It was John Boehner who invoked the spectre of the “Asian markets” by saying that he would deliver a framework deal on how to increase the debt limit by Sunday night. Once you do that, there’s nowhere else to go. If no announcement is made, the Asian markets will most certainly react negatively. If the announcement is seen as unworkable or inadequate, they’ll drop too. This creates rather than arrests a crisis.
And it appears that Boehner’s gambit is to call President Obama’s bluff on a short-term debt limit increase. This was really the only option available to Republicans to avoid the entire blame for default.
House Speaker John Boehner (R-Ohio) is set to call the Democratic Party’s bluff on the debt ceiling. The Ohio Republican, in a briefing with his conference on Saturday, announced that he would press for a short-term deal, with major spending cuts paired with longer-term deficit-reduction strategies, as a way around the current impasse.
That strategy puts the speaker directly at odds with the White House and allied Democrats, who have insisted for weeks that they would not support a short-term extension of the debt ceiling. The president went so far as to dare House Majority Leader Eric Cantor (R-Va.) to test his opposition to a temporary deal during a tense meeting more than a week ago.
Whether that rigidity will fade as the Aug. 2 deadline to raise the debt ceiling nears is a big gamble on Boehner’s part.
Apparently this short-term increase came up in the White House meeting yesterday, and the President said he wouldn’t sign it because it would lead to a debt downgrade. The shadow of Standard and Poor’s is looming over this entire deal now.
The idea Boehner has is essentially that two-tiered process we’ve been hearing about. In the first tier, the $1.5 trillion in agreed spending cuts would be executed, along with a $1.5 trillion increase in the debt limit. In the second tier, there would be a “Super Congress” created, essentially a Catfood Commission II, whose recommendations on entitlements and taxes would be fast-tracked to the floor of each chamber for an up-or-down vote. The debt limit would be raised after those recommendations were delivered to Congress and voted upon.
I think the only change that Obama and the Democrats want to this setup, which is essentially McConnell-Reid, is that the debt limit increase is guaranteed up front. So the first-tier vote would extend the debt limit through the 2012 elections, and execute the spending cuts. The Catfood Commission II – the Recattening – would still come into being, and their recommendations would still be fast-tracked. But the debt limit wouldn’t be tied to that vote.
Obviously, decoupling the debt limit increase from the Catfood Commission II would make it easier to vote it down. But if the President wanted the debt limit separate from deficit reduction, they should have thought of that weeks ago. Clearly the President wanted to use this leverage for the last several weeks to get a grand bargain.
And Boehner’s gambit would put the President in the tough position politically of having to veto a solution to the debt limit crisis. I don’t know that it would get there, since Harry Reid seems aligned with the President on this point. Reid said in a statement last night after talks broke off, “(Republican) unwillingness to compromise is pushing us to the brink of a default on the full faith and credit of the United States. We have run out of time for politics. Now is the time for cooperation.”
Boehner does appear to be more concerned with getting his party out of their political box, and shifting blame. The deal he has on the table would probably be amenable and passable if the debt limit were dealt with up-front. It’s a pretty raw deal for Americans, as it shifts accountability for cuts to the social safety net to a small group of 12 legislators instead of the Congress as a whole. Not to mention the fact that it achieves austerity in the face of a jobs crisis. But it does look like a political ploy on the part of Boehner. And by invoking the Asian markets, he’s using the threat of a financial shock to do it.