Memphis, History & Politics

Thursday, July 14, 2011

What the President Will Say Tomorrow

Chances are you're one of two kinds of people right now: either you're afraid that their won't be an agreement on extending the debt ceiling or you don't think the debt ceiling should be increased at all. I know there are also people who either don't care or don't know anything about what is happening with the debt ceiling negotiations, but they stopped reading at the subject line.
If you are afraid that a deal might not be reached and what might happen to the country's credit rating, good. If you're not afraid, you're not paying attention. However, you may also have missed the fact that this is shaping up to be a critical moment in U.S. politics. What started out to be a staring contest over spending cuts versus tax increases and Obama versus the Tea Party is actually a period of political volatility that could create the biggest changes in at least two of the most intractable aspects of the federal budget, taxes and entitlement spending.
First to set the stage, the elections of 2010 were notable not just for the change in who held a majority in the House, but how that was accomplished. Republicans picked up 63 districts previously represented by Democrats, but these were mostly from moderate and conservative Democrats. Moderate Republicans lost in primaries to Tea Party supported Republicans who either won the general elections or lost to more liberal Democrats. The result is a House that has far fewer moderates or centrists form either party than before, maybe than ever before. The Republican majority in the House was determined to force a showdown over federal spending to show they were cutting government. The first phase was the FY2011 budget which was a deal only agreed to with hours to spare to avoid shutting down the government. Bu this just "kicked the can down the raod" to the unresolved FY2012 budget and essentially agreed to agree to further cuts in spending. Meanwhile the Federal debt ceiling, a separate law which sets a limit on the total amount the government can borrow regardless of the budget obligations already passed, would be exceeded in May 2011. The Treasury can essentially meet its obligations to pay T-bills coming due until August 2. House Republicans decided to tie the vote on raising the debt ceiling to the FY2012 and beyond budget cuts they want. What they want are budget cuts equal to the amount the debt ceiling needs to be raised, somewhere in the neighborhood of 2.5 trillion.
What has transpired appeared to be negotiations of terms between the Obama Administration and the House Republicans lead by House Speaker John Boehner. What really happened is that the Republicans have not actually negotiated anything from their original position. Obama has proposed as much as 2 trillion in budget cuts with the remaining amount offset by revenue increases, i.e. more taxes. Some of the tax increase is the elimination of loop holes and exemptions like the ones major oil companies use to avoid paying billions to the IRS. That alone is not enough revenue to cover the increased debt. Increases in the highest tax rate, those making over $250,000 are also in Obama's plan.
The political reality. Most Republicans in the House have said they will never raise taxes. Most of them have even signed a pledge to that effect. The Republican leaders, if they wish to remain the leaders will not consider tax increases in negotiations. However, the House can pass a measure with only a small number of Republicans, about 10% to join with the Democrats to reach a majority. Opinion polls show most Americans agree that tax increases should be a part of a deficit reduction. House Republicans have spent a lot of time getting to the point that they have nothing with which to negotiate. Obama, on the other hand has surprised, even disappointed many Democrats by offering cuts to Medicare and Social Security but only if tax increases are part of the deal. With their backs to the wall, Republicans are coming up with stop gap measures which make it appear they are voting against raising the ceiling, but giving the President the authority to raise the debt ceiling anyway. For his part, Obama is sticking to a position that this will be a long term change for both taxes and Medicare and Social Security policy.
I think what convinced me that this was not just another showdown, but rather the kind of policy change that happens once, maybe twice in any presidential administration was the reaction back in June from Senate Minority Leader Mitch McConnell.

It is true that divided government is the only government that can do transformational, difficult things… One thing I do tell my members is: whatever we do with this President is not going to be an issue in the next election. Because when you do it with divided government, no one can take advantage of whatever the difficult part of it was. You saw that on display with [Ronald] Reagan and Tip O’Neill on tax reform in ‘83, Bill Clinton and the Republicans on welfare reform in ‘96. And, you know, balancing the budget in the late 90’s was not easy; that was done by Bill Clinton and a Republican Congress. So, I view this discussion surrounding the debt ceiling as actually an opportunity, an opportunity to do something important for the American people and to actually get a result. And those discussions are under way and I’m hoping that they can lead to something that I can recommend to my members and that at least most of them will conclude that it is an important accomplishment for the country… Most of my members believe that the debt crisis is actually here and this is the opportunity to deal with it. So I hope it’ll be a big moment for the country, but I can’t tell you for sure yet, that that’s the way it’s going to turn out.

Consider that McConnell would be Majority Leader today if it were not for the Tea Party losses in Delaware, Nevada, Colorado. You can just tell by the way he is offering alternatives behind the scenes right now how much he wishes he were part of making history and not just standing in the way of getting things done like his counterparts in the House.
I don't know exactly how the President is going to say it, but somehow he is going to appeal to the fact that both a majority of Americans want the version of deficit reduction he is proposing and a majority of members of the House likely do too. It's just a matter of getting the Republican leaders to let it happen. The thing is a majority of Americans want the federal government to do something about jobs more than they want something done about the deficit, but that another post.


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