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Sequester And Shutdown Could Be More Likely Than A Fight Over The Debt Ceiling

16 Jan 2013
Posted by Stan Collender

Over at The Plum Line, Greg Sargent has an important post about the way the debt ceiling fight could end without triggering a cash-crunch crisis for the federal government. Greg thinks is could be one of two possibilities.

First, the House GOP could agree to a version of the plan first proposed by Senate Minority Leader Mitch McConnell (R-KY) that helped solve the last debt ceiling fight in August 2011. That plan effectively transfers the ability to raise the government's borrowing to the president. Greg notes that this time the plan would be approved over the legislative equivalent of McConnell's dead body, that is, over a filibuster McConnell himself would lead. Greg also notes, however, that there may well be enough Senate Republicans willing to join the 55 Democrats to make this happen.

Second, Greg says that the same combination of Democrats and some Republicans in the House that voted for the fiscal cliff deal would likely approve the McConnell plan or a clean debt ceiling increase if the GOP leadership allowed the vote to take place.

Both options are plausible for a basic reason Greg does not mention: The GOP seems to be coming to the conclusion that fighting over the debt ceiling is not its best option. The better fight, and the one that gives them more leverage and scores them more political points with their base, may be to punt on the debt ceiling and instead use the sequester spending cuts that will occur on March 1 and the threat of a government shutdown on March 28 to force concessions on sending from the White House.

In fact, given the three options -- debt ceiling, sequester, continuing resolution -- the debt ceiling may actually be the worst rather than the best place for the GOP to make a stand this year.

From a logistical point of view, refusing to increase the debt ceiling won't have the impact on federal spending the GOP wants and needs to show it's base because spending is not automatically cut if the debt ceiling isn't increased. Add the chaos that could create on Wall Street, and the anger that would likely cause from the bond market, and the GOP doing the equivalent of holding its breath until it turns blue on the debt ceiling might not win it anything at all.

By contrast, the sequester is an immediate spending cut. Yes, it includes military reductions the contractor community hates, but over the past two years the GOP has already repeatedly demonstrated it is willing to throw the Pentagon under the deficit reduction bus. Plus, House and Senate Republicans might need military spending supporters to push the White House and congressional Democrats to substitute other spending cuts for the military sequester -- what the GOP wants -- and actually having the sequester go into effect could be the best way to make that happen.

Not extending the continuing resolution that expires on March 27th at midnight and shutting down the government for a few days or weeks might also be a better option than refusing the raise the debt ceiling because that too would result in immediate spending reductions. The spectacle of a federal shutdown and the obvious demonstration to the GOP base that would be of the willingness of Republican members to go to great lengths to cuts spending might be seen as a big plus.

That's not to say there aren't huge political risks in punting on the debt ceiling and focusing on the other two options. Not using the debt ceiling as leverage after threatening to do so for so long could be seen as a unilateral concession by the GOP base. Allowing the sequester to occur no doubt will anger the military community. And the GOP really took it on the chin politically after the last two government shutdowns in 1995 and 1996.

Nevertheless, if Sargent is right and the GOP is looking for ways to deal with the debt ceiling or are starting to understand that it doesn't really provide the political leverage it once had assumed, punting to the sequester and a government shutdown would be the two most likely options.

When will the pundits look beyond their noses?

Your blog excluded, I've been waiting for those in the pundit class to remember the actual government shutdown deadlines, rather than the misunderstood government default deadline.

While the GOP has been burned at the shutdown altar before, it wins points with their base and House members are unlikely to be punished in their primaries for a government shutdown (as you point out in your other post).

On the other hand, a government default and its ramifications might be far too great of a price for the House GOP members to bear. I think even members of their base would turn against them, once the true consequences are understood, and certainly there would be fallout in the business community.

I'll be curious if we start to see more on their other options in the days to come.

After all the sturm and drang

After all the sturm and drang the GOP has raised over spending, it's telling they never come up with specific cuts. This is because the cuts they want --the elimination of Social Security, Medicare, Medicade, CHIP, unemployment insurance,etc. -- are hopelessly unpopular beyond the extremely wealthy and the rabidly extreme. So they dance this Devil's dance, demanding unnamed, massive cuts with the intention of demonizing Obama afterwards for making the cuts. And the media wonders why our President has lost all interest in negotiating with these unprincipled lunatics.

I think Sargent is just

I think Sargent is just reading comments sections of various different sites where this interpretation has been a very, very common observation since the minute the ink dried on the fiscal cliff law. Plus who is to say why the government shutdown if the House has sent the Senate an approved continuing resolution which the Senate happens to hate? But I do agree that it may all be leading up to the point where Republicans are going to have to describe in specifics and then vote on things they want to cut. But should they find a manner to package it so that Democrats grudgingly signoff on it, well come 2014 the quick rejoinder to Democratic complaints will be easy - you voted for it, too. Hence, make sure that PPACA implementation is viewed as a success by most Americans as that, probably, is going to be a much clearer story over who did what by the next election.

See also the story the

See also the story the Financial Times ran today on Americans for Prosperity's argument for punting on the Debt Ceiling: a focus on debt is the wrong way to reduce federal spending because any "grand bargain" to increase the Debt Ceiling would be negotiated with liberals.

This is nonsense, in that any legislation to counteract sequestration, and any budget or continuing resolution, will be "negotiated" with the same people as would have been involved in a "grand bargain" triggered by the Debt Ceiling, or for that matter the tax-rates piece of the Fiscal Cliff.

But it may send the signal that, even if the "base" hates it, Americans for Prosperity won't "primary" republicans based on a vote to raise the Debt Ceiling.

Pull the Other One, Stan

"Greg also notes, however, that there may well be enough Senate Republicans willing to join the 55 Democrats to make this happen."

Yep. Five Republican Senators who didn't break with the party over any major or minor issue over the past two years are going to break with the party over what they have made a Signature Issue.

Forget finding 30 bankers, or ten capable managers of Fortune 500 companies. Find five Republican Senators who are not indebted to the party enough that they will sign off on any bills that also can get past Bernie Sanders.

The sequester

The sequester will get delayed again. Probably for a month this time, to coincide with the expiration of the continuing resolution.

What we OUGHT to do with the sequester is phase it in rather than delaying it. Let the cuts happen, but let them happen slowly over time rather than all at once. This makes infinitely more sense than having a law that makes them happen all at once but then never allowing the law to take effect by delaying it every time at the eleventh hour.

Of course, as I pointed out in my previous comment, the GOP doesn't want the military cuts to happen, despite all of their talk of spending cuts in the abstract.

The real battle is going to be over the expiration of the continuing resolution. I'm not sure how it's going to play out. A shutdown for anywhere from a few days to a week my happen, but what will it accomplish? The likelihood of any sort of grand bargain is small. The most probably outcome, based on recent history, is another short-term, small deal.

A great discussion is going

A great discussion is going on here, I found a number of important things that I needed to learn. Here arguments and counter arguments are great to read.

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