The Republican Debt Ceiling Bluff

Last fall, Obama compromised with Republicans to extend the Bush tax cuts for another two years. He was roundly criticized by the left for caving in to Republican demands. I actually thought Obama got a great deal when you consider how weak his negotiating position really was. An outcome of failed compromise was more tolerable to the GOP than it was to Obama, for various reasons, so he really couldn't force their hand on anything. Obama recognized his weak bargaining position, and took what he could get. It may not have been satisfying but it was the right move.

Fast forward to several weeks from now, when Republicans will apparently be "demanding fundamental changes in policy on health care, the environment, abortion rights and more, as the price of their support for raising the debt ceiling." This is code for Republican intent to defund planned parenthood and strip the EPA of regulatory authority. Contentious issues, no doubt, but they are also issues that don't really affect government spending. They are a partisan distraction.

In the coming battle over the debt ceiling, I don't think Republicans realize how weak their bargaining position actually will be. The fundamental problem for the GOP is that they control one house of congress, but not the other. Since they control the House, it is absolutely a foregone conclusion that the House GOP will, at some point, vote to raise the debt ceiling. Concessions by democrats or no, forcing the US government to default would be most intolerable to the GOP's powerful backers. Obama himself is shielded from the process because any bill will have to make it through the Democrat-controlled senate; a bill with lots of partisan riders won't pass. Even if the GOP managed to buy off some of the few remaining centrist democrats, there will be at least 41 liberal Democrats who would filibuster an intolerable GOP-sponsored bill.

In the context of failed negotiations, the end-game is this: the GOP-led house passes a bill with severe cuts and partisan riders while the Democrat-led senate passes a modest bill with a few token spending cuts. At that point it is a game of chicken to see who jumps first. Who fears a US government default more, the Republican Party or the 41 most liberal Democrats in the senate? Is it plausible that banks, corporations, and other business interests will tolerate a US government default over a petty battle about say planned parenthood? As the default deadline approached, the Republicans would be forced to pass the senate bill by overwhelming pressure from their powerful backers.

Conservatives, now more than ever, need to start looking for the pragmatic voices in the Republican Party to lead in these negotiations. I absolutely believe that if Republicans put partisan battles aside, Democrats would join them and real progress on spending could be made. There are tons of low-hanging fruits that could be plucked to get real reductions in government spending. I am not confident that the GOP can yet be led by pragmatists. I anticipate they will insist on continuing to fight distracting partisan battles. If Republicans charge into this looking to win a political fight, they may be dealt a defeat of staggering proportions when the Democrats call their bluff.

Contract From America

I guess you really can't expect much better from a group of angry
nitwits, but here it is: the 10 terms that have been agreed upon by
the Tea Party Movement as a new contract from America. My comments
below each point, preceded by a *.

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1. Protect the Constitution: Require each bill to identify the
specific provision of the Constitution that gives Congress the power
to do what the bill does.

* Thanks guys, but we already have this. Its called the Judicial Branch.

2. Reject Cap & Trade: Stop costly new regulations that would
increase unemployment, raise consumer prices, and weaken the nation's
global competitiveness with virtually no impact on global
temperatures.

* Whatever, I'm not going to fight with them on this point since the
cap and trade bill sucks anyway. I would point out though that every
time we fill up at the station, we're sending money straight into the
coffers of the governments of Saudi Arabia, Venezuela, Iran, and
Russia. Finding a way to reduce oil imports should be something all
Americans agree on.

3. Demand a Balanced Budget: Begin the Constitutional amendment
process to require a balanced budget with a two-thirds majority needed
for any tax hike.

* Its easy to say you want the government to balance the budget. What
is more difficult is to actually specify what we're going to cut in
order to accomplish such a drastic target. So what are we going to
gut first? Medicare, social security, or defense spending? Because
if you aren't looking at one of those three, you're not being serious.

4. Enact Fundamental Tax Reform: Adopt a simple and fair single-rate
tax system by scrapping the internal revenue code and replacing it
with one that is no longer than 4,543 words—the length of the original
Constitution.

* A flat tax? That sounds great. But in order to balance the budget,
as specified in point number 3, the flat tax rate is going to need to
be pretty high. In other words, we're going to drastically raise
taxes on low and middle class Americans, and drastically cut taxes on
upper class Americans. Good luck getting the electoral support for
that provision.

5. Restore Fiscal Responsibility & Constitutionally Limited Government
in Washington: Create a Blue Ribbon taskforce that engages in a
complete audit of federal agencies and programs, assessing their
Constitutionality, and identifying duplication, waste,
ineffectiveness, and agencies and programs better left for the states
or local authorities, or ripe for wholesale reform or elimination due
to our efforts to restore limited government consistent with the US
Constitution's meaning.

* Great...have at it. Nobody is stopping you here.

6. End Runaway Government Spending: Impose a statutory cap limiting
the annual growth in total federal spending to the sum of the
inflation rate plus the percentage of population growth.

* This is something that I think I could actually agree with in
theory. But the rest of this document is so worthless, the one good
idea that accidentally made it into this list will almost certainly be
ignored right along with the rest of these stupid ideas.

7. Defund, Repeal, & Replace Government-run Health Care: Defund,
repeal and replace the recently passed government-run health care with
a system that actually makes health care and insurance more affordable
by enabling a competitive, open, and transparent free-market health
care and health insurance system that isn't restricted by state
boundaries.

* Actually, health insurance system not inhibited by state boundaries
would be a disaster. All of the health insurance companies would
solicit the best regulatory offers from state governors. The one who
agreed to write the most favorable regulation for health insurance
companies (IE least favorable to the consumer) would get all of the
insurance companies to move to his state. The rest of us would then
be forced to buy insurance based on the lowest standards possible.
Anyway, good luck repealing Obama's health care bill. Remember: even
if the GOP does take the White House someday, they'll need 60 votes in
the senate to do it.

8. Pass an 'All-of-the-Above" Energy Policy: Authorize the
exploration of proven energy reserves to reduce our dependence on
foreign energy sources from unstable countries and reduce regulatory
barriers to all other forms of energy creation, lowering prices and
creating competition and jobs.

* The problem with "drill baby, drill" is that it just reduces the
price of oil temporarily, which slows the development of alternative
forms of energy technology. Nothing can compete with cheap oil, and
we're going to have to transition some day. We can do it after we've
given the Saudis all of our money, or before. Seems like an easy
decision to me.

9. Stop the Pork: Place a moratorium on all earmarks until the budget
is balanced, and then require a 2/3 majority to pass any earmark.

* Ok, I agree with this too, but earmarks still only constitute a tiny
fraction of the federal budget. Again, you'd have to seriously gut
all or parts of medicare, social security, and defense spending to
balance the budget.

10. Stop the Tax Hikes: Permanently repeal all tax hikes, including
those to the income, capital gains, and death taxes, currently
scheduled to begin in 2011.

* To be fair, those hikes aren't beginning in 2011. Rather, the Bush
tax cuts are just expiring. But I mean, how are we going to balance
the federal budget without raising taxes? Where is this money going
to come from?
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This "Contract From America" is a good allegory for the Republican
Party. A lot of criticism, a lot of soundbytes, a lot of really easy
solutions being proposed. But when it comes down to them, most of
them have no basis in reality, whatsoever. Worthless document by a
worthless movement.