As is their wont these days, Congress is now scrambling to defuse a self-imposed crisis. This time it’s a twofer: they have to fund the government before Oct. 1 or face a government shutdown, then they have to raise the debt ceiling by Oct. 17 or the treasury will default on its payments and trigger a financial meltdown.
Either of these scenarios would be frightening enough. But because they’re occurring at the same time, how the first fight is resolved could have a major impact on the second fight. Adding more confusion to the mix, no one is even sure exactly what the House Republicans threatening fiscal apocalypse actually want.
The House passed a bill defunding the Affordable Care Act’s implementation, but with the Senate set to reject the health care provision on Friday, Speaker John Boehner has yet to announce plans for his next counteroffer and his divided caucus can’t seem to agree on a list of demands to raise the debt limit either. Meanwhile the White House and Democratic leaders are demanding a “clean” continuing resolution that funds the government at previously agreed-upon levels. And they won’t even negotiate over the debt ceiling.
The result is that the entire process is an unpredictable mess. Politicians and commentators have wildly divergent opinions on whether one side is bluffing, why they’re pursuing their particular demands in the first place, and whether it might be preferable to suffer a shutdown – or even default – in order to head off even worse crises down the road. Here are a few of the competing theories.
1. Boehner needs a shutdown
So far the budget fight is following a familiar script. Boehner’s team floated a “clean” bill that would avoid a shutdown. The tea party revolted, forcing him to pass a defunding bill instead. Now the Senate is predictably set to reject it. In past fights, like the fiscal cliff, this has been the moment when he’s given up on uniting his own caucus and turned to Democrats to pass a crisis-averting compromise instead.
Here’s the problem, though. Every time he cuts one of those deals, he ups the odds angry conservatives will try to replace him. Mindful of their tenuous position, GOP leaders have been trying to head off the shutdown by promising members an even tougher confrontation on the much scarier debt limit. If Boehner gets through the shutdown and debt limit fight without drawing blood, that could be the last straw for House conservatives.
So how does he get around this dynamic? Some observers think Boehner’s best option might be to just let the tea party wing shut down the government. That way they get their big confrontation out of their system now – and suffer the political and economic consequences – instead of a few weeks later when the more dangerous debt limit kicks in.
“If a shutdown is avoided, it is likely to be because congressional Republicans have opted to wait and push for policy concessions on the debt limit instead,” Goldman Sachs economist Alec Phillips wrote in a research note. “By contrast, if a shutdown occurs, we would be surprised if congressional Republicans would want to risk another difficult situation only a couple of weeks later.”
2. Boehner is bluffing
If Boehner decides to avert a shutdown by passing a “clean” CR, perhaps with major Democratic help, he might be setting up a bigger fight over the debt ceiling. Or he might use the exact same tactics to get out of that fight as well.
In the case of the shutdown, House Republicans voted en masse for a defund-it-or-else bill. But then members did something interesting: rather than going after Senate Majority Leader Harry Reid, they started daring Senate Republicans to prove they could pass a defunding bill. This is where we’ve seen the most tension between Sen. Ted Cruz and his fellow GOP lawmakers. Republican Congressmen like Pete King and Sean Duffy have argued that if Cruz, after demanding a defunding fight for months, can’t round up the Democratic and Republican votes to pass the House bill then it’s his fault when the House ultimately surrenders.
There’s no reason this couldn’t be a model for the debt limit fight as well. The House can pass a bill with an absurd Christmas wish list of Republican demands, from delaying Obamacare to gutting environmental regulations to ending net neutrality. Then, when Democrats remove all of their supposed demands, Boehner can point a finger at Senate conservatives like Cruz, Rand Paul, and Mike Lee and say they failed to finish the fight.
What would Republicans get out of losing not one, but two, major fights? A bunch of difficult votes for red state Democrats up for re-election, who would have to go on the record opposing a host of conservative wedge issues that are popular in their state. Salon’s Brian Beutler points out that the House’s (now shelved) debt limit proposal didn’t include any of the GOP’s supposedly most central demands, most notably Paul Ryan’s plan to privatize Medicare. That’s because they’re not very popular. If Boehner’s goal is to actually implement the GOP platform, he’d include them. But if his goal is just to embarrass a few moderate Democrats before raising the debt ceiling without incident, he’s picked a good list.
3. Democrats are bluffing
That’s the theory plenty of Republicans subscribe to in Congress. Sure, Obama says he won’t even consider defunding or delaying Obamacare or negotiating over the debt ceiling at all. But when the chips are down, he’ll cave. He’s done it plenty of times before: House Republicans, for all their grumbling, have obtained trillions of dollars in spending cuts over the last three years by either threatening to shut down the government or breach the debt limit. That’s how we ended up with the sequester. If Obama is really so worried about default, there’s no way he’d sit back and let it happen just to prove a point right?
“The president says, ‘I’m not going to negotiate,’” Boehner told reporters on Thursday. “Well, I’m sorry, it just doesn’t work that way.”
The trouble is if they become convinced Obama will crack as the deadline nears and the White House is equally convinced Republicans will cave, there’s not a lot of time to figure out a last minute solution if they both prove wrong. Especially given the trouble Boehner has rounding up votes within his caucus, many of whom seem to think the debt ceiling is just some fancy talk from economists that won’t actually plunge the markets into chaos.
4. Obama should let default happen
This is not exactly a popular view, but at least one influential commentator is throwing it out there.
The idea goes like this. The whole reason Obama is refusing to negotiate over the debt ceiling is that he’s decided it’s too dangerous to the nation to keep legislating via an annual crisis that empowers one wing of one party in one chamber of Congress to make outlandish demands or threaten to destroy the economy. New York Magazine’s Jonathan Chait argues that if House Republicans don’t think there are consequences to taking the nation’s credit hostage, then maybe they just have to see it for themselves.
“Terrible though it may be, a default may actually be necessary to preserve the constitutional structure of American government and the rest of Obama’s presidency,” he wrote in a post this week.
Under Chait’s theory, every year that he cuts a debt limit deal, the more he entrenches the precedent that Republicans should expect goodies in exchange for not dragging the country they purport to serve through catastrophic default. Maybe Obama and Boehner reach a deal this year, maybe they come to an agreement next year, but sooner or later one side will underestimate the other’s resolve and that will lead to a default. Meanwhile, even just having the debt ceiling debate can do economic harm: the uncertainty created by the 2011 fight dampened consumer confidence and raised borrowing costs for the government. The only way to destroy the debt ceiling is to crash on through it.