debt limit


The Debt Deal: A Temporary Truce

I have a new post up on The Corner detailing why the debt deal is only a patch, and the real fights are still to come:

Fittingly, the “deal” that has emerged from the protracted, months-long stand-off on the debt limit isn’t so much a deal as it is a (very) temporary truce between the parties. Because, while its passage will result in some real and desirable spending reductions in exchange for a bump up in allowable federal borrowing, it also purposely sets the stage for new confrontations in the months ahead — confrontations that will bring to the surface all of the reasons this battle has been so heated, and which weren’t resolved at all by [the deal]....

For starters, it’s clear that both sides will find it exceedingly hard to live with the automatic cuts that will go into place if no plan comes out of the joint committee, or if the plan that does come out is defeated in the House or Senate. Keith Hennessey estimates that the automatic 2013 cut in defense could reach 10 percent. That’s not responsible, and most Republicans would find it extremely difficult to swallow.

Indeed, the Democrats are hoping that enough Republicans will balk at this prospect that the joint committee will be able to recommend a “balanced package” – meaning something with tax hikes. But as Hennessey notes, the automatic cuts in domestic spending would be nearly as deep as they would be for defense — perhaps 8 percent in 2013. And so it’s not clear who would feel the most pressure. Are rank-and-file Democrats really ready to go along with automatic, across-the-board cuts in education, labor, and health programs? Moreover, the president is the commander-in-chief. No one will get more blame than he will get if the military is hamstrung, and the country more vulnerable, from the cuts that would be imposed by political gamesmanship.

Read the whole post here.

posted by James C. Capretta | 1:15 pm
Tags: debt limit, debt deal, debt
File As: Health Care

The Path Forward on the Debt Limit

I have a new piece up on National Review Online making the case for how the debate over the debt limit ought to proceed now, in the wake of the House passage of Speaker Boehner's plan. Here's an excerpt:

It’s been apparent for days now that Senator Reid and his Democratic colleagues aren’t going to simply pass the Boehner plan as-is, especially now that it includes the balanced-budget-amendment requirement. To get this bill through the Senate and to the president’s desk, the GOP is going to have to give the Democratssomething. And that something is almost certainly what the president has said is his bottom-line demand at this late hour: an assurance that there will not be another debt-limit showdown before the November 2012 election. That could be accomplished by dropping the balanced-budget-amendment requirement and substituting for it a modified version of the McConnell proposal from a few weeks ago. Under that formulation, the president could unilaterally increase the debt limit next spring if the “super committee” set up by the Boehner plan does not produce another $1.6 trillion or so in deficit reduction. Republicans would have the opportunity to vote against this second debt-limit increase, but they would need a two-thirds majority to override the inevitable presidential veto.

Many House Republicans will be very upset if this is the compromise that comes out of the Senate and goes back to the House for another vote before Tuesday. But they shouldn’t be. Because, even with such a compromise in the final legislation, the bill would represent a significant strategic victory for the GOP. The president would be denied what he wanted most out of this process — which is GOP acquiescence to a massive tax hike. All of the deficit reduction would come from spending cuts. There would be no “grand bargain” for Obama to tout going into 2012, and no tacit approval of Obamacare from GOP agreement to minimalist entitlement “reforms.” Most especially, the GOP would be seen as acting responsibly to defuse the potential for turmoil and chaos post–August 2.

Some in the GOP may lament that giving the president this out will take the pressure off the “super committee” to actually produce another round of real deficit reduction. That shouldn’t be a concern. Indeed, it should be a relief to the GOP if the “super committee” is rendered toothless — because nothing good will ever come of it. With this president in the Oval Office, there’s no chance that genuine entitlement reform will get enacted, as the Bowles-Simpson commission demonstrated (Obamacare was left entirely in place in the commission’s plan). It is more likely that a disaster would ensue when one wavering Republican on the “super committee” agreed to a “grand bargain” along the lines of what the president was pushing in June and July. That would force both the House and the Senate to vote, up or down, on the “super committee” recommendations, meaning there would be a very real chance that a massive tax hike would pass with very little on the entitlement side in return.

You can read the whole piece here.

posted by James C. Capretta | 5:26 pm
Tags: debt limit, debt

Getting to “Yes”

With the collapse of the Boehner-Obama talks, it looks as if something closer to “regular order” in the legislative branch will probably be needed to produce the final deal to raise the debt limit. The House is moving toward taking up a plan drafted by the speaker and his lieutenants, and Senate Majority Leader Harry Reid is drafting a competing version for his chamber.

