The White House is firm in its stance that it will engage in no negotiations on the debt ceiling. It’s demanding a “clean” hike from Congress, unlike in 2011, when it ultimately agreed to 11th-hour spending cuts in order to avoid a debt ceiling breach.
This refusal to negotiate appears to be more than merely good game theory (i.e. putting 100% of the onus on the GOP to swerve at the last second).
Ezra Klein explained that The White House sees this stance as being important for the fate of the nation, basically:
Top administration officials say that President Obama feels as strongly about this fight as he has about anything in his presidency. He believes that he will be handing his successor a fatally weakened office, and handing the American people an unacceptable risk of future financial crises, if he breaks, or even bends, in the face of Republican demands. And so the White House says that their position is simple, and it will not change: They will not negotiate over substantive policy issues until Republicans end the shutdown and raise the debt ceiling.
In 2011, The White House caved to governance by hostage-taking. Going down that road again in 2013 would surely establish this as the norm, rather than a freak exception.
The only problem is, John Boehner may not be able to pass a clean debt ceiling hike without some kind of “victory” over The White House, something that would be impossible to achieve without negotiation.
But there is one kind of condition under which Obama should be willing to deal.
…a deal should include policies that minimize the potential damage of a future debt-limit standoff. The most important one would be a law stipulating that even if the debt limit is breached in the future, the government will still be authorised to make debt-service payments in full, taking a default off the table. Republicans in the House have already passed a bill that would come close to doing this. Once this change is enacted, hitting the debt limit would mean having a partial government shutdown — which isn’t great, but not the disaster a default would be.
Basically, if it could be ensured that 2013 was the last time there was ever the risk of the debt ceiling being used as the nation’s self-destruct button, then that would be a good deal for Obama to make, both in terms of avoiding current pain and also for the long-term. If Obama could get some kind of acceptable way to permanently defuse the debt ceiling, then that would be worth a “cave” somewhere.
But if Obama does ultimately give a pound of his flesh, and the debt ceiling remains on the table next year, the year after that, and every year after that, then we’re looking at something very grim.
For one thing, we’d be establishing that when the opposition minority party held Control of even one of the Houses of Congress, it was appropriate and institutionalized to go right up to the edge of a breach in order to win a concession.
And we’d be permanently hampering the economy.
On Twitter, investors and economist Matt Busigin explained:
Bottom line: A major governance crisis every year or so can not be part of the landscape of a healthy economy.
If there’s a deal to be made where Obama takes this off the table in the future (and that doesn’t seem very likely) then he should go for it.
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