Obama, Republicans gird for new debt-chicken round

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WASHINGTON — Democrats and Republicans, bracing for a game of chicken over a possible government shutdown and a debt-ceiling default, should rewatch the 1955 movie, “Rebel Without a Cause,” starring the American icon James Dean.

A thug challenges Dean's character to race their stolen cars toward an abyss. The first driver who jumps out of his speeding vehicle is a coward. Dean leaps just as his car is about to go over the cliff; the other guy's leather jacket gets ensnared in the door handle, and he plunges into the void.

In Washington, both sides anticipate a huge fight this autumn over the budget, the mandatory spending cuts under the so-called sequestration and the debt ceiling. They're expecting the other guy to jump first.

House Republicans think President Barack Obama is bluffing when he says he won't negotiate on lifting the debt ceiling. They contend that the president's position isn't nearly as strong as it was at the end of last year, when the tax cuts enacted under President George W. Bush were about to expire. Obama, who had lots of leverage then, got half a loaf.

The White House recalls Speaker John Boehner's discomfort with the game House Republicans played with the debt ceiling in 2011, which hurt both the economy and their party. Privately, they say that Boehner doesn't wish to wage that fight again when the limit is reached late this year and that his demand that any increase in the debt ceiling be matched by comparable spending reductions is a bluff. That position is unacceptable to Obama and Democrats.

The stakes are high in this game of chicken; a miscalculation could send shock waves through the economy.

The probability is that any budget deadlock, which could force a government shutdown and action on the much-discredited across-the-board sequestration cuts in defense and nondefense discretionary spending, will be postponed beyond the Oct. 1 deadline. Then, everything, perhaps including any tax reform initiative, will be thrown in with the debt-ceiling increase sometime in November.

There were plenty of private partisan and bipartisan conversations before the congressional recess, which began Aug. 2. Some of these discussions will continue this month. No one is confident of the path, much less the outcome.

The early budgetary battle lines for the fiscal year that begins Oct. 1 have been drawn, and the two sides are almost $100 billion apart. Neither starts from a position of strength. The White House has made little progress on its insistence on additional revenue. House Republicans had to pull a spending bill containing big cuts from the floor last week for lack of votes. It is relatively easy for most Republicans to support a scaled-back budget concept; actually cutting programs is tougher.

Much of the negotiations when Congress gets back in September are likely to focus on the sequestration, which was adopted only because any agreement on regular spending measures collapsed. The sequestration is indiscriminate, makes for poor policy and is ridiculed by most members of Congress, from defense hawks to domestic policy progressives. It's just that they can't agree on a replacement, as House Republicans continue to pretend that the Pentagon will largely be spared.

Treasury Secretary Jack Lew made clear a week ago that any changes to the sequestration had to equally affect nondefense discretionary cuts as well as defense. There are a number of senators, from both parties, who would support such a deal.

There is a rational replacement that makes for better economic and fiscal policy and addresses top political concerns — for the Democrats, the necessity of more revenue, and for the Republicans, to start addressing entitlements. The cuts in discretionary domestic programs — which as a percentage of the economy are headed to the lowest level since the Eisenhower administration — would be replaced with cuts in entitlements, principally health care, that the White House would accept.

Higher revenue would substitute for the defense cuts. Given the political realities, that solution probably couldn't fly for more than a year. At this stage, it's doubtful even it could get through the House.

The cherished, elusive grand bargain — significant cutbacks in entitlements and more revenue, coupled with short- term stimulus spending on infrastructure and selected other programs — would boost the economy, increase market confidence and perhaps reduce some of the political pettiness that engulfs Washington. The partisan-inspired paralysis makes that a nonstarter.

The best hope is for a mini-bargain, building on a sequestration deal that itself may not occur. There is little good faith on either side, with many expressing disdain for one another. Republicans seem convinced Obama's no-negotiations on the debt ceiling stance amounts to posturing. He has backed down before and, in a view shared by a number of Democrats, tough negotiating isn't this White House's forte.

