Wednesday, July 20, 2011

What is the real plan B?

We're now thirteen days from debtpocalypse. And things are worse than they seem. A few weeks ago, Barack Obama announced that the "real" deadline for a debt ceiling compromise was July 22nd -- tomorrow -- because additional time would be needed to prep the compromise bill for a vote. Now, July 22nd might not be the actual point of no return -- it's an inherently fuzzy line -- but it does seem clear that some time will be needed to write a bill, so the true debt ceiling deadline will indeed come before August 2nd. What's more, the markets know this too. Assuming there's no deficit compromise in the immediate future, bondholders are likely going to realize before August 2nd that a US default has become inevitable.

Despite all this, the White House continues to lobby feverishly for the largest and most dramatic compromise plans it can dream up. Not coincidentally, those same plans also contain the largest revenue hikes, and are therefore the most objectionable to many Republicans. What's even stranger is the manner in which the administration has reacted to new developments: barely at all. The House has turned down idea after idea, plan after plan, and the White House hasn't visibly budged. For the past two weeks, the New York Times' top headline has been virtually frozen in place, always reading something like "White House Continues to Push for Broad Deficit Bargain."

This behavior is odd, to say the least. Surely, if nothing else, the last few months have taught the administration that, for Republicans, its endorsement makes an idea politically radioactive in a way that nothing else can. Surely the administration has learned the folly of giving the GOP a policy football and letting it play Lucy. And surely the administration knows the urgency of the situation. So what's actually happening here? Does the administration really think that if they ask over and over for the same set of concessions, House Republicans will eventually relent?

Maybe, but I doubt it. At this point, staking the nation's economic future on some sort of late-breaking grand compromise would not only be bold, it would be foolish. The president and his administration can't possibly be that dense. There is obviously more happening here than meets the eye.

First, I'd guess that the calls for a large-scale compromise are basically a facade. That's not to say that Obama wouldn't like to strike one; he clearly would, as his original negotiations with Boehner demonstrate. But that ship has probably sailed, and the White House surely realizes it. But they've also realized that his calls for compromise are slowly becoming a political boon. They prove Obama's deficit-reduction bona fides, and they make Republicans look utterly unreasonable. That puts political pressure on Republicans, and helps shift blame for any eventual fallout back on to the GOP. Whatever's going on in Washington's back rooms, Obama has clearly decided that his best public role is as the Great Conciliator. And hey, if by some twist of fortune Republicans do decide to compromise, Obama's offer will always be on the table.

In the meantime, however, one has to suspect that the White House is quietly lining up a plan B. Emphasis on "quiet" -- if Obama's role becomes too clear, the plan will likely become politically unworkable. Which leads to the question for the rest of us: "What is plan B?"

It's clearly not the Gang of Six proposal. That's too close to Obama's original plan, and besides, has already been publicly endorsed by the administration. A week ago I would have said it's the McConnell plan -- Harry Reid sure is hard at work making it more palatable to Republicans -- but the McConnell plan is also loathed by House Republicans. And if it really were the fallback, Harry Reid should be concerned about making it more palpable to Democrats, because there are no doubt many Republicans who will simply never touch the thing.

There are a few other possibilities. A last-minute scare offensive, designed to frighten a few moderate Republicans into enacting a clean (or almost clean) debt limit increase, just as the maw of doom closes on America, might do the trick. It also has the nice side-effect of requiring little or no prep time, compared to most of the other alternatives. On the other hand, this approach remains a tremendous gamble, because if it fails, time will have almost certainly expired. The president could also take Bill Clinton's advice and resurrect the constitutional option, which has many advantages but would probably end in some sort of push for impeachment.

Finally, I suppose the president might just be prepping for the hundreds of billions of dubiously-legal, instantaneous cuts that would go into effect August 3rd. But let's hope he's not. Cuts to government on that scale, enacted that quickly, would tilt the US back into recession almost immediately. They would represent a default on American fiscal obligations and would probably result in a reduction of the country's credit rating. And as dozens, maybe hundreds, of government services evaporated overnight, the damage to civil society and the wellbeing of millions of Americans would be almost incalculable. At the end of the day, the biggest question about Obama's plan B to raise the debt ceiling isn't how it works -- it's whether he's got one in the first place.

1 comment:

  1. I think you mean palatable, not palpable.

    -Dept. of Unintentional But Nonetheless Weird Images