Cross-posted from Credit Writedowns
President Obama is not the only debt ceiling flip-flopper. During the Bush administration, when a budget surplus tuned to deficit and debt piled up, Republican leaders in Congress voted to raise the debt ceiling 5 times, increasing the limit nearly $4 trillion. We’re talking about Speaker John Boehner, House Majority Leader Eric Cantor, Senate Minority Leader Mitch McConnell and Senate Minority Whip Jon Kyl. Combined, they voted 19 times for a debt ceiling increase without complaint or conditions.
May 2003: Congress approves a $900 billion increase, raising the debt limit to $7.384 trillion. All four approve.
March 2006: Congress approves a $781 billion increase, raising the debt limit to $8.965 trillion. All four approve.
September 2007: Congress approves an $850 billion increase, raising the debt limit to $9.815 trillion. All four approve.
So, what happened? Republicans went from being the party aligned with the President to being the opposition party attacking the President. That’s how politics works.
Republicans will show extreme opposition to any stimulus, any bailouts and may look to rescind the healthcare bill already passed by whatever means necessary. Likely, stimulus is out for good now. The Obama Administration clearly understands it made a tactical error in predicting a more robust economic outcome while bailing out the financial sector. This has left it in a bind because they are trying to argue that the stimulus prevented depression when (the U-6 measure of)underemployment is still 17%. I anticipate the Obama people will change tack because the Republicans will beat them over this. It is not clear yet what they will do in order to demonstrate their ‘for and by the people’ stature. However, I have speculated that the Administration will become even more conciliatory toward the financial sector (which feels aggrieved because of populist rhetoric) in order to deflect Republican criticism about being anti-business and to protect their previous policy decisions.
Even if the debt ceiling showdown ends without default, there will be more shutdown attempts when the federal budget comes up for review in the fall. Get ready for more gridlock – and a US sovereign debt ratings downgrade.
P.S. – See also:
P.P.S – The democratic party meltdown of 2010 was entirely predictable as early as January 2010. That tells me that Obama blew it. I see Barack Obama as Herbert Hoover. I said quite clearly when Obama entered office in January 2009 that Krugman was right. “Obama has one shot. From a political standpoint, he should be opting for massive stimulus and look for that to be cut back to a more palatable level in negotiation. However, he seems to be treading a cautious line, looking for bipartisan support that he may not receive”. He better hope the Republicans get the blame for the debt ceiling meltdown.