The Republican blustering is more striking. Privately, some have suggested giving Obama a multiyear extension of the debt ceiling in return for changes in Medicare, including raising the eligibility age. Boehner continues to advance the notion that any increase in the debt ceiling must be matched dollar-for- dollar with spending reductions.

The biggest fraud is led by a few right-wingers in the Senate, principally Ted Cruz of Texas, who insist that an increase the debt ceiling must be accompanied by the defunding of Obama's health-care measure. Cruz plans to barnstorm the country for 10 days this month to rally the faithful — and collect names and maybe money for any presidential hopes — to this illusory demand.

None of this is serious.

There are two possible outcomes. A one-year arrangement containing small, cosmetic changes that postpones bigger decisions. The other is going over the cliff, a la “Rebel Without a Cause.”

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Albert R. Hunt is a Bloomberg View columnist.

bc-hunt

Comments

fatherof5 8 months, 2 weeks ago

This is a manufactured crisis caused by a ridiculous House of Representatives. If Obama and the Senate Republicans were the only ones at the table, they could and would work this out with a compromise. (With 46 Republicans in the Senate and the filibuster rules in place, the Republicans are essentially as powerful as the majority Democrats.)

Both parties have voted against raising the debt ceiling before, but that was ONLY when they were the minority party and it was a symbolic vote. Until recently, no one has ever seriously proposed that the United States of America should not pay its bills. That is the reason our credit rating dropped. That is the reason for this foolish sequester. And that is entirely the fault of the House of Representatives. They should let the grown-ups in the room work this out.

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NewInWW 8 months, 2 weeks ago

Unfortunately, the perfect storm of the 2010 redistricting by Republican controlled state legislatures, together with the rise of the Tea Party, have made any consideration of what's best for the country a distinctly secondary issue for any Republican wishing to be reelected. Any representative who fails to do the Tea Party's bidding will likely be "primaried" and lose the opportunity to retire rich.

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ImJustSayin 8 months, 2 weeks ago

As Reagan said...... "there you go again".

You seem to gloss over the fact raising the debt ceiling is a result of growing debt from too much spending and borrowing to pay for that spending. When a person charges to the max on their credit card limit, it's not financially prudent to call the bank and ask for the credit limit be raised knowing you will continue to charge for items. Painting Republicans as obstructionist is an old and tired ploy of the left.

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downhillracer 8 months, 2 weeks ago

There is no "painting" involved. It merely requires an honest look at the facts inasmuch the current administration has reduced taxes, spending and the deficit. The number of bills presented for his signature is at the lowest in a generation. Wanton obstructionism is well documented since the arrival of the shrieking tea-publicans and their woefully uninformed diatribe.

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PearlY 8 months, 1 week ago

Do you have a source for the claim about this administration reducing spending? Granted Wikipedia is not a perfect source, but it says that the Obama budget submissions have been: 2010, $3.6 trillion; 2011, $3.8 T, 2012, $3.7 T, and 2013, $3.8 T. Bush's last submission was 2009: $3.1 T.

That seems like a 20% increase over the highest level of the past administration, but then, you've pointed out the inadequacy of my math skills before.

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fatherof5 8 months, 2 weeks ago

There is no historic comparison for the level of obstructionism we have witnessed since 2010. I could link you to dozens of websites, if need be, that will show you charts and graphs in any form you want demonstrating the Senate's use of the filibuster and the House's unwillingness to meet the President anywhere near the middle.

Your credit card analogy doesn't work, either, because that would be for NEW spending. Raising the debt limit allows us to pay for spending that has already occurred.

Finally, the debt's rapid growth was a result of tax cuts and spending increases that were pre-Obama, combined with a deep recession. Government spending growth under Obama is at it's lowest levels since the 1950s.

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ImJustSayin 8 months, 2 weeks ago

Our debt is 16 trillion. You want to raise the ceiling so we can continue to spend and get to 17 trillion? That's lunacy and the non-insane are finally saying enough. Why meet in the middle for something that is blatantly wrong. And your last 2 paragraphs......wow.....how did you keep a straight face when you wrote that. You can keep repeating lies over and over hoping people will buy in, but in the end...they're still lies.

