StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between

GOP Stunt On Debt Ceiling Is Total Surrender To White House

23 Jan 2013
Posted by Stan Collender

Given what happened in July 2011 when they decided to do the opposite (you remember the anything-but-super committee, right?), we should all be happy House Republicans have agreed that this time they won't hold hostage the increase in the federal debt ceiling the Treasury says will be needed by the end of February.

We should also be grateful that legislation embodying the House GOP plan will be debated and presumably passed in the House today -- about a month before the deadline.

But it's important to note this moment in federal budget history: The House GOP plan is nothing less than total capitulation to the Obama administration and Senate Democrats.

How much of a surrender? In 2011 Senate Minority Leader Mitch McConnell (R-KY) was saying that a debt ceiling would never again get adopted unless the president agreed to concessions. Eighteen months later the debt ceiling effectively is being raised with no White House concessions and the GOP is struggling to come up with some kind of spin it can use to counteract what everyone can see...that it tucked its tail between its fiscal legs and rolled over.

The exact same plan the Republicans are about to approve would have caused howls of protest had it been suggested to them by the Obama White House. A Democratic version of this plan would have evoked angry criticism by conservative pundits, been the main topic of conversation on right wing radio and resulted in frequent protests by tea partiers outside the Capital. And it definitely would have been a topic for comedy homologues on late-night television.

How much of a surrender is the House GOP plan? Consider the following:

1. The plan doesn't just allow the government to borrow more, it requires the existing ceiling to be ignored. The party that supposedly was the darlings of the Tea Party is proposing that the same federal debt ceiling that up-to-now it has likened to a tool of Satan be treated as if it's not there and doesn't matter.

2. The ignoring is allowed to continue until May 15. At that point, the debt ceiling will increase automatically to accommodate the additional borrowing the government has done between now and then. In this GOP-proposed version of the "look ma, no hands" theory of budgeting, House Republicans are voting to raise the amount the government borrows without anyone having to go on record to do it. They don't even get a campaign issue to use against Democrats in 2014.

3. The bill includes a provision that requires that the salaries of representatives and senators be withheld if their respective house of Congress doesn't adopt a budget resolution this year. But the provision doesn't require that the two houses agree on a budget, just that each pass something of their own. No agreement on the budget resolution means that reconciliation-- the procedure used in the Senate to avoid a filibuster on spending cuts and revenue increases and, therefore, makes them more likely to happen -- can't be used because that can only happen pursuant to instructions in guessed it...budget resolution agreement. Therefore, the House GOP forcing the Senate to pass a budget resolution means nothing.

In addition, budget resolutions themselves are largely meaningless because they only include totals rather than specifics. For example, projected lower Medicare spending could be the result of either legislated reductions in benefits or an assumption that the program will be operated more efficiently. Similarly, higher revenues could come from assumed higher economic growth or a legislated increase in rates.

The Senate's inability to pass a budget the past four years has been a main GOP talking point so it's not that surprising that this was the price House Republicans decided they should demand in exchange for surrendering on the debt ceiling. But given the reality of what a one-house passed budget resolution means, it's also not surprising that the White House is okay with the plan and the Senate is likely to go along. In reality, it's a free pass.

In other words, the House GOP really isn't getting anything for not fighting on the debt ceiling, and that's about as complete a surrender as you can imagine.

GOP Holding a Losing Hand

For the past 2 years, the GOP has been trying to bluff the Dems with its losing hand in budget negotiations. The bluff reached its peak in August 2011 when the Dems finally called the bluff and the GOP had to show that it had nothing.

Since then, Wall Street has completely undercut the GOP position and the Dems have picked up a new ace: threats to raise taxes on the 1% which they made good during the fiscal cliff fight. Now the Dems are threatening to do it again by closing loopholes of the 1%, so the GOP must fold.

Boehner is simply between a rock and a hard place with his losing hand. Obama wins again.

In addition, the proposed

In addition, the proposed solution might be unconstitutional: the pay of senators and representatives can only be changed with an election in between (27 Amendment). Witholding pay in an escrow, as suggested, is 1) still unconstitutional and 2) pure theatrics, because they can borrow the money from a bank against the escrow.

Not Every Retreat an Ignominious One

The GOP's play on the debt ceiling was really stupid. It had approximately zero chance of working out well for them as long as the President refused to adopt their terms (which he fatefully accepted in 2011, hoping it would facilitate a grand bargain). Obama refused to adopt their terms.

What is the right thing to do at this point? Clearly, it is to back down. To use Bill McBride's poker metaphor, the Republicans were essentially bluffing into the nuts--the longer they persisted, the more they would lose. The smart play is to fold the hand, period.

To portray this as some kind of "tail between the legs" surrender is thus puzzling. Yes, it would have been far better never to raise the rhetorical stakes; but no, that does not mean that walking away now is best understood as ignominious or cowardly.

I think the Republicans were bad actors on the debt ceiling in 2011 and 2013; I wish this resolution were far more lasting. But why are people so eager to make them eat crow for coming to their senses

Certainly the horserace or

Certainly the horserace or warfare interpretation of events is mainstream media. However, what does it serve America to be distainful and triumphant when someone takes a step (voluntarily or otherwise) toward the middle ground? Is a rare glimse of reality on the part of the Republicans to be mocked? I think a thank you or attaboy would be far more constructive than this article's disasterous approach.

Working together

Honestly, don't we want our gov't to stop stalling and actually start governing? We have enough black swan events that occur naturally that we don't need to be making artificial ones.

And while the Left might take glee in the Right caving on this, they shouldn't because it'll just cause more hard feelings and future unwillingness to compromise down the road.

"And while the Left might

"And while the Left might take glee in the Right caving on this, they shouldn't because it'll just cause more hard feelings and future unwillingness to compromise down the road."

We now have a totally loony right with which no compromise is possible. That's nobody's fault except theirs and that of the ill-informed people who voted them into office.

And yet, the President

And yet, the President achieves nothing lasting from this surrender. Republicans should have surrendered even more obviously with a 1 or 2 year deal without gimmicks. The debt ceiling was a pure poison pill except for a few fanatics, but what truly exerciseable influence over fiscal matters have Republicans given up here? None. This does not mean they are going to get their way on everything, but the President doesn't have one more vote available than he did a week ago and clearly has one less giant hammer to beat Republicans with.

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