Will Democrats Cave in Order to Avoid Revisiting the Debt Ceiling Before 2012? – UPDATED

Will Democrats Cave in Order to Avoid Revisiting the Debt Ceiling Before 2012? – UPDATED July 25, 2011

[Note: See Update Below]

I did not wake up this morning expecting to be impressed by the clever political maneuvering of John Boehner.  If I correctly interpret the events of the past few days, however, then count me impressed.  I suspect that Boehner might have cornered Democrats, so they will have to make major concessions to Republican demands on the debt-ceiling issue.  Boehner and Republicans might be on the verge getting at least most of what they want.  And the solution, here in the eleventh hour, is surprisingly simple.

First, a recap.  When the President intervened in the debt-ceiling negotiations he did so in the hopes of achieving a legacy-burnishing grand compromise, and the one point on which he insisted most strongly was that any solution should raise the debt ceiling high enough that it would not have to be revisited until after the 2012 elections.  So the President purportedly (although we’ve never seen a plan, and have only learned about these things through self-serving leaks) sought a plan that would cut government expenditures (cuts are often promised and rarely enforced), including some marginal cuts in entitlements (which Republicans say far fall short of what is needed), in exchange for increased tax revenues (which are always enforced) and a debt-limit increase sufficiently large to last through 2012.  For obvious reasons, Obama did not want to find himself defending tax-and-spend liberalism at the same time that he would be trying to convince voters that he’s not a tax-and-spend liberal.

According to reports, about a week ago, President Obama and Speaker Boehner had agreed in outline to a package that included $800B in “additional revenue” by broadening the tax base and eliminating certain tax deductions.  The President took heat from his base, and asked for an additional $400B in taxes.  Boehner and Cantor said no, and this came to a head last Friday.  Boehner concluded that he could not deal with the White House (he later said that it was like negotiating with a bowl of Jello), and this prompted what Hugh Hewitt called “the most irresponsible presidential press conference in memory.”  Says Hugh: “The president threatened seniors with a cut off of Social Security, predicted a market panic on Monday morning, and then descended into the worst sort of demagoguery even as he denounced politics.”

Now we come to the intriguing part.  The President had said on Friday that he would consider “any plans” lawmakers sent him, but “the only bottom line I have is that we have to extend this debt ceiling through the next election, into 2013.”  The claim is that this would take “politics” out of the equation — which is laughable.  Renegotiating the debt/deficit issue right before the election would, to be sure, include a healthy dose of “politics,” but so does negotiating the issue now.  Also, the kind of “politics” implied in addressing the debt/deficit right before the 2012 election might also be called “accountability.”  Our representatives would feel even more pressure to do what their constituents want — and that’s a bad thing?  It’s only a bad thing if the public isn’t with you.

In any case, after Boehner accused the President of being more concerned with reelection than the economic health of the country, and started speaking on Saturday and Sunday morning of a two-stage solution, raising the debt-ceiling now and tackling serious deficit-reduction later.  House Republicans apparently began crafting the two-tiered approach last week, and it must have helped Boehner have the comfort to walk away from the White House.  At first glance, Boehner’s proposal appears similar to Mitch McConnell’s, which also included a hike in the debt-ceiling without significant changes to spending or taxation.  In Boehner’s proposal, however, it’s Congress and not the President who determines the extent of the debt-ceiling hike.  Republicans would propose a smaller debt-ceiling hike, which would have to be revisited before 2012.

This apparently put the fear of God into the Democrats, who are suddenly willing to cave to major Republican demands.  As the Washington Times reports:

Senate Majority Leader Harry Reid said he is working on a plan to raise the debt limit by $2.7 trillion, coupled with an equal reduction in projected future spending. In a concession to Republicans, he said that plan would not include tax increases, but that the new debt level would last through the 2012 elections.

This would exchange several Republican demands (matching the debt-hike with spending cuts dollar-for-dollar, and no tax increases) for a single Democratic demand (making sure the issue does not resurface before the 2012 elections).  This was Obama’s, remember, “only bottom line.”

So Obama and the Democrats were faced with (1) either rejecting a two-tiered proposal and plunging the economy into chaos for transparently political reasons, or (2) accepting the proposal and revisiting the issue in the heat of the 2012 election cycle.  Both of these options have to be extremely unappetizing.  If you think the American public would forgive the Democrats for rejecting a tax-ceiling hike and damaging our economy for some faux-principled “let’s keep politics out of it” aversion to revisiting the issue before 2012, I think you’re sorely mistaken.  Presumably this is why Reid is now proposing to give Republicans what they want in exchange for a large enough debt-ceiling hike to get them past 2012.

Unfortunately, as Ed Morrisey points out, a two-tiered approach that delays resolution on changes to entitlements and taxation would extend the economic uncertainty that’s keeping a lot of capital on the sidelines.  Businesses would be unable to price changes to the tax structure or the consequences of changes to entitlements into their business plans.  However, if the reports on Reid’s proposal are accurate, the threat of a two-tier solution may just be enough to get Republicans most of what they want.

John Boehner: genius?

Update: It may be the case that a two-tiered solution from Boehner was not just a threat, but was actually successfully agreed upon and delivered to President Obama.  Jennifer Rubin reports (also: now with confirmation from Byron York) that a bipartisan deal was essentially reached, with Senators Reid and McConnell and Speaker Boehner all agreed, until Reid took it to the White House.  The White House, according to an aide, rejected the deal, and Reid withdrew from the process.  If this is true, then Rubin is certainly right that Obama’s actions are highly irresponsible and “playing with fire.”

This supports my view that Obama and the Democrats are eager above all things to avoid re-legislating this issue before 2012, and that this was why Reid began developing a solution that essentially gives Republicans what they want in exchange for a debt-ceiling hike sizable enough to get beyond 2012.

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