Wednesday, July 13, 2011

Government shutdown 2.0: The debt ceiling

By Nicholas Wilbur 

It's getting down to the wire. The eleventh hour. Crunch time.

If Democrats and Republicans don't make a deal on the debt ceiling by August 2, the Earth will explode. The U.S. will default on its debts. Interest rates will rise. Rep. Eric Cantor will make a killing on his stock investments against the U.S. economy. And who knows, Ann Coulter might not look like a barfly in her next book-jacket photo, Jon Stewart might sign a contract with Fox News, Rep. Barney Frank might go back into the closet, and Marcus Bachmann might come out.

Golfing Buddies: Obama & Boehner
Source: Charles Dharapak/Associated Press

Nobody knows for sure how bad it would be if America defaulted, but everyone who's trained in the economic arts to have an educated opinion about such things seems pretty well convinced it wouldn't rank very far behind "vicious shark attack" on the summer fun scale. And isn't that odd? Doesn't President Obama have an apocalypse czar for this sort of thing?

The fact that nobody knows the exact consequences of a default says something about the likelihood of Congress not increasing the debt ceiling. Maybe it's just me, but this seems oddly reminiscent of the media frenzy surrounding the government shutdown threats in March and April of this year, when Republicans demanded a "historic" $100 billion in spending cuts to the 2011 budget.

Remember that? All the hype about the effects a shutdown would have on society – the unsettling mental images of senior citizens rotting in their own filth because they didn't get their Social Security checks on time to pay the nurse, little kids burning American flags in protest of Yellowstone campground closures, foreigners rioting in the streets (of their home countries?) because their VISA applications weren't processed? It was going to be chaotic. And then, suddenly, it wasn't.

It didn't happen. The Republicans who'd threatened to shut down the government if Obama and Co. didn't defund Planned Parenthood and NPR and the health-care reform law and the EPA, they eventually compromised, threw in the towel on the Tea Party's demands for radical policy riders, and settled on a budget deal that satisfied everyone, more or less.

Leaders from both parties boasted about the agreement, the shared sacrifice, "the biggest annual spending cut in history."

Facing threats of a primary election challenge from the Tea Party, House Speaker John Boehner (R-Ohio) had to confute his right-wing critics who claimed he was a spineless "Republican in Name Only" (RINO). And he did. He secured "historic" budget cuts and proved himself a socialism slayer, a fiscal hawk, and a trusted advocate of the small government ideal that is foundational to the Republican Party.

"This has been a long discussion and a long fight," he said, "but we fought to keep government spending down because it really will, in fact, help create a better environment for job creators in our country." The "fact" about a better job creating environment didn't pan out exactly as planned, but he heralded the deal as a victory for the GOP, because it was, and he promised to continue fighting for even more spending cuts in the future, which he has.

President Obama got what he needed from the deal as well. He was the lead negotiator of a compromise bill that was both fiscally and socially responsible. "Reducing spending while still investing in the future is just common sense," he said. He demonstrated his leadership skills by negotiating what amounted to a short-term stimulus bill, and he upheld his promise to govern from the middle – an appeal to both independent voters and the moderates who comprise the majority of the Democratic establishment. Once again, he looked like the adult sitting at the kids table. 

They avoided a government shutdown, and something tells me Congress won't let the country fall into default, either, if only because nothing has changed since the April budget deal.

Raising the debt ceiling isn't uncommon, not since Reagan anyway.

The same Tea Party leaders continue to threaten RINOs with primary-election challenges. The same Democratic president continues his pursuit to convince the nation that he's not the radical left-wing socialist Fox & Friends accuse him of being. And the same anti-Washington blowback is at stake if the two parties fail to reach an agreement.

Will there be significant spending cuts? Probably, at least compared to what Republicans managed to finagle from Obama last time around. (The non-partisan Congressional Budget Office reported after the budget agreement was approved that the $78 billion in alleged spending cuts actually resulted in a net increase in government spending – to the tune of about $3.2 billion.)

Will the country crumble under the pressure of such austerity measures? Probably not, as Obama and the leaders of the Democratic Party understand much better than I do that appearing as the sane and level-headed party of political moderates means nothing in the eyes of the electorate if the spending cuts they so pragmatically negotiated end up causing a double-dip recession.

As Andrew Leonard predicted, the final product will likely involve "loophole closing, public-sector-employee squeezing, inflation-index finagling, and tax code juggling that allows Democrats to claim revenue increases while Republicans can pledge allegiance to the god of zero tax hikes."

But at the end of the day, the details of an agreement matter less than the politics of it. Boehner and the GOP need only look like hawks in the eyes of the extremists and the 67 percent of Republicans who identify as "conservatives." Obama and the Democrats need only appear as moderate and responsible peacekeepers who saved America from an economic apocalypse without giving away the farm in the process.

When each side agrees to the talking points, they will emerge from the negotiations and begin a joint press conference announcing in broad strokes the "historic" agreement to increase the debt ceiling before the August 2 deadline.

Because that's politics.

(Cross-posted at Muddy Politics.)

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