The Debt Battle’s Next Act

While the Beltway was mesmerized by the stand-off between outgoing Secretary of State Hillary Clinton and Republicans senators at the long-delayed Benghazi hearings, House Republicans quietly introduced a bill to extend the debt ceiling until May 18th.

In doing so, they dropped a demand they had made since summer 2011: a dollar in spending cuts for every dollar in additional borrowing the government took on.

The final vote was 285-144, with 33 hardcore Tea Party Republicans and 111 Democrats opposed. The Democrats presumably thought the debt ceiling should be extended much further—or eliminated.

This was the second Republican surrender in less than a month. The first, of course, was allowing the top marginal tax rate to revert to Clinton-era levels of 39.6% for earnings above $400,000 and $450,000 a year in the New Year’s “fiscal cliff” deal.

Democratic leaders rubbed Republicans’ noses in it. Here’s Sen. Patty Murray (D-WA):

The Republicans have stepped back from the precipice when it comes to the debt limit and essentially admitted that their demand of the last two years for spending cuts equal to the debt limit increase is both absurd and unworkable.

And indeed President Obama’s strong stands, especially over the debt ceiling, forced Republicans to cave. Since his reelection, his tone has been sharply partisan, free from his previous calls for bipartisanship.

Now the next two battles will be over the automatic spending cuts that kick in on March 1st and the expiration of the continuing budget resolution, which keeps the government funded through March 27th.

That will give Republicans plenty of time to shut down the government, if they want to, without harming the full faith and credit of the United States as a result of not extending the debt limit.

House Speaker John Boehner addresses the Ripon Society Tuesday. Photo: Ripon Society.

House Speaker John Boehner addresses the Ripon Society Tuesday. Photo: The Ripon Society.

House Speaker John Boehner acknowledged how toxic the latter would be in a speech to the Ripon Society Tuesday:

I think moving the debt limit out of the way and dealing with the sequester and the [continuing resolution] at the end of March puts us in a much stronger position…

We’re going to have to make some big decisions about how we as a party take on this challenge. Where’s the ground that we fight on? Where’s the ground that we retreat on? Where are the smart fights? Where are the dumb fights that we have to stay away from? We’ve got a lot of big decisions to make.

Boehner, incidentally, made headlines in that speech for saying the president was trying to “annihilate” the Republican Party.

So, here’s what I think will happen.

Republicans will try to stick Democrats with politically difficult spending cuts as part of any deal to extend funding. Senate Democrats have vowed to pass a budget for the first time in four years. But it’s likely to be woefully short on spending cuts and long on more revenue increases, through tax reform. Senate Minority Leader Mitch McConnell has said the tax train has left the station.

House Budget Committee Chairman Paul Ryan (R-Wis.) is preparing a new budget that will erase the deficit within ten years without raising taxes.

The only real “solution” to this is for Democrats to accept some cuts in entitlement programs like Social Security and Medicare in exchange for Republicans offering more revenue through tax reforms—eliminating some exemptions and deductions for individuals and corporations.

That will be a brutal battle, which will require more concessions than either party may be capable of making. And the big stumbling block could be who’s willing to stick his or her neck out first and accept blame for unpopular decisions—something politicians spend their whole careers avoiding.

The two parties have averted a full confrontation until now. But I think it’s coming.

Also read: How Obama Plans to Crush the GOP

Obama Turns American Exceptionalism on its Head

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