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downhillracer 8 months, 2 weeks ago

As to the two paragraphs, a "straight face" isn't required when a person is speaking the truth. Increasing the debt limit does not enlarge the nation's financial commitments, but allows the government to fund obligations already legislated by Congress.

Instead of just calling reasonable folks "liars", perhaps a little homework is in order: http://www.washingtonpost.com/blogs/wonkblog/post/everything-you-need-to-know-about-the-debt-ceiling/2011/07/11/gIQA3mPTTI_blog.html

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VinoTinto 8 months, 2 weeks ago

So, what have the Republicans accomplished lately? Anything will do. I thought so, now go to zipit.com

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PearlY 8 months, 1 week ago

They've obstructed some very bad legislation. Doing nothing is always preferable to doing the wrong thing, and it's about the best that can be done at present.

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VinoTinto 8 months, 1 week ago

Getting nothing done means you're either too stupid to make a decision and/or too lazy to execute it.

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namvet60 8 months, 2 weeks ago

It would seem if the Pres stayed in the White House and met with the House of Representatives to work out some legislation rather than living on AF One there might be something accomplished. Instead of spending all of his time campaigning for Obamacare (the costilest piece of legislation every passed into law) would be a start. The House has sent hundreds of pieces of legislation to the Senate but never brought to the floor for a vote. Which the legislation would probably be vetoed anyway.

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fatherof5 8 months, 2 weeks ago

Which is another way of saying that the House has spent all of its time posturing and virtually no time passing bills that even senate Republicans could support. Senate Republicans shake their heads at what an idiotic mess the House is.

Namvet, do you need me to school you again on how many vacation days Obama has taken as compared to Bush?

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namvet60 8 months, 2 weeks ago

Your double speak does nothing to move the conversation forward. If the Pres is off campaigning for Obamacare and not meeting with anybody in the White House how would you expect results? Try commenting without the double speak.

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MyFamNews 8 months, 2 weeks ago

One problem with your analogy, namvet. The 'Representatives' aren't there. They only work, and I use the term loosely, 126 days a year. They are out of session the entire month of August and scheduled only 9 days in September. Is it any wonder they can't get anything done?

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PearlY 8 months, 2 weeks ago

Personally, I'd prefer it if the President took 365 days a year vacation time.

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paco1234 8 months, 1 week ago

Personally, I would prefer if Ted Cruz goes back to Canada!

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downhillracer 8 months, 2 weeks ago

The Do-Nothing 113th Congress has passed a whopping 15 bills this year, and spent over 50 million dollars to attempt a vote to "repeal" the ACA. They could have been debating and working on legislation to do such things as pass the American Jobs Act, raise the minimum wage, pass the Paycheck Fairness Act, pass a Responsible Homeowner Refinancing Act, create an Infrastructure bank, repeal tax breaks for outsourcing jobs, strengthen the Voting Rights Act, pass a Supreme Court ethics act, institute a Carbon Tax, reduce tax breaks for oil companies, pass an immigration bill, ban assault weapons, restore SNAP and CHIP.. and on, and on, but it's not in their character. They don't have the permission of their corporate sponsors, and anything in the name of progress will upset the "base". Pathetic.

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ImJustSayin 8 months, 2 weeks ago

All lib-tard measures that are nothing more than excuses to spend.

Do you have an original thought or do you rely on getting your tingle up one leg from Chris Mathews and down the other from Rachel Maddow.

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NewInWW 8 months, 2 weeks ago

It's interesting - comments such as this say so much more about the person making the comment, than the person to whom the comment is directed.

If we in our little town can't respectfully debate important issues, there's clearly no hope that they can or will do so in Washington, D.C.

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paco1234 8 months, 1 week ago

Good for you, NewInWW! I'm with you, therefore I make a pledge to be civil and considerate to our fellow Walla-wallans! Civil anyone?

