Why Obama can’t negotiate the debt ceiling

Excellent post from Chait that really lays out why it would be utter folly for Obama to negotiate on the debt ceiling again.  Which is why he won’t.  So, what happens when the Republicans try and insist he does any way?   Longer excerpt, but worth it:

Republicans see the magnitude of a debt-ceiling breach as a reason to believe Obama will eventually negotiate. It’s actually a reason to believe he won’t.

The meta-conflict over whether the debt ceiling ought to be held hostage, or simply raised, has implications that extend well beyond the actual demands at hand. If Obama agrees to trade policy concessions for a debt-ceiling hike, he will permanently enshrine debt-ceiling hostage dramas in the practical functioning of American government. That means not only will unscrupulous opposition parties be able to wring concessions from himself and future presidents, but eventually a negotiating snag will trigger a real default.

This is what Obama meant when he said that enshrining the debt-ceiling hostage drama would alter “the constitutional structure of this government.” It would fundamentally change the country’s governing norms, permanently placing new and destructive power in the hands of Congress.

What’s more, Obama has placed his credibility on the line publicly by insisting he will not negotiate the debt ceiling. By doing so, he has essentially blocked off his own escape route. Folding would destroy his negotiating credibility in general and specifically make it impossible for him to stop a future debt-ceiling ransom. Not only are the Republicans’ absurdly grandiose debt-ceiling demands unacceptable — they’re currently calling for Obama to essentially accede to the entire Republican fiscal and regulatory agenda in addition to destroying his health-care law — but any demands are unacceptable.

The incentive structure for Obama is therefore such that a debt-ceiling breach, while terrible, is better than trading something to prevent one. But it’s not clear if Republicans actually don’t understand Obama’s incentive structure or are merely pretending not to understand it. Terrible though it may be, a default may actually be necessary to preserve the constitutional structure of American government and the rest of Obama’s presidency.

I’m not about to predict what happens, but any hope for a decent outcome depends upon the common sense and financial incentives of the Republican’s ultimate overlords.  Here’s hoping the Wall Street/big business types need to convince the Republicans not to cause serious and lasting damage to our economy.   Of course, the problem now is that for many individual Republican legislators their ultimate overlords are the Tea party fanatics who are primary voters in their home district.   And they don’t actually understand or care about the macro-economy at all.  So, here’s a rare appeal from me– go Big Business!

About Steve Greene
Professor of Political Science at NC State http://faculty.chass.ncsu.edu/shgreene

2 Responses to Why Obama can’t negotiate the debt ceiling

  1. Ava Hutchens says:

    Obama has already caused lasting damage to our economy. However, as a political Science professor you should understand the President is suppose to show leadership. I have lived through 11 presidents and have never seen one without the understanding of what his job description is. Democrats and Republicans presidents have come and gone, but all have negotiated with the Congress. By the way, Obama voted against raising the debt ceiling for George W. Bush, perhaps it is just karma.

    • Steve Greene says:

      As has this president negotiated with Congress. This is the second Congress ever to threaten the full faith and credit of the United States. Obama made this mistake of negotiating one time with a hostage taker and is not doing it again. Obama’s Senate vote was pure political posturing, as he would surely admit, and in no way actually threatened the US economy.

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