I've spared my readers a blow-by-blow of the latest developments around cliffs, ceilings, CR's, shutdowns, etc., but as gridlock shifts into overdrive and the self-inflicting wound squad are sharpening their knives, here's my abbreviated take:
It's all about Boehner.
Too abbreviated? OK, I'll explain.
As I see it, the House is in the thrall of a significant minority, willing to shut down the government and breech the debt ceiling if they can't get their way on repealing Obamacare. Thankfully, they will not get their way.
But that's the bill they'll send to the Senate. Over there, however, I'm quite certain that there are enough Democrats and moderate Republicans to strip out the health care repeal and send the other parts -- a budget patch to keep the lights on; later, an increase in the debt ceiling -- back to the House. If a simple majority in the House passes those bills, the president will sign them and we live to have this same fight again in another few months. Woohoo!
Now, you're probably wondering about that last "if" -- the one about the House passing the stripped down Senate versions. The only way that works is if Speaker Boehner allows votes that will pass with the help of Democrats. He might even have to be willing to break the "Hastert rule," meaning that the budget and debt ceiling bills might have to pass with a minority of the majority.
And that could be the end of his speakership, so at a fundamental level, this comes down to whether Boehner's had enough of his Kamikaze caucus.
The Markets Have Priced In a Solution: Are They Right?
Financial markets seem to think D.C. will figure this out at the last minute like we always do. Partly, they just don't believe the politicians would be that irresponsible. One market source (no link) wrote that they "... do not believe that congressional leadership would purposefully allow the Treasury to deplete its cash and to miss payments. It would also not be in their political interest, since the payments that might be missed... include politically sensitive items such as Social Security and Medicare payments, and veterans and military retiree benefits."
Hmmm...I'd place the likelihood of default below 50 percent, but to be honest, and not to be alarmist, maybe not that much below. As CBPP's Bob Greenstein just wrote:
In fact, House Republicans now seem to be preparing for a default. They have proposed...to direct the Treasury to pay bondholders and Social Security recipients first if the government defaults.
Paying bondholders and Social Security recipients first won't change the fact that the government has defaulted, and it would actually make things even worse for everyone else who's owed money by the government -- for instance, soldiers and veterans, doctors and hospitals that treat Medicare patients, state and local governments, and low-income Americans who receive Supplementary Security Income, SNAP (food stamps), and unemployment benefits. But, the "prioritization" process seems designed to make default more palatable for the politicians doing the hostage taking.
The center usually holds... until it doesn't.
How Did It Come to This?
That's an important question that I'll largely leave to political scientists. Someone the other day suggested that once Congressional leaders could no longer dole out earmarks to members of their caucus, they lost an important disciplinary tool -- "break with your leaders and you won't get that bridge!" The political scientists I've asked about this say, "maybe," but the Hill vets tend to put a lot of weight on this explanation.
I've argued that wealth concentration has interacted with money in politics such that folks like the Koch's can buy the politics they -- not the parties' leaders funded by establishment money -- want (they can also buy the "think tanks" to explain why they're right [sic]).
And, as budget expert Maya MacGuineas noted the other day on a panel we were on together, don't underestimate the damage done by not having a budget. All this fiscal patchwork -- "continuing resolutions" -- means there's never a lasting agreement on receipts and outlays that both sides have hammered out together. That creates endless oxygen for the renegades to get their crazy on.
Finally, it really does seem to be the case that the obstructionists are doing the bidding of their constituents. One House R was quoted in the paper the other day saying, essentially: the folks back in my district would rather see me work to shut down the government and default on the debt then compromise. And I'm gonna listen to them, not Boehner and Cantor.
One could of course peel the onion back further and ask why constituents want their reps to take votes that would do far more harm than good on many levels -- votes that will likely hurt their party, the broader economy, even their own living standards. But once we get to that part of the onion, my eyes start to tear up.
This post originally appeared at Jared Bernstein's On The Economy blog.
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