I cannot imagine a more perilous undertaking than predicting the outcome of the debt limit increase negotiations still underway as I write this.
To those who just prefer to ignore politics and blame both sides, that's all they'll take away from this prolonged battle as the eleventh hour draws near: Some uninformed, cynical notion that it's a pity they can't just get along accompanied by tut tuts about how impotent Washington is and childish the principals are.
I don't see it that way. This fight is long overdue in a nation which has been ideologically rather evenly divided for some time and is just now awakening to the reality that the baby cannot be split in half. There needs to be some tough principled action taken if we are to avoid crashing on the shoals. The shift to a more reality based budget quite naturally will meet with opposition by those who are utterly innumerate and who want to keep buying votes by handing out taxpayers' money to likely allies.
On one side, the side I am on, are those who wish to limit government and government spending and who believe that raising tax rates will further fatten government coffers at the expense of job creation and economic growth.
On the other side are those who seem unwilling to agree to any plan which does not increase taxes even when the record reveals that such hikes hamper growth without increasing revenues. At some point people simply refuse to risk their treasure and work hard for little or no return.
My assertion that the entire Democratic position can be summed up in the desire to impose more taxes on us might sound hyperbolic, but here's Maryland Representative Steny Hoyer on the subject:
House Minority Whip Steny Hoyer (D.-Md.) said on the House floor last night that if the balanced budget amendment Republicans are supporting is ratified and included in the Constitution it would make it "virtually impossible" to raise taxes.
Here's The Hill's account of the fury of the Democratic Congressional leaders upon hearing there might be a deal that didn't include tax increases:
Senate Democrats were incensed at what they heard, underscoring the thorny politics Obama is facing as he seeks a comprehensive deficit deal that can pass muster with conservatives and liberals alike.
Senate Majority Leader Harry Reid (D-Nev.) confronted White House budget chief Jack Lew in a closed-door meeting of the Democratic conference; he afterward publicly dismissed a proposal that lacked new revenues.
Reid said there had to be fairness in a "potential agreement" under discussion, and that it could not just include spending cuts.
"What I have to say is this. The president always talked about balance. There has to be some fairness in this. This can't all be cuts," Reid said. "There has to be some revenues. The caucus agrees with that. I hope the president sticks with that, and I am confident he will."
Sen. Barbara Mikulski (D-Md.) said many Democrats in the meeting with Lew were "volcanic" over the idea of a budget deal that would not include new revenues.
Asked if he thought a big deficit plan without revenues could pass the Senate, the chamber's Budget Committee Chairman Kent Conrad (D-N.D.) replied: "Obviously I don't."[/quote]
The New York Times' account was substantially similar:
Hours before the Congressional Democrats met with Mr. Obama, they had expressed alarm publicly to reporters that the emerging proposal seemed too reliant on deep spending cuts compared to new revenue. In private, some vented their criticism at Mr. Obama's budget director, Jacob J. Lew, during a heated party lunch of Senate Democrats on Thursday.
"The president always talked about balance: there had to be some fairness in this, this can't be all cuts," said Senator Harry Reid, the Senate majority leader, as he left the meeting with Mr. Lew. "The caucus agrees with that. I hope the president agrees with that, and I'm confident he will."
The extent to which these Congressional leaders represent the Democratic base seems clear . A review of the comments to the New York Times piece, indicates that of 500 comments, the most popular was this one:
There is no reason for cuts to the social net. If we want to save 5 trillion dollar over ten years, let the Bush tax cuts expire.
Just One Minute poster, Jim Ryan, who spotted the comment and observed its popularity among the paper's readers was taken aback by it:
Innumeracy? Fantasy? Some sort of social disease? A fetish or compulsive disorder? Or just simply the triumph of ideology over easily discoverable facts?
Whatever it is, it is a fact. The Democratic base thinks taxes on people who make more than they do (that seems to be the sliding scale of "rich" in left circles) are necessary for "fairness." If they do not get this, they do not care if the debt ceiling is not raised and the entire economy collapses as a result of our inability to meet our debt obligations.
Some have noted that the length of these negotiations is not working in Obama's favor. That his favorability ratings keep falling the longer the debt limit negotiations continue without resolution.
President Obama Job Approval
But, don't be fooled. There's every reason to believe the slippage is because the base is unhappy he has not been able to "tax the rich," for in their minds if he had, the social welfare gravy train could keep on gathering steam without end or interruption or cuts. It's like Lotte Lenya singing Moon of Alabama under the lamp post in some Brecht musical, " Show us the way to the next whiskey bar, oh you know why."
