Trading a Policy Problem for a Political Problem

As the summer has gotten hotter, the pressure has increased on members of Congress and the Obama Administration to reach a deal on the debt ceiling. The debt ceiling was established in 1939 and allows Congress to authorize the Department of the Treasury to issue public debt. The debt ceiling currently stands at $14.294 trillion, the government reached that limit in May and extraordinary measures will be exhausted by about August 2nd. By raising the debt limit the government will be able to pay its already incurred legal obligations – the debt limit is not about future spending but about past financial commitments. The negotiations between the Republican leadership and the White House have resulted in little movement, and it has shown that the politics of the situation are murky at best.

Both sides are far apart on multiple pieces of deal. Congressional Republicans want a deal reduce the deficit by $2 trillion over ten years, while the Obama Administration wants a deal that would reduce the deficit by $4 trillion over ten years. Congressional Republicans want to achieve deficit reduction exclusively through budget cuts, while the Obama Administration wants to achieve deficit reduction through a combination of budget cuts and tax increases (although tax increases represent less than a fifth of the package). There have also reports of possible cuts to Social Security and Medicare. But, it seems that a large multitrillion dollar deal might be unattainable – as Congressional Republicans have rejected the idea of any deal with new revenue.

There is another proposal that has been floated today; Ezra Klein reports that Senator Minority Leader Mitch McConnel proposed replacing a policy deal with a political deal:

The process McConnell is proposing would go like this: First, Obama would submit a request for a $700 billion increase in the debt ceiling, along with a nonbinding proposal to cut spending. That would automatically trigger a $100 billion increase in the debt ceiling to give Congress time to consider the request. Congress could then vote to either approve or disapprove of the president’s request. If they disapprove of it, however, Obama could veto their disapproval, and unless two-thirds of both chambers voted to overturn his veto — a virtually unthinkable outcome given that Democrats control the Senate — he could raise the debt ceiling anyway.

The same thing would happen, albeit in $900 billion increments rather than $700 billion increments, in fall 2011 and summer 2012. Take it all together, and Republicans would almost completely forfeit their leverage over the debt ceiling. In return, they’d get to make Democrats vote repeatedly to first raise the debt ceiling and then to “approve” of raising the debt ceiling. As Sen. Lamar Alexander (R-Tenn.) said, this “gives the president 100 percent of the responsibility.”

Or, to put it differently, 100 percent of the blame. Raising the debt ceiling is unpopular. That’s part of why House Republicans are demanding such massive concessions in return for doing it. But McConnell, who leads the Senate minority and wants to lead the Senate majority in 2013, would not have to vote for any increases in the debt ceiling, nor would his members. That’s why this appeals to him: It would force Senate Democrats to repeatedly vote to raise the debt ceiling, and he hopes that would make it easier to defeat them in the next election. As David Corn described it, the message to the president is: “You drive. We’ll carp.”

The proposal has received mostly negative reviews, from Republican and Democratic lawmakers and from conservative and liberal commentators. But, Ezra Klein had another interesting observation:

I should say that I don’t know why House Republicans would go for it and it seems clear that this is going to be a big black eye for McConnell. But that doesn’t make it a bad plan. In essence, McConnell is proposing to permanently disarm the bomb that is the debt ceiling. He’d formalize the informal arrangement the parties have had in recent years, which is that the debt ceiling is used to embarrass the party in power, but it’s not allowed to threaten the American economy. If his plan passed, it’d become easier for the minority party to embarrass the majority party, but harder for them to threaten the economy. It’s win-win.

If you want to take a generous view of McConnell’s motivations here, you’d say that the canny Kentuckian, whose understanding of the way polarization and party discipline dominate today’s congress vastly exceeds that of any other politician, realized that it was no longer safe to assume that the two parties would always reach agreement in time to lift the debt ceiling, and in that world, the debt ceiling was too dangerous to the American economy.

The cynical interpretation of McConnell’s motivations is that knowing there’s no deal Republicans could sign onto and the White House would accept, he’s moved on to a strategy of embarrassing Democrats rather than trying to reach agreement. But in truth, that’s a distinction without a difference. Whether he’s responding to congressional dysfunction or demonstrating it, his proposal is still a way of getting past it, or at least limiting the damage it can do to the economy. That the very forces that make it necessary make it impossible to pass seems obvious, but that doesn’t mean it shouldn’t pass. McConnell is giving us a way out of the hole we’ve dug for ourselves, and eventually, we’re going to wish we’d taken it.

So, should the Obama Administration trade a policy problem for a political one? Should it ensure the fragile economic recovery is not derailed by accepting a politically dangerous deal?

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