A Prospect newsletter about the debt limit
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Twelve Years of Being the Most Responsible Guy in the Room

On today's X-Date, the seeds for what is now a negotiation over how
much of the budget to cut were sown during Obama's 'grand bargain'
phase.

 

 

Evan Vucci/AP Photo

By David Dayen

**** For some reason, the commentariat was expecting a
"showdown
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on Tuesday afternoon in the Oval Office, at a meeting between the Big
Four congressional leaders and President Biden about the debt ceiling.
What actually happened, rather predictably, was that each individual
restated their priors
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and agreed to meet again later.

But the shifts in the state of play have been visible for a little while
now. We're in a live hostage negotiation over what level of austerity
will satisfy the hostage-takers. There's this effort among Democrats
to pretend that this isn't happening, but I'm afraid I believe my
lying eyes. And the reason why Democrats are dutifully playing the
compromiser role dates back to the last hostage-taking, which Democrats
also (enthusiastically) accepted.

In 2011, for the first time ever, Barack Obama knowingly used the debt
ceiling as a way to begin negotiations on a "grand bargain" on deficits
and debt. Most observers conclude that it didn't work out, thanks
mainly to Republican Tea Partiers rejecting tax increases. But we ended
up with protracted austerity in the form of across-the-board
sequestration cuts and the lowest level of public investment since
Eisenhower, which prolonged the agony of the recovery from the Great
Recession.

The sad spectacle accomplished something else. It set a precedent, among
policymakers and especially the media, that the debt ceiling in divided
government was a time for negotiation and compromise. It legitimized the
hostage-taking event. The way the debt ceiling is covered now, chiding
Biden's previous stance of no negotiations as "increasingly untenable
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flows right from the 2011 standard.

**Read all of our debt ceiling coverage here**
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Of course, that standard is only applicable when the divided government
involves a Democratic president and Republicans in some leverage
position in Congress. In 2019, under a Trump administration and a
Democratic House, Democrats-proudly-did not demand the rollback of
the Trump tax cuts, more spending on social programs, or new rules
favoring renewable energy in exchange for enabling continued federal
borrowing. That's because Democrats in Washington like nothing more
than being seen as respectable. And when Democrats have the White House,
they'll "do the right thing" by defusing the debt ceiling time bomb,
which comes down to negotiating the terms of the ransom. Random
Democratic frontliners have been calling for negotiations
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several days now.

That's clearly where we are headed. Senate Majority Leader Chuck
Schumer (D-NY) has indicated
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wants to hammer out a bipartisan budget appropriations deal. This has to
be done anyway, of course, and that's the conceit that Democrats are
using to say they're not actually negotiating over the debt ceiling.
But the budget deadline is nearly five months off, an eternity in
politics. (Republicans will 100 percent ask for more cuts then,
regardless of this outcome.) The reason the talks are starting now is
that the debt ceiling needs to be raised now.

The idea is that Republicans can say to their members that they're
negotiating on the debt ceiling and Democrats can say to their members
that they're negotiating on the budget. I mean, whatever gets you
through the night. But it's clear that Republicans won the right to
negotiate.

This was inevitable once Democrats got through the lame-duck session,
while holding a trifecta, without dealing with raising the borrowing
limit
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Because Democrats have this insatiable desire to look like the
reasonable ones, they were always going to make concessions. In fact,
that's why they didn't raise the debt ceiling on their own terms.

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Once you've established threatening the full faith and credit of the
U.S. government for ideological ends as a normal political
back-and-forth, you cannot go back. The extraordinary measures the
president can use to defuse this time bomb (which we'll get to in a
minute) are "silly," sniff the pundit class. However, the debt ceiling
is

**also extremely silly**; the idea that Congress can ring up a tab and
then refuse to pay it should be met with loud howls of derision. But
Obama made it justifiable. And here we are.

As for what this negotiation will lead to, my previous X-Date note
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on the potential areas of compromise was on target. The two sides, at
least to start, are talking about rescinding unused COVID relief funds
and enacting some permitting reform. As I said then, that gets you an
exceedingly tiny amount of deficit reduction. So now we're hearing
about some form of discretionary spending caps, which would likely be
worse than the 2011 sequestration, which fell equally on the defense and
nondefense side, sharing the pain and at least minimizing the impact of
cuts to social programs. That this is seen as the "responsible" path is
madness.

That doesn't mean this negotiation will succeed, of course. Any
climbdown from fulfilling the far right's desires will be rejected by
the hard-liners. It could fall apart. And so Biden was asked at his
press availability yesterday about the aforementioned extraordinary
measures. There seemed to be a fair bit of excitement that he was
"considering
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invoking the 14th Amendment, which says that the validity of the public
debt shall not be questioned. But he tempered that response right away,
saying it needed to be litigated and that couldn't happen in time.

Maybe the union lawsuit
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on constitutionality, or a hopefully imminent bondholder case
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can force the issue from the outside and get that litigation done. But
it's clearly not coming from the White House. The fact that Biden
uttered the words "14th Amendment" or "minting the coin" does not mean
anything; these were actively explored
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under Obama
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deus ex machina isn't being rolled out in the Oval Office; it will
have to come from outside litigation, if anywhere.

"I'll be very blunt with you," Biden added. "When we get by this,
I'm thinking about taking a look at ... what the court would say."
That at least shows some recognition that Democrats get routinely rolled
with each debt ceiling one-way ratchet, and that litigating it out of
existence is actually the best alternative. But that doesn't help
avoid the self-inflicted wound Democrats are about to impose on
themselves.

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