The House of Representatives did its job, passing cut, cap and balance, only to have Senator Reid and the Senate Democrats table this bill, which was overwhelmingly popular with everyone but his base. And the base was able to pull out all the stops at the Senate level as Richard Pollock documented.
Michael Alan at Legal Insurrection observed how even Senators like Manchin who claimed to be for a balanced budget and Ben Nelson and Claire McCaskill who face tough re-election battles, folded under the pressure:
The party line vote was 51 to 46 in favor of tabling. While I didn't expect the twenty Senate Democrats that were previously on the record in support of a balanced budget amendment to keep their word, I did expect a handful of moderate Democrats to at least allow the plan to be debated and amended (if not out of principle, at least out of a recognition of the electoral consequences of opposing fiscal responsibility).
Friday Obama gave another petulant, partisan press conference blaming House Speaker Boehner for the talks' collapse, but Boehner said it was the President's doing and I think the evidence
favors his version detailed by The Right Scoop:
"It's the President who walked away from his agreement and demanded more money. At the last minute. And the only way to get that extra revenue was to raise taxes."
That's basically why negotiations fell apart. Boehner said that the White House moved the goal posts by asking for another $400 Billion in revenue over 10 years on top of what they had already agreed to, and the only way to get it was in tax increases. As I'm typing this I'm listening to Levin and he points out that this just proves that these negotiations aren't about the debt limit, but rather increasing taxes. In other words, as Levin points out, Obama sees it as another opportunity to make big lurch to the left.
I love that Boehner points out once again the White House never put a plan on the table and that was the House that put both their plans on the table by passing their budget as well as Cut, Cap, and Balance. He also adds that the White House never got serious about cutting spending which is no big surprise to us.
Like Tom Maguire, I think Mickey Kaus has it just right on this benighted notion of a need for "balance":
There is nothing as powerful as an idea whose time is coming. And when that idea springs from the brow of Mickey Kaus well, stand back.
A month ago, Mickey tackled the debt ceiling debate with the notion that a "cuts only" deal made sense:
Opponents of bloated government don't trust politicians to make cuts if extra revenues are in the offing. Neither, sensibly, do many voters. But if you make dramatic cuts, demonstrate you've sweated out the fat-and there's still a deficit, you've got a shot at getting a tax increase through. Cuts First! You could start with the Department of Education's Office of Civil Rights.
In any case. it's inane to argue that every step on the road to deficit reduction has to be a balance of cuts and tax increases. That's like saying you can't take a piss unless you're taking a drink.
All told, while I can't be sure where this is going, I am sure the market will be roiled on Monday if we do not have a deal or are not close to one, I do think Obama's chief motivation is his re-election and I am sure that Michael Barone is right that Obama's re-election is far from a sure thing:
Absent a considerable redefinition by the incumbent president, he or his party's nominee is likely to run just about as well (or poorly) in the next presidential election as his party's House candidates did in the most recent off-year elections.
Obviously, the three most recent examples portend an unhappy 2012 for President Obama and the Democrats, while the 1994-1996 example is a precedent for an incumbent Democratic president overcoming a "thumping" (George W. Bush's term) in the off-year and winning reelection by a nontrivial margin. What I think these numbers suggest is that, absent a considerable redefinition by the incumbent president, he or his party's nominee is likely to run just about as well (or poorly) in the next presidential election as his party's House candidates did in the most recent off-year elections. The off-year vote represents a settled opinion on how the president and his party have performed in nearly two years in office, and unless the president takes a significantly different course toward governing, as Bill Clinton arguably did in 1995-1996, then that settled verdict remains more or less in place. Or so the numbers suggest.
My crystal ball listened to all this and responded:" The notion of a deal consisting of a short term extension and an approximate $500 billion spending cut with no tax hike is more and more likely."
Sure enough, by Friday evening Pelosi was signaling it was heading that way:
House Minority Leader Nancy Pelosi acknowledged Friday that Democrats may reluctantly accept a last-minute compromise to avoid a default that involves up to $2.5 trillion in spending cuts - without agreed-upon new tax revenues - if Medicare, Medicaid, and Social Security are protected from the debt limit brinksmanship.
Correction 11:20 AM EDT: Steny Hoyer identified Representative, not Senator