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The Campaign Spot

Election-driven news and views . . . by Jim Geraghty.

Debt Deal Doldrums



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In the midweek Morning Jolt, a look at the White House’s reluctance to write down its budget plan, a suggestion that Obama’s base is crumbling, and, of course, the Byzantine debt negotiations and strategies.

We Need Some of Harry Potter’s Debt Eaters… Oh, What? They’re Not Called That?

Somehow the debt ceiling has turned me into Socrates; the more I learn, the less I know. I’ve heard from smart, qualified minds in the financial world argue, forcefully and seemingly informed, that the net effect to the economy will be much, much less than the doomsday talk suggests.

(Forget tying a game; awesome off-the-record discussions are like kissing your sister.)

I’ve also heard the quite compelling argument that because the real issue for America’s credit rating is not the debt ceiling but the size of the debt itself, that it’s effectively already too late, and that we will lose our AAA credit rating sometime in the near future even if we do enact the Boehner plan or the Reid plan. (I don’t say the Obama plan even though Jay Carney insists it’s the most brilliant plan ever never committed to paper.) In this line of thinking, it is argued the best move for Congressional Republicans is to lose the fight and let Obama and the Democrats pass a version as close to their ideal as possible, to demonstrate that their approach can only hurt the country’s credit rating and let Obama reap the whirlwind in 2012.

A bit of evidence for this argument: “Only seven days stand between the U.S. and the effects of a credit default. But a downgrade of the nation’s stellar AAA credit rating seems a lot more likely, and a lot sooner. The White House had been alerted repeatedly over the past month by rating agencies that without a strong, long-term plan to restructure the country’s debt, they would lower America’s credit rating as soon as this Friday, according to two officials familiar with the process. The White House was warned that the deal would have to be significant—and not a short-term fix over the next few days to avoid a credit drop.”

Then again, I’ve also heard a strong argument that even if Obama “wins” this showdown, it will be moot in six months – Americans will know that their government is still spending and borrowing with reckless abandon, and they’ll know that their own households and small businesses and institutions have to demonstrate credit-worthiness before getting a loan. (I’m told that credit for small businesses has simply not recovered from 2008, and no one expects it to anytime soon.) Congress is the only institution that when it maxes out its credit cards can just create more credit by voting itself a hike in the limit, an act that, at some point, can only run into the laws of supply and demand. At some point, fewer institutions and people will want to lend the federal government money, and then the reckoning hits.

At Hot Air, Allahpundit assembles the scorecard for the Boehner plan, which looks like “PRO” and “CON” were assembled by selecting prominent righty lawmakers, institutions and columnists randomly from a hat: “In addition to [Paul] Ryan and Allen West, Cantor’s supporting the bill on grounds that it’s time to stop whining and take what the party can get. Haley Barbour agrees, as apparently does the Chamber of Commerce. Meanwhile, Fred ThompsonYuval Levin, and James Pethokoukis argue that Boehner’s plan isn’t half bad under these awfully unfavorable circumstances… Opposed to the bill are influential House conservatives like Jim Jordan and Louie Gohmert and influential Senate conservatives like DeMint and, er … Lindsey Graham. The Club for Growth is also a no, which will make incumbents worried about a primary challenge think twice.”

Hey, in light of this bizarre patchwork, can we skip the traditional RINO-accusations, branding, posse-organizing and public pillorying that are now pro forma of every intra-Republican debate?

Put another way… you tell Allen West he’s a RINO squish.

Yet the editors of the Wall Street Journal are getting a bit snippy with Boehner deal opponents: “What none of these critics have is an alternative strategy for achieving anything nearly as fiscally or politically beneficial as Mr. Boehner’s plan. The idea seems to be that if the House GOP refuses to raise the debt ceiling, a default crisis or gradual government shutdown will ensue, and the public will turn en masse against . . . Barack Obama. The Republican House that failed to raise the debt ceiling would somehow escape all blame. Then Democrats would have no choice but to pass a balanced-budget amendment and reform entitlements, and the tea-party Hobbits could return to Middle Earth having defeated Mordor. This is the kind of crack political thinking that turned Sharron Angle and Christine O’Donnell into GOP Senate nominees. The reality is that the debt limit will be raised one way or another, and the only issue now is with how much fiscal reform and what political fallout.”


Tags: Barack Obama , Debt Ceiling , John Boehner


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