President Obama has managed to claim the moral high ground in his battle with Republicans over raising the debt ceiling by appearing to put good fiscal policy ahead of short-term political considerations. By putting a bigger deficit reduction package on the table than Republicans were proposing the President forced the GOP to defend tax loopholes and tax breaks for the wealthiest Americans. Is Obama now trying to leverage that position of strength for political purposes?
On Wednesday, Obama reportedly threatened to veto an offer by House majority leader Eric Cantor to raise the debt ceiling by $1.7 trillion. Why? Because projections show that would mean having to hold another vote on raising the debt ceiling before the 2012 election. Is the President really willing to risk the U.S. defaulting on its debt just to avoid having to vote again on a bill before the Presidential election?
The administration puts forward several non-political reasons for Obama’s position. On Thursday, Obama spokesman Jay Carney argued at the White House briefing that the economic costs of repeated debt limit debates are unacceptable. “We have rating agencies putting us on warning,” Carney said, “I mean, this is not good for our economy. So if we do this regularly, you can bet that it will have a negative impact on our economic prospects, on our growth, and our job creation, because it creates uncertainty about the economic environment that we’re — that businesses are operating in.”
But Obama isn’t arguing against any future debt ceiling increase, just one that happens before the next Presidential election. Obama gave another reason for that position in his press conference on Monday, arguing that it would only get harder to do big things before the election. “If we think it’s hard now, imagine how these guys are going to be thinking six months from now in the middle of election season, when they’re all up,” Obama said. “It’s not going to get easier, it’s going to get harder. So we might as well do it now; pull off the Band-aid, eat our peas.”
Do we know that’s the case? Would the full glare of public scrutiny in an election season really make it harder to do the right thing for the country? Or would it make it easier? Obama himself said that what the American people want is for their representatives in Washington to solve the big problems. “I think the American people want to see something done,” Obama said Monday. “They feel a sense of urgency, both about the breakdown in our political process and also about the situation in our economy.” If that’s the case, wouldn’t the pressure be even greater right ahead of our biennial exercise in electoral accountability? Some polls suggest a majority of Americans are opposed to raising the debt ceiling. But, as Obama himself noted on Monday, that depends on how you phrase the question.
Obama’s best defense is that the answer to that question may really be no, thanks to the House Republicans nearly fanatical opposition to any increase in the debt ceiling. As Jay has reported, House Republicans have told their leaders that they’ll only vote once to raise the debt ceiling before the next election and there is reason to think that Cantor might not be able to deliver his troops for another. Cantor himself, prior to Wednesday’s White House meeting, had argued he couldn’t get a second vote through the House.
That may not be true. Perhaps, in a year’s time, Obama could again maneuver to a position of strength and argue for a big deal, like the bold one he negotiated with House Speaker John Boehner that would have reduced the deficit dramatically, raised the debt ceiling and helped stabilize the troubled entitlement programs. But a TARP-like scenario, where a shattering drop in the stock market and an international flight from Treasuries follows a failed debt ceiling vote, is sufficient reason not to risk another debt ceiling vote before the 2012 election.
As a practical matter Obama may be off the hook: the House is in such disarray that it is not clear Cantor can force a vote to raise the debt ceiling temporarily. Cantor would need Democrats to get the temporary bill through, and they hate his proposal on policy and political grounds. Which means Obama probably won’t face the tough choice of whether or not to follow through on his veto threat.