The conventional wisdom now dictates that every time a debt-ceiling hike comes up for a vote, Republicans will threaten to torch Uncle Sam’s credit rating unless their demands are met. Just take Senator Mitch McConnell, Washington’s most transparently devious operator, at his word: “In the future, any President, this one or another one, when they request us to raise the debt ceiling it will not be clean anymore. This is just the first step.” Even more bluntly, he called the economy “a hostage worth ransoming.” Joe passionately made the case last week that this marks the first deployment of an incredibly dangerous political weapon that will threaten proper functions of democracy for a long time. I’m not so sure.
Whether their calculations were right or wrong, Democrats and Republicans both thought they could play this last deb-limit showdown to their political advantage. “Let the Republicans have some buy-in on the debt. They’re going to have a majority in the House,” Democratic Majority Leader Harry Reid said last December, explaining his inclination to put off an adjustment to federal borrowing authority. “I don’t think [we should raise the debt ceiling] when we have a heavily Democratic Senate, heavily Democratic House and a Democratic President.” Similarly, President Obama went from calling for an unconditional debt-ceiling hike to pushing for a deficit-reducing grand bargain because he thought it would undermine Republicans’ persistent claim that he is profligacy incarnate. Meanwhile, Republicans have been trying to turn their mandate from the 2010 elections into a shrink ray for federal government. This dynamic gave way to a debt fight in which Republicans made a lot of demands and Democrats acceded to them in the broadest sense. Want to borrow more? Need to cut first.
But both parties got the politics wrong. Everyone involved ended up looking foolish and irresponsible — Republicans more so than Democrats, according to Pew — and the American public was simply turned off. It’s unclear if purely political incentives for another hostage situation are really there. Furthermore, the public learned something about the debt ceiling in this high-profile exchange. While raising the debt ceiling was unpopular at the outset of the debate — superficially, it sounds like a bad thing — raising the ceiling to end the threat of default was a more popular option by the end.
The political landscape will also be radically different in 2013, the next time the debt-ceiling will be due for an increase. The White House will either be occupied by Obama, just entering his second term, or by a new Republican President. Without re-election concerns, Obama would likely hold a harder line against Republican demands, and could easily say he settled the issues with 10 years of cuts last time around. If it’s a Republican President — oh, let’s call him Ritt Momney — the notion that his own party would jack him up for cuts he doesn’t want is far-fetched. If he does want them, there’s no hostage situation. The Tea Partying House freshmen, meanwhile, put through the wringer of a re-election season, will likely be milder in temperament and more loyal to the party leadership that helped them remain in office. Even by the end of the 2011 debt debate, majorities of the House Tea Party Caucus and the House GOP freshmen voted for a compromise everyone found unpalatable. And speaking of that unpalatable compromise, the next debt-ceiling renewal will likely arrive just as the special deficit-reducing committee’s savings are taking effect or, if it deadlocks, just as the draconian across-the-board cuts automatically kick in.
There are also economic concerns. It’s often a fool’s errand to speculate about causality in the market — especially on a political blog — but it’s apparaent that the great debt deal of 2011 did not make Wall Street feel warm and fuzzy. It’s more worried about a sputtering economy. The recent talk of a short-term debt crisis is largely a political creation, and the macroeconomic picture is a much more important variable. If, in 2013, the economy is better, tax receipts will be rising and debt-to-GDP will be falling all on their own. If, god forbid, the economy is the same or worse, any one squabbling about dollar-for-dollar cuts will be — or at least should be — laughed out of Washington. (If it’s the same or worse, there’s also a good chance Ritt Momney will be President.)
Ultimately, perspective clarifies the situation. The debt ceiling has historically provided the out-of-power party in Washington with an opportunity to make demands and try to embarrass the sitting President. A confluence of factors — Tea Party politics, Obama’s approaching re-election, Democrats’ tactical errors, a weak Republican Speaker, etc. — made 2011’s debt-ceiling standoff particularly fraught. But it seems unlikely that the debt debacle of 2011 will see repeat performances every year or two.