Declaring the Grand Bargain Dead Is Premature
Stories in The Washington Post and the New York Times have some in the blogosphere proclaiming that it's time to celebrate the death of the Grand Bargain, and others at least raising a question about its death. I'll go on record as saying that celebrating its death is definitely premature.
It is so because we've yet to go through the budget or continuing resolution-passing activities coming up in September, and also have yet to go through the debt ceiling conflict to come in October. Mainstream Washington commentators believe John Boehner is determined to avoid a government shutdown crisis of the budget/CR conflict and that one or the other will be passed before October 1. Assuming they're right, that still leaves the matter of the debt ceiling “crisis,” which the same commentators are saying will happen because Boehner has to promise his tea party caucus a chance to coerce the Administration, if he's going to get their acquiescence on the budget/government shutdown matter.
So, they think, we are looking at a debt ceiling crisis around October 15, when Jack Lew says the Government will run out of borrowing authority, and he will be reduced to juggling $50 Billion in available cash to both repay debt and pay for the other obligations of Government legislated by Congress. The position on the debt ceiling being taken by the Administration now is that it will not negotiate over it, and that it's demanding a clean bill raising the debt limit to pay for spending Congress has already approved.
Matthew Yglesias commented on this position on August 27, 2013:
Back in 2011, in an act of hubris and weakness, the administration decided that debt ceiling negotiations might be a good backdoor way to entrap both mainstream conservative Republicans and liberal Democrats into a "grand bargain" on long-term fiscal policy. We got no bargain, just a panic. It can't happen again. My favorite solution would be to exploit the platinum coin loophole and put this issue behind us forever. But a smarter political strategy is probably the one Lew outlined on TV. No negotiations. No tricks. Congress just needs to step up.
I'm glad using Platinum Coin Seigniorage (PCS) to avoid the debt ceiling is Yglesias's favorite solution, since it's mine too. But, first, I don't see why that, alone, would put the debt ceiling issue behind us forever unless the President were 1) willing to use it again when the debt ceiling is reached or 2) he then uses Josh Barro's terrible and unnecessary “negotiation with the Republicans” idea, to trade away the Treasury's PCS authority in return for repeal of the debt ceiling legislation. In addition, I'd like him to explain why he thinks a smarter political strategy is “No negotiations. No tricks.”
What's smart about a political strategy that risks default?
What's smart about a strategy that gives tea party Republicans a chance to creates hysteria in international markets?
What's smart about a strategy that creates a finger-pointing spectacle where Republicans blame the Administration and the Democrats for ideological intransigence and vice versa, when we don't need to have this spectacle to completely defang the tea party Republicans?
Sure, the Administration will probably win the shouting match in the short run and the Republicans will be forced to back off, hopefully in time to avert more than minimal damage to the economy. But this kind of brinksmanship by the smart money in the Administration is the same kind, fed by the same underlying attitude, that brought us the sequester, which is now slowing down the US economy.
From where I sit, it would be an awful lot smarter to wait for the Republicans to agree to a CR and then mint the $60 T coin the day after it's passed. That would make the debt limit a dead letter and also change the political climate in a way that would free up the Administration to push for jobs programs, Medicare for All, reconstructing the economy, doing something concrete about climate change, energy, education, and infrastructure and actually strengthen the safety net by enhancing and extending it. In that new political climate the Democrats could actually win the elections of 2014, and the President could thereby avoid impeachment, which is what he's going to get from the tea party if the Republicans take over the Senate.
While I don't think the President will follow that kind of strategy, it seems a lot smarter to me than a strategy of “No negotiations. No tricks.” How about you? If you like it better, then please read this Post and sign the Move-on petition linked from it.
(Cross-posted from New Economic Perspectives.)