Saturday, August 10, 2013
WASHINGTON — Democrats and Republicans, bracing for a game of chicken over a possible government shutdown and a debt-ceiling default, should rewatch the 1955 movie, “Rebel Without a Cause,” starring the American icon James Dean.
A thug challenges Dean's character to race their stolen cars toward an abyss. The first driver who jumps out of his speeding vehicle is a coward. Dean leaps just as his car is about to go over the cliff; the other guy's leather jacket gets ensnared in the door handle, and he plunges into the void.
In Washington, both sides anticipate a huge fight this autumn over the budget, the mandatory spending cuts under the so-called sequestration and the debt ceiling. They're expecting the other guy to jump first.
House Republicans think President Barack Obama is bluffing when he says he won't negotiate on lifting the debt ceiling. They contend that the president's position isn't nearly as strong as it was at the end of last year, when the tax cuts enacted under President George W. Bush were about to expire. Obama, who had lots of leverage then, got half a loaf.
The White House recalls Speaker John Boehner's discomfort with the game House Republicans played with the debt ceiling in 2011, which hurt both the economy and their party. Privately, they say that Boehner doesn't wish to wage that fight again when the limit is reached late this year and that his demand that any increase in the debt ceiling be matched by comparable spending reductions is a bluff. That position is unacceptable to Obama and Democrats.
The stakes are high in this game of chicken; a miscalculation could send shock waves through the economy.
The probability is that any budget deadlock, which could force a government shutdown and action on the much-discredited across-the-board sequestration cuts in defense and nondefense discretionary spending, will be postponed beyond the Oct. 1 deadline. Then, everything, perhaps including any tax reform initiative, will be thrown in with the debt-ceiling increase sometime in November.
There were plenty of private partisan and bipartisan conversations before the congressional recess, which began Aug. 2. Some of these discussions will continue this month. No one is confident of the path, much less the outcome.
The early budgetary battle lines for the fiscal year that begins Oct. 1 have been drawn, and the two sides are almost $100 billion apart. Neither starts from a position of strength. The White House has made little progress on its insistence on additional revenue. House Republicans had to pull a spending bill containing big cuts from the floor last week for lack of votes. It is relatively easy for most Republicans to support a scaled-back budget concept; actually cutting programs is tougher.
Much of the negotiations when Congress gets back in September are likely to focus on the sequestration, which was adopted only because any agreement on regular spending measures collapsed. The sequestration is indiscriminate, makes for poor policy and is ridiculed by most members of Congress, from defense hawks to domestic policy progressives. It's just that they can't agree on a replacement, as House Republicans continue to pretend that the Pentagon will largely be spared.
Treasury Secretary Jack Lew made clear a week ago that any changes to the sequestration had to equally affect nondefense discretionary cuts as well as defense. There are a number of senators, from both parties, who would support such a deal.
There is a rational replacement that makes for better economic and fiscal policy and addresses top political concerns — for the Democrats, the necessity of more revenue, and for the Republicans, to start addressing entitlements. The cuts in discretionary domestic programs — which as a percentage of the economy are headed to the lowest level since the Eisenhower administration — would be replaced with cuts in entitlements, principally health care, that the White House would accept.
Higher revenue would substitute for the defense cuts. Given the political realities, that solution probably couldn't fly for more than a year. At this stage, it's doubtful even it could get through the House.
The cherished, elusive grand bargain — significant cutbacks in entitlements and more revenue, coupled with short- term stimulus spending on infrastructure and selected other programs — would boost the economy, increase market confidence and perhaps reduce some of the political pettiness that engulfs Washington. The partisan-inspired paralysis makes that a nonstarter.
The best hope is for a mini-bargain, building on a sequestration deal that itself may not occur. There is little good faith on either side, with many expressing disdain for one another. Republicans seem convinced Obama's no-negotiations on the debt ceiling stance amounts to posturing. He has backed down before and, in a view shared by a number of Democrats, tough negotiating isn't this White House's forte.
The Republican blustering is more striking. Privately, some have suggested giving Obama a multiyear extension of the debt ceiling in return for changes in Medicare, including raising the eligibility age. Boehner continues to advance the notion that any increase in the debt ceiling must be matched dollar-for- dollar with spending reductions.
The biggest fraud is led by a few right-wingers in the Senate, principally Ted Cruz of Texas, who insist that an increase the debt ceiling must be accompanied by the defunding of Obama's health-care measure. Cruz plans to barnstorm the country for 10 days this month to rally the faithful — and collect names and maybe money for any presidential hopes — to this illusory demand.
None of this is serious.
There are two possible outcomes. A one-year arrangement containing small, cosmetic changes that postpones bigger decisions. The other is going over the cliff, a la “Rebel Without a Cause.”
Albert R. Hunt is a Bloomberg View columnist.