This is a good development. Because it’s been clear for some time now that President Obama has been the real roadblock.

The president and his advisors wanted to take what looked on its surface as a potential problem for them—the need to raise the debt limit—and turn it into an opportunity. They have had three primary objectives in this fight. First, the president has wanted to force congressional Republicans to agree to a large tax hike. Such a hike would partially mask the government’s spending problem for a time (though not permanently), and thus ease the pressure for spending cuts. It would also badly divide the conservative coalition going into an election year. In other words, it would be a real “twofer” for the president and his party and would certainly be trumpeted as such by the mainstream press.

Second, the president has wanted to further advance the Obamacare vision for health care. That has meant no meaningful move toward repeal and replace, and in fact further changes in Medicare and Medicaid that are in the spirit of Obamacare’s central-planning philosophy.

The president’s third objective was to reposition himself politically. His first two years in office were dominated by the so-called “stimulus” proposal and Obamacare — efforts that cemented the electorate’s perception of him as a big spending, big government liberal. Heading into 2012, the president and his advisors desperately want to change his image, especially among independent voters, and they were hoping that a “$4 trillion” deficit-cutting plan would do the trick.

Unfortunately for the president, as the details of his talks with Speaker Boehner have spilled out into the press, it hasn’t helped him shed his well-earned reputation as a big spender. The dominant story line that has emerged is that the president has insisted on a $1.2 trillion tax hike to get a deal, and Republicans have said “no,” especially given the president’s insistence that a serious re-write of the health care entitlements, including Obamacare, is “off the table.” By holding firm, Republicans have — so far — denied the president the ability to shift political blame onto them for the tax hikes he wants to impose on working Americans. Consequently, as matters stand today, the debt-limit talks have only further exposed the president as a big government liberal.

So Republicans have acquitted themselves remarkably well to date. The question is, what should they do now?

First, House Republicans must realize that, at this stage, they have to pass a credible plan through their chamber. Having rejected the Obama “grand bargain,” they need to show the country they are willing to pass a debt-limit increase on reasonable terms to avoid the real, if sometimes exaggerated, risks associated with a debt-limit crisis. The two-step process that Speaker Boehner outlined to his colleagues today looks like it should do the trick in that regard. It would impose discretionary spending caps for a decade, thus producing real restraint on domestic appropriations. The savings — about $1.2 trillion over ten years — would be accompanied by a substantial and immediate increase in the debt limit.

In addition, the Boehner plan would empower a special bipartisan joint committee of House and Senate members to draft further budget-cutting reforms, including entitlement changes. The target would be an additional $1.8 trillion in deficit reduction over ten years. The recommendations of this committee would go to an up or down vote in both the House and the Senate, probably sometime in early 2012.

Senator Reid and his Democratic colleagues are objecting to the Boehner plan on the grounds that it would force another debt-limit showdown in 2012, almost certainly with the same disputes about taxes and entitlements. Fair enough. House and Senate Republicans should be open to a reasonable counter-offer from Senator Reid, especially if it is an offer that could actually pass in the Senate.

The details of course matter immensely here. The legislation to raise the debt limit needs to include real spending restraint, not gimmicks or smoke and mirrors. But if the cuts in a Reid counter-offer are real, and if they are of a size to comfortably allow an even larger bump up in the debt limit, Republicans should be open to moving in that direction if doing so would produce a final deal with Senate Democrats.

Because, from a strategic point of view, even a resolution of the kind Reid is pursuing — one giving the president a debt-limit hike into 2013 — would give Republicans all they need from this fight, if the spending cuts are indeed real and not focused on defense. There would be no “grand bargain” for the president, and no “Gang of Six” plan. There would be sizeable, even historic, spending cuts, with no accompanying tax increase. There would be no tacit approval of Obamacare. And there would be no political fallout from the unpredictable economic turmoil that could accompany a hiatus in federal borrowing.

It’s true that such a deal would also mean giving up on entitlement reform before 2013. But, given what’s happened over the past two months, it’s obvious that genuine entitlement reform isn’t going to happen with this president in the Oval Office.

Republicans have successfully dodged several bullets to this point. It’s now time for them to see that they are in a good position to close a deal on their terms — and then move on.

[Cross-posted to the Corner.]

posted by James C. Capretta | 5:48 pm
Tags: John Boehner, Harry Reid, Barack Obama, debt limit
File As: Health Care