This debt ceiling thing is dragging its way towards the August deadline. Here are my broad impressions so far.
It’s far too early for either side to declare victory for themselves and/or defeat for the other side, so I’m not going there. However, despite this debacle of a ‘negotiation’, I’m still sticking to my belief that a deal will be done and default will be avoided. I just want to touch on three bone-headed negotiating tactics, two on the GOP side and one from Obama.
First, before I do that, the ratings agencies, namely Moody’s, Dagong, S&P, and Fitch sort of finally realized that the debt ceiling might be a problem. It blows my mind that it took them this long to put out statements, but it’s also par for the course for them, as they’re not exactly known for getting these things right in an actionable timeframe.
The GOP idea to introduce a Balanced Budget Amendment to the Constitution into the discussions is a terrible idea. It’s not because the BBA itself is a bad idea. I think it’s a great idea if we can shape it such that it works just right, meaning it works well enough to ensure fiscal discipline and long-term fiscal sustainability while not working too well and having dangerous short to mid-term effects on the economy. However, this is the kind of idea that needs time to be carefully thought-out and written. This is not the kind of thing you try to write with such a near-term deadline. If the GOP really wants to go there as part of these discussions, I suggest they instead attach a provision to the bill stating that Congress has X deadline to craft a BBA to submit to the state legislatures/conventions for approval.
Also, on the note of poor negotiation, GOP Senate Minority Leader Mitch McConnell did a great job of knee-capping the GOP position by offering an alternative proposal that would basically expand Obama’s authority to increase the debt ceiling. So, the GOP’s first plan is to fight tooth and nail to ensure that the debt ceiling isn’t increased, and if it is increased, ensure that there are strong spending cuts. Their back-up plan is to allow Obama to increase the debt ceiling with no strings attached. That’s like a sports coach saying to the team, “Ok, we’re gonna go out there, fight hard, and win big. Or maybe win. Perhaps a tie? Screw it. If things get too tough, let’s just give up.”
By the way, former Speaker of the House and current House Democrat Minority Leader Nancy Pelosi had this to say about McConnell’s idea. “Everyone who is concerned about lifting the debt ceiling is saying bravo for Senator McConnell.” She couldn’t possibly be more wrong. You clearly see I’m concerned about it and you clearly see I’m not applauding McConnell, and I’m not the only one. The GOP is also very angry, and rightly so.
It’s not just the right that’s doing some bad negotiating because Obama trying to play the Social Security checks card is a dreadful miscalculation. He’s saying that if a deal isn’t reached, then Social Security checks may not go out. It’s a great scare tactic, but it’s a bad card to play. Obama would be opening up Pandora’s Box for the Democrats politically here. For one, the GOP could easily put forth a resolution that puts Social Security checks first or second or wherever in line to receive government money in the event of a default. If a Democrat votes against said resolution or Obama doesn’t sign it, the right can easily create a perception of someone who doesn’t care about seniors. This would also drive a wedge between Obama and his party. For two, if we already seriously need inflows from borrowing to ensure that Social Security checks go out, it sure makes Social Security look unsustainable. If we’re already at that point, how are we going to handle the baby boomers when they really begin retiring? This would make the general Democrat party line that Social Security is perfectly fine look like the foolish nonsense it really is.
I have plenty more to say on this, but I’d rather wait until we have something that looks even remotely like a deal before I go there. Some tactics, like the GOP BBA idea, McConnell’s GOP knee-capping, and Obama’s Social Security play, however, are exceptionally horrible ideas that I can’t help but highlight. In the mean time, I’ve got some other debt-related posts to put up.
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