Why Did the Obama-Boehner Debt Talks Fall Apart?

Both the President and Speaker Boehner gave press conferences on Friday to explain whey their debt negotiations fell apart, each spinning the situation to sound favorable. Keith Hennessey breaks down the evidence to explain what happened. Here is Hennessey’s summary of what happened in the last week:

• Last weekend the White House was willing to, from their perspective, reduce revenue at least $2.8 T relative to current law. That’s about $700 B higher revenues than current policy. That number would be a ceiling for revenues.
• Tuesday the Gang of Six proposed their budget plan. The Gang’s plan would reduce revenues $1.5 T relative to current law, which (using these baselines) means $2 T higher revenues than current policy.  That means the Gang of Six proposed $1.3 T higher revenues than the President had been demanding privately. The Gang of Six includes three conservative Republican Senators.
• After the Gang of Six offered their plan, the President backtracked from his position last weekend and increased his demand. Late this week the President was willing to reduce revenue by at most $2.4 T relative to current law. Using CBO’s numbers, that’s about $1.1 T higher revenues than current policy, and $400 B higher than last weekend. That number would be a floor for revenues.

The President changed his position in an aggressive manner, asking for $400 billion more in revenue. Hennessey draws the same conclusion that I have made:

Imagine the Republican reaction if word had leaked out that the Speaker and Leader Cantor had agreed to a worse tax position than the President had offered them one week prior. There is no way they could take that risk, and the President had to know that.  The President made a new demand he had to know Republican Leaders could not possibly accept. The President toughened his position knowing it would cause the talks to fall apart, yet feeling comfortable that he had a stronger rhetorical position explaining the collapse.

So the President tanked the negotiation because he felt confident that he has the leverage to win the blame game that is being played on the debt ceiling. This contradicts his claim that he is doing everything he can to complete a deal, and suggests that what is going on in the private negotiations is not what we’re being told publicly. Hugh Hewitt sees why the President doesn’t want the negotiations public:

“I’m not going to negotiate in public” has been the president’s mantra, and it is simple code for “the public won’t support what I am proposing.”

The President and the Democrats can’t truly take their proposals to the public and win support, so they have to play the game they have been playing. The game was perpetuated by the President last week when he demanded something that everyone knows Speaker Boehner could not accept.

McConnell Plan and Short-Term Debt Deal

Now that the Senate has tabled the cut, cap, and balance bill and hasn’t proposed anything else, Republicans ought to consider both a short-term debt ceiling deal and the McConnell plan. Of the plans currently available or possible, Charles Krauthammer favors a short-term increase of the debt ceiling for half a trillion dollars. George Will, on the other hand, thinks conservatives should back the McConnell plan to defeat President Obama in 2012, allowing for real budget reform later.

Neither suggestion is likely to please conservatives who are seeking real spending cuts in this deal, but the reality is that big cuts are probably not going to pass the Democrat-led Senate. The above-mentioned plans, however, might generate enough Democrat support to pass. Democrats would likely take a short-term deal over nothing as August 2 approaches, and the Democrat leadership seems open to the McConnell plan.

The policy battle might not be won in this round, but both sides can still inflict significant political damage to the other that could determine the policy outcome in 2013. The two options advocated by Krauthammer and Will could help the Republicans win the battle.

What to Expect for Arizona Immigration Law

SCOTUSblog has featured legal and political commentary on the Arizona v. United States case over the past week or so. Some of the posts are worth reading to get an understanding of the arguments both for and against the Arizona immigration law, and to assess the law’s chances going forward.

First Presidential Debate on Twitter

The first ever presidential debate was held on Twitter today, featuring some of the GOP candidates. You can read the questions and answers here. This was a good idea, even though not all the candidates participated.

It is difficult to answer policy questions in such short form, and I doubt Twitter debates will replace the traditional formats, but Twitter is a forum that can connect voters directly to candidates. Hopefully we’ll see more events like this.

Neither Side Can Cave in Debt Debate

President Obama was smart enough to realize that he wouldn’t get a better deal on the Bush tax rates once the new Congress arrived in 2011, so he cut a deal to extend them before they expired. The current debt negotiation suggests that he indeed would have had a hard time getting what he wanted in this split Congress. The odds of a grand deal on the debt ceiling don’t look good either. There probably never has been a great chance of a big deal happening, as the two parties involved in negotiations have what are likely to be irreconcilable differences over spending and taxes. Are there some members on each side who might be willing to concede some to get a deal? Probably, but neither side can cave, at least not first.

While we may yearn for a federal government that can come together to solve a huge problem, keep in mind that the kind of intense debate we’re experiencing now is not foreign to this country. The founding fathers had strong philosophical differences in a set of conditions arguably worse than ours, and our country even split and went to war over slavery. And yet, we’re here in a great country and still with a potentially bright future. Can the two sides come together on this one? Probably not, but there is something to recognize about that disagreement other than polarization.

The bottom line is that the general views represented by the two parties are drastically different right now, and are in many cases antithetical. We can’t increase and decrease taxes at the same time. Same for spending. Republicans might recognize a potential need for increased tax revenue, but as we saw with Ronald Reagan, deals with tax increases for spending cuts can yield the former without the latter. Republicans therefore can’t concede on any tax increases without first having a mechanism in place to limit spending. After all, how would increased tax revenue reduce the deficit if it were only used to increase spending that maintains the deficit?

On the other hand, Democrats cannot make significant concessions on spending, particularly entitlements. We have an election year coming up, and the President and his party cannot risk losing their base by abandoning core principles. They also cannot come out with proposals of big tax increases or more stimulus spending because of how unpopular those ideas are. That explains why the Democrats, with a huge majority in both chambers of Congress before 2011, didn’t pass a budget, and why the Senate still has not. They can’t push what they really want, and they can’t concede, so they play the reactionary game of demagoguing what the Republicans propose to pass the blame for a lack of solution onto the GOP.

That’s why Senator McConnell’s backup proposal announcement wasn’t so surprising, even if it was alarming. While the proposal may seem cynical in that it would allow the President to raise the debt ceiling without the support of Republicans, it may reflect the reality of the situation. Republicans may be worried that they will be blamed for the economy as the two sides fail to agree, and if they believe a deal isn’t going to happen, why risk the blame when they can force the Democrats to propose an alternative to what Republicans have already put on the table?

This is a high-stakes game being played politically and economically. If the choice is between trying to win a PR battle over who is preventing a debt deal and putting all the chips on the table to see which approach the American people want, I’ll take the latter option.

“Say No To the Dems’ July Surprise”

So advocates Power Line’s John Hinderaker in a must-read post. Hinderaker has an idea of what is happening:

Thus, they developed the strategy that we now see at work: First, publicize a purported deadline for an agreement to raise the ceiling, and promote the claim–false, in my view–that a fiscal disaster will ensue if a deal is not reached by that supposed deadline. Second, engage in secret negotiations with the Republican leadership that are expanded to include future tax increases and limited entitlement reform. That is the stage we are in now. Third, announce a deal–a cosmic, bipartisan budget agreement that ostensibly saves the Republic from a sea of debt–48 hours or so before the bogus debt ceiling deadline. Fourth, commit the deal to writing and rush it through Congress before anyone has a chance to read it or understand what is in it. Sound familiar?

Are both sides looking to come away with a victory that positions them for 2012? Of course, but the above-described process should not be how they reach a deal.