Obama’s decision to campaign for a comprehensive budget solution is right, I think, but it came very late. His new posture conforms to the “leading from behind” model of his presidency to date. In the end, he advocates reasonable solutions capable of commanding sufficient support in the country–in this case, a “balanced” fiscal plan that mixes spending cuts with higher revenues–but he has to be dragged there, let alone led there. He gets to the right place reluctantly. It looks like defeat, so his advocacy is much less effective. Peggy Noonan says his intervention is a net negative. I disagree. It’s a net positive, but not nearly as positive as an earlier forceful intervention could have been.
One day this week he explained why he had decided to back the Gang of Six proposal. What was new about it, he was asked? He said it was new because it was bipartisan: for the first time a plan was getting support from Democratic and Republican senators. What? The broad outline of the Gang of Six plan (which is all we have) is very familiar: it is Bowles-Simpson for slow learners. Democratic and Republican senators on the president’s own fiscal commission all voted for a similar deficit reduction plan months ago. Where was the president back then?
Did the anti-tax activist misspeak when he chatted to the Washington Post, or is the following weirdness his considered position? From the Post’s editorial:
With an handful of exceptions, every Republican member of Congress has signed a pledge against increasing taxes. Would allowing the Bush tax cuts to expire as scheduled in 2012 violate this vow? We posed this question to Grover Norquist, its author and enforcer, and his answer was both surprising and encouraging: No.
In other words, according to Mr. Norquist’s interpretation of the Americans for Tax Reform pledge, lawmakers have the technical leeway to bring in as much as $4 trillion in new tax revenue — the cost of extending President George W. Bush’s tax cuts for another decade — without being accused of breaking their promise. “Not continuing a tax cut is not technically a tax increase,” Mr. Norquist told us. So it doesn’t violate the pledge? “We wouldn’t hold it that way,” he said.
Who knew? Shortly after, Norquist issued a clarification:
ATR opposes all tax increases on the American people. Any failure to extend or make permanent the tax cuts of 2001 and 2003, in whole or in part, would clearly increase taxes on the American people.
So he’s against this $4 trillion tax increase–but his tax pledge, strictly speaking, doesn’t rule it out. That does seem strange. What is it about “oppose any and all efforts to increase the marginal income tax rate” that I am failing to understand? Signatories of the pledge have promised not to reduce tax deductions (expenditures) by so much as one net dollar. But they haven’t promised to stop marginal rates returning to pre-Bush levels, which would raise a net $4 trillion. On what planet does that make sense?
Norquist’s pledge would seem to be a pretty incompetent piece of work, from his own point of view. But look, that’s fine. We need the extra revenues.
Slate’s John Dickerson takes the new Gang of Six plan (whose details are still sketchy) more seriously than TNR’s Jonathan Chait. Dickerson says a small bargain is no easier to get than a grand one, so you might as well be ambitious:
So now that McConnell’s face-saving deal looks as hard to get as the big deal, the big deal is back in play (at least for this sliver of the news cycle). All along the president has been saying that since a small deal was just as hard as a big one, why not go for the big one and at least get the credit? Yes, such a deal would require some kind of creative tax solution that would appeal to the president’s desire for balance. But it would also allow fiscal hawks to point to a big amount of savings as well as cuts in entitlement spending, which they have long sought.
Chait says the House Republicans will simply never agree to it:
In theory, you could image a minority of the House GOP caucus supporting such a plan along with a strong majority of Democrats. But remember that John Boehner needs the support of most House Republicans to keep his job. I suppose it’s possible to imagine a sequence of events in which Boehner supports a Gang of Six-style Grand Bargain, it passes over the objection of most House Republicans, and then Boehner quickly discovers a burning desire to help humanity via a private sector job.
Barring such a scenario, I don’t see how this goes anywhere.
I agree with Chait, mostly. Much as I wish they would, I don’t see how House Republicans can row back from their opposition to any and all revenue increases. But this does not mean that the Gang of Six resurgence is unimportant.
Its real significance–and the reason why Obama supported the new initiative so strongly (without knowing much about what it actually says)–is that it increases the risk to the House Republicans of refusing to agree to any deal. With an authoritative bipartisan proposal back in play, rejecting any and all compromise is a little harder to sustain: the House GOP looks even less reasonable and even more isolated. The political pressure on them to accede to a McConnell-like outcome (which calls for no increase in revenues) thus increases.
In other words, the (apparent) revival of the grand bargain improves the (actual) chances for a small bargain.
