotiation; it just has to be raised, and that’s all there is to it. Republicans, on the other hand, are quite looking forward to the chance to once again threaten to bring about the collapse of the American economy unless they can squeeze some more cuts from the budget. But once we get to that confrontation, most of the leverage the Democrats now have will be gone. Remember that there are two main things Republicans want: They want to keep taxes low on the wealthy, and they want to cut domestic spending. Obama’s leverage in the current negotiations came from the fact that if action wasn’t taken, all the Bush tax cuts would expire—i.e., there would be a large tax increase, including on the wealthy. Because Republicans really didn’t want that to happen, he could force them to accept some of his other priorities, like an extension of unemployment benefits.

But now the tax issue is settled. So when the debt ceiling comes up in a couple of months, there will be nothing Republicans will be afraid of. They’ll have no reason to give an inch. And they’ll be emboldened by the fact that every time we’ve had one of these crises, Obama has drawn a bunch of lines in the sand that he eventually backtracked right over.

And that, my friends, is why you don’t (or shouldn’t) reverse yourself on a position you have previously declared non-negotiable. If you know you are incapable of honoring your own line in the sand, then don’t draw one. But one or the other. Don’t draw the line and then erase it.

8 comments to The Next Fiscal Battle

  • John Zimmerman

    Why don’t Dems get in front of this and suggest major cuts to the bloated defense budget, like going back to the amount in G
    Shrub’s first term? Let the Repubs defend military bases in Uzbekistan and Turkey, no-bid contracts to Blackwater, and budget items even the Pentagon does not want.

  • jo6pac

    I think this a big win for 0, he’ll roll over on cuts to SS and Medi-Care/Caid and say the repugs made im do it. When all the time it’s what he and his ws puppet masters wanted.

  • dude

    President says he “will not tolerate” yata-yata…

    Or he’ll do what exactly? This man reminds me of onetime Sec of State George Schultz telling the world something is “unacceptable”. Or Harry Reid sending a “firm” letter to a colleague.

    “No arrows in the quiver” is about all any of these expressions convey.

  • nymole

    Worse, but unsurprisingly, the IMF seems to take the GOP line (except perhaps, very perhaps for the debt ceiling) .

    http://www.voanews.com/content/international-monetary-fund-says-us-fiscal-deal-does-not-go-far-enough/1576663.html

  • Don Henry Ford Jr.

    Americans tend to think they can do as they like without consequences.

    Excessive debt will one day destroy our credibility and the buying power of the dollar.

    There ain’t no free ride.

    Bring the troops home and stop trying to run the whole world.

  • Excessive debt will one day destroy our credibility and the buying power of the dollar

    How, exactly? I’ve not seen a credible explanation of why a nation that runs a fiat currency, one that is the de facto base currency of the world, is in danger of either of these. Economic slowdown due to austerity, which has the potential to domino-topple the economies of many other nations with weaker currencies and then boomerang back as even more economic slowdown at home, is far more of a real and present danger. Kickstarting the economy by even more government spending should be the priority – the time to pay back debt (debt no-one is calling in) is when you’re making money, as three Nobel winning economists have pointed out.

    • Thomas Lord
      Excessive debt will one day destroy our credibility and the buying power of the dollar

      How exactly?

      If gov’t spending as a fraction of GDP grows faster than GDP itself for too long then holders of debt will be anxious about inflation and eager to find alternatives to the $USD for reserves, weakening the dollar and our national “buying power” in global markets. If that happens, presumably our domestic economy will start running a large trade surplus as our impoverished work-force obligingly assists with the massive resource extraction that results.

      I think I agree with you (and the MMTers) that at this particular juncture, more rather than less deficit spending by gov’t could be helpful but that doesn’t mean that all deficit spending is good either in general or at this specific time.

      If there should be a mandate for gov’t to spend more money I think it has to be much more specific. It has to be evaluated in terms of how we think it will impact productivity and distribution of income in the country. If gov’t (pseudo-)”stimulus” spending is towards ends that don’t increase real, structurally valuable productivity (e.g., certain military expenditures), and/or if the spending tends to further upward redistribution of income, then all it will do is add to the inflationary threat of excessive debt while helping the elites consolidate power and wealth. (It’s too much of a digression to get into here but, briefly, this relates to why I think the mantra of “infrastructure and education” is unpersuasively vague: there are very bad as well as potentially good ways for gov’t to spend on those things.)

    • Don Henry Ford Jr.

      Good question and worthy of an answer that will require more thought and space than a comment allows.

      I will try to come up with a new post to offer a few ideas.

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