Don’t Be Distracted: The Top Four Red Herrings of the Debt Debate

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The day-to-day of Washington political debate is often little more than misdirection. All sides craft messages aimed at attracting the sympathies of select groups of voters, even if the soundbites have little or nothing to do with what is actually happening. These red herrings make headlines, but they poorly reflect policy or political realities. Here’s a look at the biggest red herrings of the debt ceiling debate:

President Obama doesn’t have a plan. First, the back story: Earlier this year, Republican Rep. Paul Ryan put out a budget plan that would eventually transform Medicare into a voucher system. Democrats pounced, attacking it as an effort to take money out of seniors’ pockets, but refused to release their own plan for dealing with the unsustainable entitlement. Republicans found this unfair and cowardly, and so began the “Where’s their plan?” refrain. At some point in July, this same refrain was transferred over to a new debt ceiling debate. Republicans began saying that Obama had no plan to craft a compromise that would lift the debt ceiling. “He doesn’t like our plan, but he has not put a plan forward yet,” announced House Majority Leader Eric Cantor on July 26. This “Where’s his plan?” refrain quickly became a GOP koan, repeated ad nauseam on cable television and later by reporters in the White House briefing room. In fact, the President has presented House Republican leaders dozens of different plans behind closed doors in the hopes of crafting a compromise. After talks collapsed on July 22, White House aides briefed reporters about one version of this compromise plan, including $425 billion in cuts to Medicare and Medicaid and $1.2 billion in new revenues. The White House never released the plan as legislative text, but that was a strategic political decision. In fact, House Republicans have been told exactly what sorts of plans the White House was willing to accept.

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Republicans reject the idea of compromise. White House officials have made “compromise” and “balanced approach” their watchwords during this debate, as part of a broader effort to woo non-ideological voters. “All they have to be willing to do is compromise one inch,” White House Communications Director Dan Pfeiffer said in a recent interview. Republicans by contrast have mostly avoided the same rhetoric, since it is frowned upon among the conservative base. But that does not mean that Republicans leaders have either refused to compromise or rejected the idea of a balanced approach. The plan that Speaker John Boehner put forward this week, for instance, is dramatically more centrist than the plan Republicans passed last week, representing significant compromises. (Although it still cedes no ground on tax increases.) Nonetheless, it is not a plan that shows any hope of passage in the Senate. As with the compromises that Obama has pushed, the balance is in the eye of the beholder.

Not raising the debt ceiling is no big deal. Texas Gov. Rick Perry was the latest to peddle this fiction on Thursday. “I think this threat that somehow or another the world is going to come to an end and the threat of we are not going to be able to pay our bills is a bit of a stretch,” he said. This has been echoed countless times by others on the right, who say there is plenty of money available to pay our core obligations, including our debtors. This view, though rhetorically comforting, is not backed up by facts. It is impossible, given current spending and tax revenues, to pay for all essential services, including debt payments, the military salaries and entitlement benefits, without borrowing. Something would have to go. Secondly, world markets would react negatively to such a course of events, say corporate leaders, economists, bankers, and just about everyone else, including Ron Paul. As a result, interest rates would likely go up, putting added pressure on the weak economy, with damaging effects, not just in the U.S. but around the world.

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This debate is about getting Americans back to work. Ah jobs, every politicians’ first priority except when it is not, which is most of the time. And officials in both houses of Congress and at the White House never tire of talking about jobs, even in the context of the debt ceiling debate. But this debate is only about jobs in two indirect ways: First, if the debt ceiling is not raised, job growth is almost certain to slow, if not reverse. Second, both House Republicans and White House economists agree that there is a beneficial effect for the economy in getting the fiscal house in order, by providing long-run certainty that will encourage business investment. But beyond that, little evidence that the issue of job creation, especially in the short term, has been a primary driver of the current debate. The Cut, Cap and Balance bill, for instance, would have cut $111 billion from the 2012 budget, or about .74% of the U.S. economy, a fact that Congressional Budget Office director Doug Elmendorf said would force a downward revision in his growth projections for the year, directly reducing job growth. Republicans presented no economic analysis suggesting that increased business certainty would offset this decline. Meanwhile, further incentives specifically targeted to job creation, including short term extensions of the payroll tax cut, have played only a minor role in the discussions.