The debate in Washington is serious as a heart attack: whether the United States should raise its debt ceiling so it can borrow more money to stay afloat. The statutory ceiling on our national debt—our legal borrowing limit—is $14.3 trillion. That limit was reached, according to the Treasury Department, on May 16. Treasury says it can make do until early August, when the ceiling must be raised by $2.4 trillion.
Congressional Republicans have made their stand clear: They will agree to raise the limit only if it is accompanied by spending cuts or reforms.
The Democrats want to raise the ceiling, period.
The Republicans are being hard-line because of the base, and the base is hard-line for two reasons. First, we are in an unprecedented debt crisis. Second, the past 40 years have taught them that if dramatic action is not taken to stanch spending, Congress will spend more. Something is needed to shock the system.
If Republicans can get the White House to cut where the money is—Medicare—then Medicare, and all controversy over the Ryan plan, will be taken off the table as an issue in the 2012 election. This would not be good for Democrats. Democrats in turn would likely make some cuts in spending if Republicans agree to some tax increases. But that would take a great Republican issue off the table.
This week the House voted 318-97 against raising the ceiling without cutting. The president and a group of House Republicans met this week to talk about the apparent impasse. There is a chance they won’t come to any agreement by August.
If no agreement is reached, what happens? Nobody knows, because it’s never happened before. But economists warn: The dollar could crash, interest rates spike, equity markets melt. Foreign investors would lose confidence that America is worth risking their money and that Washington is able to face and handle a crisis.
Princeton economist Alan Blinder has noted in these pages that the bills for Social Security, Medicare, Medicaid, defense and interest on the national debt amount to about two-thirds of all federal outlays. “At some point [Treasury Secretary Timothy] Geithner could wind up brooding over horrible questions like these: Do we stop issuing checks for Social Security benefits, or for soldiers’ pay, or for interest payments to the Chinese government?”
All of this sounds fairly catastrophic, especially considering this week’s evidence that America’s economic recovery is stalled. Housing prices are down, job creation weak, manufacturing growth slowed, factory activity down. The Dow Jones Industrial Average fell 280 points on Wednesday.
So this would seem to be a bad time to be playing chicken.
Democrats think if push comes to shove and an agreement is not reached, public opinion will go against the Republicans. This may be true. Republicans think if agreement is not reached, responsibility will redound on the president. They may be true too.
But again, this isn’t a good time to play Let’s Find Out.
Democrats are right that the debt ceiling must be raised. Republicans are right that the decision to raise the debt ceiling must be accompanied by reforms or cuts to spending that equal or exceed the amount of the raise, $2.4 trillion. Here’s why.
Default is unthinkable. We are the United States of America, and we pay our bills.
Raising the ceiling without attempting to control spending is a depressing and wearying thought. It will avert crisis, yes, but there would be no gain in it beyond that. It would demonstrate to the world that we are not capable of taking necessary steps to dig our way out of the spending mess. It would mean things just continue as they are.
But cutting and reforming—showing we can make tough decisions in a crisis—will reassure the world, and our creditors. It will increase faith in the United States, and increase an American sense of well being: “We can do this, we can make it better.” It would be very good to leave the world saying, “My God, the Americans are still competent.”
Washington should forget taxes for now—fight that out later. The polls are all over the place, and no feasible amount of new revenue is going to make a difference. Cutting is what matters. And the president could play it so that he doesn’t lose. A crisis would have been averted—on his watch. He could claim to have been conciliatory, looking out for the national interest. The left won’t like it, but the center will. And he will have shown he can work closely and in good faith with Republicans, who control the House.
On that, a word. Talks on the debt ceiling will no doubt continue, but there is an Obama problem there, and it’s always gotten in the way. He really dislikes the other side, and can’t fake it. This is peculiar in a politician, the not faking it. But he doesn’t bother to show warmth and high regard. And so appeals to patriotism—“Come on guys, we have to save this thing”—ring hollow from him. In this he is the un-Clinton. Bill Clinton understood why conservatives think what they think because he was raised in the South. He was surrounded by them, and he wasn’t by nature an ideologue.
He absorbed not the biases of his region but of his generation and his education (Ivy League). He had ambition: Liberalism was rising and he’d rise with it. And on the signal issues of his youth, Vietnam and race, he thought the Democrats of the 1970s were right. But that didn’t mean he didn’t understand and feel some sympathy for conservatives, and as a political practitioner he had a certain sympathy for the predicaments of his fellow pols. That’s why he could play ball with Newt Gingrich and the class of 1994: because he didn’t quite hate everything they stood for. He had a saving ambivalence.
Barack Obama is different, not a political practitioner, really, but something else, and not a warm-blooded animal but a cool, chill character, a fish who sits deep in the tank and stares, stilly, at the other fish.
He doesn’t know how to confuse his foes with “outreach,” with phone calls, jokes, affection. He doesn’t leave them saying, as Reagan did, “I just can’t help it, I like the guy.” And because he can’t confuse them or reach them they more readily coalesce around their own explanation of him: socialist, destroyer.
This isn’t good, and has had an impact on the president’s contacts with Republicans. And it’s added an edge to an emerging campaign theme among them. Two years ago I wrote of Clare Booth Luce’s observation that all presidents have a sentence: “He fought to hold the union together and end slavery.” “He brought America through economic collapse and a world war.” You didn’t have to be told it was Lincoln, or FDR. I said that Mr. Obama didn’t understand his sentence. But Republicans now think they know it.
Four words: He made it worse.
Obama inherited financial collapse, deficits and debt. He inherited a broken political culture. These things weren’t his fault. But through his decisions, he made them all worse.