Democrats and Republicans managed to work out a controversial tax-cut deal in December. Then they managed to work out a controversial spending-cut deal in April. Now they just need to work out a deal to raise the debt limit, something both sides agree needs to be done to avoid a national calamity. No problem, right? Didn’t the killing of Osama bin Laden remind Washington that Democrats and Republicans are all Americans first?
When Vice President Biden opens bipartisan debt-limit negotiations today at the Blair House, he’ll certainly find a different dynamic than the one that produced the last two down-to-the-wire deals. But it won’t be an easier dynamic. Here are the reasons this deal could be even harder to get done—and one reason it should—probably, hopefully, eventually—get done anyway:
Fooled Me Twice. Biden was careful not to dance in the end zone after the last two deals, but the White House clearly thinks it won twice—first by passing an $850 billion tax cut that’s essentially a second stimulus, then by holding the GOP to $38 billion in largely illusory cuts that essentially maintained the status quo. Many Republicans agree with this analysis, and GOP negotiators will face intense pressure to drive a harder bargain this time, rather than grant President Obama another victory heading into the 2012 election season.
Multi-Dimensional Chess. Democrats control the White House and the Senate, while Republicans control the House, so Obama and Biden negotiated the budget deal with House Speaker John Boehner, who kept arguing that he needed to move the deal to the right to sell it to the more extreme Tea Party elements of his caucus. But many of them didn’t buy it; Boehner ended up needing Democratic votes to get the deal through the House. So this time, the dynamic will be much more complex; House Minority Leader Nancy Pelosi is going to want a seat at the table, too.
Theoretically, this could help produce a deal, since the need for votes from both parties limits the influence of the extreme wings of both parties. But Boehner cannot afford to ignore his Tea Partiers if he wants to keep his job. Perhaps a bipartisan deal will emerge from the so-called Gang of Six or some other group outside the main negotiations. But complexity does not usually make deals easier.
High Stakes. Republicans have been drawing lines in the sand over the debt limit, suggesting they won’t vote to raise it without agreements for drastic spending cuts, tax reform, and other longstanding GOP priorities. And some Democrats resisted the initial White House push for a “clean” debt limit bill as well. So Obama has basically agreed that the debt-limit deal will have to include some kind of bipartisan framework for long-term debt reduction. That’s a heavy lift. “Spring training is over,” says one White House official. “OK, we did tens of billions of dollars. Now let’s see if we can do $4 trillion.” Yes, let’s. Especially when just about all of the Republican party has ruled out tax increases. And when the last two major Democratic exercises in deficit reduction—the 1993 Clinton budget and the Obama health care reforms—have passed without any Republican votes.
Market Pressure. The good news, if you can call it that, is that the pressure to get a debt-limit deal done is even stronger than the pressure to avoid a government shutdown. A U.S. government default would be an economic catastrophe, leading to a massive selloff of Treasuries, a collapse of the dollar and all kinds of horrible stuff. Even worse, we don’t have to pass the August default deadline for horrible stuff to start happening. The mere possibility that our politicians would be willing to play chicken with the debt limit is already shaking confidence in our creditworthiness. And once the game of chicken begins—House Republicans are already talking about voting down a clean debt-limit bill to show their seriousness—the financial repercussions could be swift and scary. And then the pressure to get something done immediately might get so intense that the politicians fold.
Because they’re all Americans first. Right?