As we anticipated, the Republicans have climbed down on making the debt ceiling the key battle line in their plan to impose spending cuts. Good Democrats applauded that move as a sign that Obama had displayed toughness and prevailed.
It’s not quite that simple.
First, if you widen the frame, the budget jockeying is largely kabuki: which team is going to score more points that appeal (or more accurately, can hopefully be spun to appeal) to their base? The reality is that both parties are fully committed to imposing austerity. The only question is whether we get Dem Lite or Republican Hi Test. But rest assured, neither version will be good for ordinary Americans.
Second, the Republicans have not dropped the deficit ceiling cudgel, but they seem to recognize that it is a mutual assured destruction weapon, and therefore not as useful as they once thought. They seem to still be coming to grips with the negotiating implications. As the New York Times reports, the Republicans are willing to extend the deficit ceiling for three months, but that increase was conditioned on having the Democrats approve a budget (during the Obama administration, no budget has been approved; the government has carried on because Congress has passed spending resolutions). Notice that while Obama has said that he would not discuss deficit cuts under a debt ceiling sword of Damocles. But if he accepts this deal (which includes a gimmick, of having Congresscritters go unpaid if they can’t agree on a budget on the normal timetable), he will still be doing that. So why is this a victory of sorts?
The more important part of the New York Times story on the Republican climbdown is that Dave Camp, the House Ways and Means Committee chairman, disabused his fellow party members of the idea that the government could limp through hitting the debt ceiling by using tax proceeds to pay only debt obligations, Social Security, the military, and other critical needs. So the Republicans can’t refuse to raise the debt ceiling and not do serious damage, pronto. And everyone would blame them for their intransigence. So unless they want to play Major Kong, they will probably continue to play ball with the Democrats on debt ceiling increases while trying to save face about it.
Third, as we said earlier, the Republicans have two battle lines they intend to fight over. The fiscal cliff deal expires March 1, so roughly $1 trillion of budget cuts kick in then. That’s considered by even most pro-austerity (as in mainstream) economists to be too deep, and the sequester would hit the military budget pretty hard and spare Social Security and Medicare, when both parties want more “entitlement” whackage and comparatively little in the way of cuts on military spending (and guess what, they want those to fall on health care and pensions). The deadline after that is March 27, when the current spending resolutions expire. So the Republicans have six weeks to pound the public with the message that the irresponsible Democrats don’t balance their books, and not passing a budget is more of the same.
Now it is undeniable that having the Republicans climb down from their “we’ll shoot the economy if that’s what it takes to get our way” stance is a step forward. But this tactical retreat was led by the Kochs, so I would not see this a sudden outburst of Republican temperance.
One way to tell how much the Republican bloodlust has faded (or not) is how hard they fight to delay getting Obama’s new Cabinet members in place, particularly incoming Treasury secretary Jack Lew. Having Lew not in officially as Treasury chief would be at a minimum an inconvenience (any reader input on what an appointee in waiting could do beyond advise informally is very much appreciated). Jack Sessions, the ranking member on the Senate Budget Committee, has said Lew must never be Treasury secretary, but he has not said whether he plans to filibuster the nomination. (Interestingly, filibuster reform, which seemed to be a Democrat priority, or at least was bruited about in December, has not been talked up much lately. If the Senate is going to move forward, it would behoove them to move quickly). Having Lew’s appointment delayed could hamper the Administration’s negotiating efforts.
Let’s put all this Democratic cheering in context: Obama is still eager to get budget cuts and “reform” Medicare and Social Security. We are likely to see those “reforms” given priority because both sides agree on that topic more than they do on how to implement the other elements of austerity, meaning spending cuts versus tax increases, particularly on upper income taxpayers. Obama does not have a strong point of view as to how deep cuts need to be, so long as he can preserve appearances that he is Being Responsible about the deficit and inflicting some pain on the wealthy. That gives him tons of room to sell out ordinary Americans.