The emergence of the Tea Party in 2009 posed two questions. Would the movement capture the Republican party and, if it did, would this strengthen the resistance to Barack Obama’s liberal project or cripple it? The debt-ceiling fight in Washington settles the first issue: the Tea Party insurgency has indeed captured the Republican party in Congress.
A less than electrifying performance. I understand the difficulties and sympathize. There’s little Obama can do in the short term about the refusal of House Republicans to budge. As long as they are willing to destroy the nation’s credit standing if that is what it takes to win, Obama’s choice essentially boils down to capitulation in the national interest or mutually assured destruction. Even so, the press conference was dispiriting. Obama seemed unusually hesitant and unsure of himself. I’m not sure what he hoped to achieve by it.
Alexis Simendinger explains that the grand bargain Obama is demanding is already out of reach.
Writing any legislation takes time, and moving it through the House and Senate could take longer. Even if the president and the eight congressional leaders from both chambers suddenly sprinted to the Rose Garden waving a grand bargain sketched on legal pads, congressional enactment before the default-clock tolls is close to impossible, according to budget experts interviewed by RCP.
That’s why Senate Minority Leader Mitch McConnell took the first stab on Tuesday at an emergency escape hatch. His proposal would effectively abandon Congress’ legislative responsibility to approve the administration’s requests to lift the nation’s borrowing authority, and instead cede Obama the power — and presumably the political blame, should voters object.
Putting aside for the moment details of McConnell’s fallback idea, which appears unlikely to get serious traction among the House GOP, his search for a short-term fix was a signal that the usually canny Kentucky Republican now believes his colleagues need to identify Plan B.
If not McConnell’s stratagem, then what?
Hard to know whether to laugh or cry at the Republican party’s response to Mitch McConnell’s debt-ceiling proposal. One segment of conservative opinion sees it as a shrewd idea, a masterstroke even. Another regards it as a sell-out of historic dimensions. And a third appears to think it is both, and is trying to clarify its position.
Amid disturbing signs that the US recovery has stalled, President Barack Obama took a huge gamble in his approach to the debt-ceiling talks last week. Believing he had an understanding with John Boehner, leader of the Republicans in the House of Representatives, he declared he wanted a $4,000bn “grand bargain” on the budget. Barely a day later, Mr Boehner said the deal was off. By Sunday evening, with talks about to resume at the White House, the president’s gambit appeared to have failed.
With Obama raising the stakes in the game of debt-ceiling brinkmanship–going so far, according to some reports, as to threaten to veto a small-scale stop-gap deal–Bruce Bartlett clarifies some important points in a piece about five debt-ceiling myths. I find it hard to believe that the president really would veto a small bargain, by the way. If he did actually say that, he was bluffing.
Bartlett’s link to Garrett Epps on the 14th Amendment is worth following. I wonder what Treasury lawyers are telling the president about the constitutionality of the debt ceiling.
Update: Here’s what Lawrence Tribe is telling him: the debt ceiling can’t be ignored.
The Bipartisan Policy Centre crunches the debt-ceiling numbers. It finds that the the date on which the Treasury will no longer be able to pay all its bills–the X Date–will be “no earlier than August 2nd and probably no later than August 9th.”
What would happen next? There is no precedent, says the BPC. After looking carefully at the Treasury’s projected daily outflows and inflows, the presentation concludes that federal spending would have to be cut immediately by 44%. With decisions then having to be made on a day-by-day basis, prioritizing spending would be very difficult and “the reality would be chaotic”. The government has nearly $500 billion in debt to roll over during August, at a time when a spike in uncertainty plus threatened or actual debt downgrades would be pushing up interest rates.
“The risks are real,” says the BPC. No kidding.
Update: The Committee for a Responsible Federal Budget has updated its “Realistic Baseline”:
Under its Extended Baseline Scenario, CBO bases its projections on current law, which assumes many things that are unlikely to occur, including the expiration of all the 2001/2003/2010 tax cuts and the discontinuation of the regular policy of enacting “AMT patches” and “doc fixes.”
Under its Alternative Fiscal Scenario, CBO lays out a more fiscally pessimistic path, where policymakers increase discretionary spending this decade at the rate of GDP growth, revenues stop growing as a share of GDP altogether after 2021, and the cost controls enacted under Health Carereform (PPACA) are ineffective or overridden after 2021.
CRFB’s Realistic Baseline uses a set of realistic assumptions that fall between these two scenarios and is consistent with a “current policy” path. Under this baseline, debt would rise from 69 percent of GDP today to 88 percent in 2020, 140 percent in 2035, and 437 percent by 2080.