Never Take A Hostage You're Not Prepared To Shoot

Debt-Limit Harakiri

Mitch McConnell isn't selling out Republicans.

Wall Street Journal Editorial, July 13, 2011

Republican Senate leader Mitch McConnell said yesterday he's concluded that no deal to raise the debt ceiling in return for serious spending restraint is possible with President Obama, and who can blame him? We've never thought the debt ceiling was the best leverage for a showdown over the entitlement state, and now it looks like Mr. Obama is trying to use it as a way to blame the GOP for the lousy economy.

This may have been the President's strategy all along: Take the debt-limit talks behind closed doors, make major spending cuts seem possible in the early days, but then hammer Republicans publicly as the deadline nears for refusing to raise taxes on business and "the rich."

This would explain the President's newly discovered fondness for press conferences, which he has rarely held but now rolls out before negotiating sessions. It would also explain why Mr. Obama's tax demands have escalated as the August 2 deadline nears. Yesterday he played the Grandma Card, telling CBS that seniors may not get their August retirement checks. Next he'll send home the food inspectors and stop paying the troops.

 

The reality is that Mr. Obama is trying to present Republicans with a Hobson's choice: Either repudiate their campaign pledge by raising taxes, or take the blame for any economic turmoil and government shutdown as the U.S. nears a debt default. In the former case Mr. Obama takes the tax issue off the table and demoralizes the tea party for 2012, and in the latter he makes Republicans share the blame for 9.2% unemployment.

This is the political context in which to understand Mr. McConnell's proposal yesterday to force Mr. Obama to take ownership of any debt-limit increase. If the President still insists on a tax increase, then Republicans will walk away from the talks.

Mr. McConnell would then let the President propose three debt-limit increases adding up to $2.5 trillion over the coming months. Senate Republicans (with Majority Leader Harry Reid's cooperation) would use a convoluted procedure to vote for three resolutions of disapproval on the bills. Mr. Obama could veto the resolutions and 34 Democrats could vote to sustain. The President would get his debt-limit increase, but without Republicans serving as his political wingmen.

The hotter precincts of the blogosphere were calling this a sellout yesterday, though they might want to think before they shout. The debt ceiling is going to be increased one way or another, and the only question has been what if anything Republicans could get in return. If Mr. Obama insists on a tax increase, and Republicans won't vote for one, then what's the alternative to Mr. McConnell's maneuver?

Republicans who say they can use the debt limit to force Democrats to agree to a balanced budget amendment are dreaming. Such an amendment won't get the two-thirds vote to pass the Senate, but it would give every Democrat running for re-election next year a chance to vote for it and claim to be a fiscal conservative.

We agree with those who say that Treasury Secretary Tim Geithner can cut other federal spending before he allows a technical default on U.S. debt. No doubt that is what he will do. We'd even support a showdown over technical default if we thought it might yield some major government reforms. But Mr. Obama clearly has no such intention.

Instead he and Mr. Geithner will gradually shut down government services, the more painful the better. The polls that now find that voters oppose a debt-limit increase will turn on a dime when Americans start learning that they won't get Social Security checks. Republicans will then run like they're fleeing the Pamplona bulls, and chaotic retreats are the ugliest kind. By then they might end up having to vote for a debt-limit increase and a tax increase.

The tea party/talk-radio expectations for what Republicans can accomplish over the debt-limit showdown have always been unrealistic. As former Senator Phil Gramm once told us, never take a hostage you're not prepared to shoot. Republicans aren't prepared to stop a debt-limit increase because the political costs are unbearable. Republicans might have played this game better, but the truth is that Mr. Obama has more cards to play.

The entitlement state can't be reformed by one house of Congress in one year against a determined President and Senate held by the other party. It requires more than one election. The Obama Democrats have staged a spending blowout to 24% of GDP and rising, and now they want to find a way to finance it to make it permanent. Those are the real stakes of 2012.

Even if Mr. Obama gets his debt-limit increase without any spending cuts, he will pay a price for the privilege. He'll have reinforced his well-earned reputation as a spender with no modern peer. He'll own the record deficits and fast-rising debt. And he'll own the U.S. credit-rating downgrade to AA if Standard & Poor's so decides.

We'd far prefer a bipartisan deal to cut spending and reform entitlements without a tax increase. But if Mr. Obama won't go along, there's no reason Republicans should help him dodge the political consequences by committing debt-limit harakiri.