Speaker of the House John Boehner's never-ending quest to placate the tea party resulted in the GOP approving a bill on Friday that would fund the government through mid-December, while "defunding" Obamacare. (Never mind that, as U.S. News' Carrie Wofford has pointed out, "defunding" Obamacare in this manner doesn't actually work.) If, as expected, the Senate strips the defund provision and kicks the bill back to the House, Boehner will have to find yet another way of keeping his radicals at bay.
The next hostage, then, is likely the debt ceiling. Technically, the U.S. has already reached its statutory borrowing limit, but the Treasury Department has been using extraordinary measures to delay the reckoning, a tactic that will no longer work come mid-October. And already, the GOP has drawn up a wish-list of policy concessions it hopes to extract in return for raising the debt ceiling, running the gamut from changes to the Dodd-Frank financial reform law and means-testing of Medicare to approval of the controversial Keystone XL oil pipeline. If defunding Obamacare doesn't happen now, expect that to be added to the list.
But President Obama, it seems, has learned his lesson from previous debt ceiling standoffs, and this time is refusing to play ball. He even called Boehner on Friday night to reiterate that he does not plan to negotiate over whether the U.S. government will actually pay its bills (which remember, is all raising the debt ceiling ensures).
Why is Obama right to offer the GOP nothing when it comes to raising the debt ceiling? Well, the debt ceiling is a hostage which the GOP is simply not willing to shoot. As former GOP Sen. Judd Gregg, N.H., explained in an op-ed in The Hill today:
You cannot in politics take a hostage you cannot shoot. That is what the debt ceiling is. At some point, the debt ceiling will have to be increased not because it is a good idea but because it is the only idea.
Defaulting on the nation's obligations, which is the alternative to not increasing the debt ceiling, is not an option either substantively or politically.
A default would lead to some level of chaos in the debt markets, which would lead to a significant contraction in economic activity, which would lead to job losses, which would lead to higher spending by the federal government and lower tax revenues, which would lead to more debt.
Two years ago, when the very same debate over raising the debt ceiling was occurring, House Budget Committee Chairman Paul Ryan, R-Wis. – who would go on to be his party's vice-presidential nominee in 2012 – confirmed that taking the debt ceiling hostage is impossible. "You can't not raise the debt ceiling. Default is the unworkable solution," he said. He then attempted to justify the GOP's move anyway, but the word salad that resulted shows just how untenable their plan really is.
The economic damage that would result from actually allowing the country to default on its financial obligations – be they payments to foreign debtors, Social Security recipients or government vendors – would be catastrophic, not to mention the mess that would occur in markets around the world when the absolute certainty that is U.S. payment of its debt disappears overnight. According to the Government Accountability Office, the last debt ceiling debacle, which didn't result in a default, cost taxpayers $1.3 billion in fiscal year 2011 alone. That would seem like chump change compared to the costs of an actual default.
Now, it may be that the GOP leadership lets the tea party get its way by shutting down the government over Obamacare, rather than risking a debt default. But Republicans who remember the Clinton-era shutdowns are not ready for a sequel. So Boehner is left in the unenviable position of making his wild faction a promise on which he can't possibly deliver. It remains to be seen how he'll get out of it, but Obama is certainly under no obligation to help.
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