Republicans' Debt Ceiling Threats Have No Teeth

In the days since Congressional Republicans suffered a utter, complete, and embarrassing defeat at the hands of the president on the fiscal cliff, they have been trying to regroup. One of the ways they have tried to do so is to issue threats that they would refuse to raise the nation's debt limit if the president does not agree to essentially end the American social compact. Like a wounded animal, they are trying to hit back, and threatening to shut down the government.

But all of that are the empty roars of a paper tiger, and they know it themselves. Of all people, it was Newt Gingrich, the architect of the last government shutdown, this morning on Morning Joe making it clear why this dog won't hunt:

Gingrich explained that “in the end… the whole national financial system is going to come into Washington by television and say ‘Oh, my god, this will be a gigantic heart attack. The entire economy of the world will collapse. You guys can’t be responsible,’ and they’ll cave.”
I could rest my case right there. But let's go into this a little bit. Why would I think, for example, that anything in the Republican mindset has changed since 2011, when it did look like they would take the country into default? The answer is several things, but the most compelling of them is this date: November 6, 2012. Throughout the first four years of the president's administration, everything within the GOP revolved around a singular theory: if they stopped the country from succeeding - better yet, if they hurt the country greatly - it would be seen as a failure of Barack Obama's, and he would therefore be defeated. The Republicans had also won the elections of 2010, and were emboldened by that victory.

Now, the tables are turned. The Republicans overplayed their hand, and the president trounced their nominee in 2012. Democrats increased their majority in the Senate, and gained seats in the House. The Republicans are no longer in a position to threaten the president's second term. The president, however, does not have to face an election again, and he can instead concentrate on daring the Republicans to shut down the government and melt down the economy early in the president's new term, his strongest moment and their weakest.

2014 and 2016 are not going to be referenda on the president. If the Republicans were to force a shutdown, and the worldwide economy exploded, their party will be seen as solely to blame, and routed out of Washington as Wall Street withdraws their support from the crazy side for irreparably harming their business, and the American people take out their anger out on the Republicans.

There is another reason the president will not negotiate this time over the debt ceiling. When he cut the deal with the Republicans in 2011, he was getting something no Democrat thought was possible to get from a Republican House: a big cut in defense spending through the automatic cuts (half a trillion dollars' worth), while he protected the most crucial programs for the poor, the middle class and the elderly. But the tax increases on the middle class at the end of 2012 were paired with that deal. So the only thing the president had to do to rescue that hostage is exactly what he did through the fiscal cliff deal: he severed the tax provisions (and made those policies permanent while raising taxes on the wealthy) from the spending cuts, thereby neutering all Republican leverage. That's why Republicans are so hopping mad - they know exactly what happened to them.

The defense cuts, done with an axe, won't be optimal, but I suspect the president would be quite happy to let those go into effect should Republicans not behave. The GOP establishment and their benefactors in the defense industry, however, will not be so content. This is why the president is not only refusing to play ball with the GOP on the debt ceiling, he won't even entertain the idea of replacing sequestration cuts unless the Republicans cry uncle and come up with even more revenue.

Neither the defense industry nor the financial industry - the money behind all things GOP - will stand for a Republican-caused catastrophe on the debt ceiling. It very well may come down to John Boehner having to break the Hastert rule again, and pass the debt ceiling increase with mostly Democratic votes, but pass it he will have to.

The fact is that most Republicans in Washington know this truth, albeit that it's a sad one for their party. That is why they are running around issuing threats of government shutdown without even presenting a bill in the House to show the American people just what their idea of the cuts would be in order for them to agree to a debt limit increase. They are issuing threats instead of preparing legislation because they know they have no leverage backing up their threats.

What the Republicans really want by ratcheting up their rhetoric is for the president to take their bait. They want the president to believe that they are crazy enough to cause a second economic calamity, even if their party has to become the sacrificial lamb for it. The president has no intention of taking the bait. Instead, he's calling their bluff. He's calling their bluff, and as the clock ticks, they are freaking out. No one knows better than Barack Obama how empty the Republicans' threat on the debt ceiling is (except for John Boehner and Mitch McConnell), for he was the one planned and flawlessly executed the neutering strategy.