Another fiscal showdown is gearing up in Washington, D.C., this time, over how to handle the unprecedented federal debt, and relatedly, the increase of the federal debt ceiling. After last week’s disastrous compromise between Republican and Democratic lawmakers, it is an open question whether Republican leadership has the political will to push for reforms that actually stand a chance of putting the country on the path to fiscal sanity. This is all the more questionable now that we know that, unlike with the budget battle, the full weight of the White House will be actively engaged in the fight.
After mostly absenting himself from public negotiations over the federal budget last week, President Barack Obama has made the political calculation that he must show the voters that he is serious about long term deficit reduction by getting out in front of the issue, and proposing his own broad plan to address the nation’s fiscal woes.
To that end, President Obama will make an Oval Office address on Wednesday night aimed at convincing the American people that despite his record of compiling more debt in two years than all other presidents in American history combined, he can now be trusted to address the massive deficit. And he will be making the speech against the ticking clock of a congressional vote to raise the debt ceiling – a separate but related issue that Republicans plan to hold hostage in exchange for massive cuts in entitlement spending.
It is significant that Obama sent out his number one political advisor, David Plouffe, rather than an administration expert like the budget director, to make the rounds on the Sunday morning talk shows to offer a taste of the deficit reduction plan. The White House seems to view the fight over fiscal sanity as a political brawl that it plans to ride all the way to re-election in 2012. The hinge of their strategy is to use the bold deficit reduction plan introduced by Representative Paul Ryan, which will cut $6.2 trillion from federal spending by 2020, to portray the GOP as fundamentally uncaring and intent on “destroying” Medicare and cutting taxes for the rich.
In short, Obama plans to demagogue deficit reduction by offering limited cuts in his own plan while increasing taxes on “the rich” and closing other “loopholes” that he believes benefit the wealthy. Plouffe hinted that Obama will offer his own reform proposals for Medicare and Medicaid, but they will likely be superficial, with token cuts and little in the way of concrete ideas to reduce the cost of entitlements in the long-term.
This will not satisfy Republicans – at least, they are saying as much for now. The GOP has not eagerly embraced the Ryan plan due to its controversial proposal to basically privatize Medicare and end federal responsibility for administering Medicaid. But there is much more in the plan on which most Republicans can agree, including tax cuts, large cuts in discretionary spending, the elimination of several federal departments and agencies, and other common sense proposals many fiscal hawks believe are long over due.
Speaker of the House John Boehner has made it clear that there will be no raising of the debt ceiling without firm commitments from the congressional Democrats and the White House on massive deficit reduction. White House spokesman Jay Carney scolded Republicans for their plan to connect deficit reduction with raising the debt ceiling, saying on Monday that the GOP should “not play chicken with the economy,” and that not raising the debt ceiling would have consequences that would be “Armageddon-like in terms of the economy.”
There are many congressional Republicans who disagree with that notion, including many newly minted Tea Party representatives and senators, who plan on not voting for an increase in the debt ceiling under any circumstances. They believe, as Glenn Beck said, that it would be “the beginning of the end of the Republicans” if they agreed to raise the ceiling.
The idea of voting against raising the debt ceiling has even found favor among some economists as well. Writing in the Washington Times, Veronique de Rugy and Jason Fichtner point to Senator Pat Toomey’s (R-PA) plan to prioritize paying off the debt first by paying the interest owed and then funding the government from what is left over from general revenues. In FY 2012, that would mean government spending of $1.9 trillion with around $400 billion left over after paying for Medicare, Medicaid, and Social Security. Other plans have been floated that include only funding interest on the debt, but most analysts give these plans little chance of getting the necessary support from Senate Democrats to pass.
Still, the vast majority of economists say that failing to raise the debt ceiling would indeed lead to catastrophe. While the government could limp along for a few months, eventually the Treasury Department would be unable to sell the bonds necessary to fund the debt and the United States would find itself in virtual – if not real – default. The effect on world markets would be incalculable and holders of US treasuries abroad might lose faith in the ability of the United States to pay its bills. The result would be a massive dumping of treasuries that would cause an international financial crisis similar to the one that hit in September, 2008.
The question on the minds of many Republicans is: can Boehner and Senate Minority Leader Mitch McConnell hold the line and demand the trillions in spending cuts necessary to save us from fiscal calamity in return for passing the debt ceiling increase? Boehner has received mixed reviews for his performance during the recently concluded deficit cutting debate. While the speaker can point to the fact that he got larger reductions than the Democrats publicly said they would accept, the $38 billion in cuts is a drop in the bucket compared to Obama’s fiscal train wreck of a budget deficit. Some GOP House members like Alan West (R-FL) have said they plan on voting against the package when it comes to the floor.
Boehner must overcome the impression that he is a get-along, go-along Speaker who will not fight hard enough for conservative principles – especially when it comes to deficit reduction. He also needs to unite the Republican caucus behind a serious deficit reduction proposal that can be attached to the bill to raise the debt ceiling. Finally, he must get the Senate Republicans on board, and hold everything together as the inevitable push back from Democrats begins.
Judging by how Democrats have received Paul Ryan’s plan, the hyperbole and demonization will be fierce. The White House will go into full attack mode, pushing the president’s token cuts as a “compromise” while constantly portraying the GOP as “extreme.”
This is right out of the White House 2012 playbook, as the president will try to position himself once again as a moderate alternative to Republicans as he did in 2008. The president’s advisors have been searching for months for a way to involve him in the deficit reduction debate without exposing him to the sort of criticism that will come down on the GOP as a result of tackling the deficit problem head on. Addressing entitlement spending by advocating large and painful cuts in Medicare may be responsible governance, but it comes with the risk of alienating the GOP from moderates.
The other side of the coin is that Obama can position himself to appear reasonable simply by not advocating specific reductions, while turning up the heat on the GOP by chastising them for their proposed cuts. It’s a winning strategy that Democrats have used in the past, for instance, when Social Security reform was on the table.
The temptation for Boehner to cave in and meet Obama halfway (or more) will be great. Democrats are already maneuvering to force a “clean” vote on the debt ceiling, without any deficit reductions attached. The idea won’t fly, but Democrats can point to it as proof that GOP obstinacy is responsible for the threat of credit default.
A recent Washington Post-ABC News poll showed a sizable majority – 67% – wants a deficit reduction plan that includes both spending cuts and tax increases. Just 31% believed that spending cuts alone should be tried. Boehner and the GOP have a massive selling job ahead if they are to convince the American people that deficit reduction is possible by cutting the size and scope of government, as tax increases will only end up – as they always do – being spent.
Boehner must hold a firm line on getting massive cuts to entitlements, keep his caucus united, stare down Harry Reid, while fending off the attacks of the president and his re-election machine. After last week’s lackluster performance on the budget deal, there are many in the ranks of GOP members who doubt Boehner has it in him.
Rick Moran is Blog Editor of The American Thinker, and Chicago Editor of PJ Media. His personal blog is Right Wing Nuthouse.
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