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downhillracer 8 months, 2 weeks ago

Aside from your useless attempt to demean me by using a worn-out reference coined by Limbaugh, several of these were originally "conservative" issues - for example one of the staunchest defenders of the Second Amendment, who wrote to Congress in 1994, urging them to listen to the American public and to the law-enforcement community and support a ban on the further manufacture of military-style assault weapons - that was Ronald Reagan.

My politics come from independent research, participation in my community and the heart - not a so-called "news" outlet.

If you have something remotely intelligent to offer, we're all ears. Otherwise, your childish snipping fades into the noise.

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namvet60 8 months, 2 weeks ago

What were you expecting a "u" instead of an "a"? You may have to transfer that to paper to get the full explanation.

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downhillracer 8 months, 2 weeks ago

"namvet" always brings such reason and thoughtfulness to a discussion.

Said no one, ever.

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PearlY 8 months, 2 weeks ago

Sounds like the 113th Congress has adopted the principle of "First, do no harm."

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downhillracer 8 months, 2 weeks ago

Maybe in your Bizzaro World. Like voting 40 times at a tax payer cost of more than how many million dollars to "repeal" the law of the land? There is nothing "principled" about this Congress.

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fatherof5 8 months, 2 weeks ago

You mean "First, do no harm" as in force the "sequester," refuse to participate in the jobs recovery effort, and harm our nation's credit rating by threatening not to pay our bills? No harm?

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PearlY 8 months, 1 week ago

I believe you know that the sequester was agreed to by BOTH sides because they were BOTH completely unable to do their job of reducing spending in a rational way. I would vastly prefer it if spending cuts were done in such a way as to target the bloated, multi-duplicative bureaucracy, where we have three dozen agencies tackling every conceivable issue, and by rationalizing our entitlement programs into a true safety net for the truly needy, instead of a vast system of shuffling income around among the formerly self-sufficent. But if across the board is the only way, then it's the only way, and I welcome it as better than nothing.

The so-called jobs recovery effort would do little to aid in job recovery, and just add more wasted spending, so again, refusing to participate is the best option available.

And our nation's credit rating is most threatened by our inability to get a grip on our runaway spending; the writing is on the wall for anyone economically educated enough to see it and the rating agencies can't pretend otherwise indefinitely. We're not as bad as Greece yet (well, except for Detroit and maybe a few other Democrat strongholds), but it's not for want of trying on the part of those who style themselves as 'progressives.'

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fatherof5 8 months, 1 week ago

The Sequester was agreed to by both sides, because Obama was the only adult in the room trying to make sure the House Republicans didn't make good on their threats to do real damage to the recovery.

Obama would like a "grand bargain" with meaningful cuts in spending and increased revenues (in other words, the reverse of what got us here in the first place). I think he could make progress with the Senate, but the House is beyond reason.

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marketinsider 8 months, 1 week ago

The politicians in D.C. are nuts, we all know investment, savings, education, hard work, entrepreneurship, and individual responsibility are no longer important or essential in maintaining our standard of living. All that is required is to continue to raise the debt ceiling, better yet, we should get rid of it all together. I have no idea why those idiot politicians can't get it through their thick heads that all we need to do anymore is just keep borrowing billions of dollars each year, send everyone a check every month, and everyone will go out and spend the money, and we do it it all over again. Borrow the money, give it away, spend it, sounds great to me. Heck, it has worked great for 40 years, why can't it work forever. Or at least until I'm long gone. If it does eventually become a problem, I mean all that debt, the younger folks can deal with it. So far the younger people who are living at home longer, postponing marriage and home buying, who most likely won't have any decent pension for their old age, are already paying a 10% sales tax (I paid 3% when I was young), paying $4 for gas (I paid 25 cents), who are already being hit with outrageous healthcare costs, oh, and who can't find a decent paying job with benefits even with a college education.... don't seem to care, that is, the young don't seem to care too much that they are already getting screwed, than why should I. Again, if the debt does become a problem, let the young people deal with it.

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