StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



Nate Silver: Can't Enact A Debt Ceiling Increase Without Democratic Votes

08 Jul 2011
Posted by Stan Collender

I first wrote about this back in May, but Nate Silver today has a terrific analysis in his Five Thirty Eight blog at the New York Times of why House Democrats will have far more influence in the outcome of the debt ceiling fight than seems obvious at first glance.  In fact, as Nate confirms, any deal will need support not just from House Democrats in general but rather from the progressive wing of House Democrats and that's going to make the big changes in Medicare and Social Security the White House supposedly put on the table yesterday very unlikely.  That, in turn, makes the big deal itself far less likely to emerge from the talks.

What complicates this even further is that anything that might be acceptable to what could be a bare majority in the House is likely to be unacceptable to a majority in the Senate.

 

The GOP is assuming that

The GOP is assuming that Obama will cave. Obama is assuming that Pelosi and the House Democrats will cave. The ability to have leverage is not very useful if the other side doesn't believe you'll use it. The GOP's madman strategy seems much more politically potent.

And why are we moving more strongly towards austerity in the midst of the current economic conditions? Jobs reports are getting increasingly worse. Budget cuts will only make the situation worse. We don't have a debt crisis (other than the need to increase the debt ceiling), we have a jobs crisis.


The House can easily pass a

The House can easily pass a debt ceiling increase with the smaller spending cuts agreed to - a small deal approach that kicks the can on the entitlement problem until after the 2012 election. Without any Democrats - though many Democrats in moderate/swing districts will also be likely to vote for that.

And in that case, it is the Senate Democrats and Obama who will be "vetoing" a debt limit increase because they are insistent on raising taxes - and reneging on the spending cuts they have agreed to - as part of a bogus "big deal" and making America pay for Washington's addiction to spending/bailouts. The Democrats who will be insisting that the government "default on its debts". I'll ignore the ludicrosity of the notion that government can't somehow print money to pay debts when Bernanke admits he can create money from nothing and drop it out of helicopters if he wants to.

Now maybe Nate Silver and you think that Dems will do very well in the 2012 election by campaigning on tax increases and raising the debt ceiling without tackling entitlements - and indeed tacking on more government spending in the process. If so, then go for it. That is what elections are about - and I would much rather have those issues fought out in an election - where we the people actually have some say (however irrelevant). Rather than in some cozy DC "big deal" that always ends up screwing everyone outside the beltway and Wall St.


Both sides need to channel their inner Grinch

Nice article. The dynamics of this are very unstable. The liberals are wary of getting sold out by Obama (again), and the tea party are wary of getting sold out by Boehner and given another rotten deal with fake spending cuts and real tax increases (see 1990, President Bush I). So the question is can they find enough votes while managing to infuriate not only the likes of Bernie Sanders and Nancy Pelosi, but also Ron Paul and Michelle Bachmann (no small feat.)

But while this is interesting from the "inside baseball" perspective, I doubt it really matters in the end. Any "deal" will inevitably mean both parties get to play Santa Claus to their bases. That means another extension of the Bush tax cuts for conservatives, and no entitlement changes for liberals.

Even worse, the obvious ploy of extending the payroll tax cut to get a few more dollars in peoples wallets (assuming they have a job, that is) means social security's fiscal outlook will get worse, not better. It's beyond Orwellian to try and sell more tax cuts and stimulus as a "deficit reduction" deal. Both parties are guilty of this idiocy, for example the GOP keeps on pretending that if we just cut the corporate tax rate all these jobs will magically appear.

This is all just Kabuki theater. A real negotiation would involve the GOP trading off the end of the Bush tax cuts for meaningful Medicare cuts and perhaps the elimination of an entire agency, like Fannie Mae or the TSA.

But that would imply that there is some semblance of leadership in DC, and that both parties are willing to play Grinch rather than Santa Claus. Not likely.




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