What Were the Choices Again?
Reports are coming out of Speaker of the House John Boehner’s office that he will develop a new deficit reduction plan that will cut an average of $300 billion to $400 billion a year from Federal Spending. Mr. Boehner is apparently still working on this plan, but no one who has been on the planet for at least two out the last three weeks will expect it to include the increases in revenues that Mr. Obama and Democrats say are required for spending cuts of that magnitude.
One thing that is certain with respect to all of these negotiations and plans is that it is foolish to anticipate or forecast what either side will do at any time. Well, The Dismal Political Economist is nothing if not foolish, so here is his forecast of how the scenario unfolds.
With an August 2 deadline looming, Mr. Boehner’ strategy will be to try to pass such a plan (he may not have the votes to pass any debt ceiling increase regardless of the conditions)
Freshman Rep. Blake Farenthold (R-Tex.) confirmed that Boehner was open to a short-term deal that would allow more time to solve the problem, but added that Republican leaders remain worried that even a temporary lift of the government’s borrowing authority would fail on the House floor.
and then tell the Senate and the White House that they can either take this plan or cause the Federal Government to default on its debt obligations. With zero revenue increases, accepting the House plan would require Senate Democrats and the President to renege on the very core principles that they have held during the discussion, that some of the “pain” of deficit reduction must be borne by the very wealthy.
The use of “fiscal extortion” is not a new tactic for the Republicans, and the decision on whether or not to yield to such a plan will be the often termed “defining moment” for Senate Democrats and the President.
For Mr. Obama the stakes will be high, to yield to House Republican demands and effectively end his Presidency or to take the nation to the brink of default and possibly over that brink.