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Spend Spend, Elect Elect, Tax Tax

The White House debt strategy.

Jul 25, 2011, Vol. 16, No. 42 • By STEPHEN F. HAYES
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The president has never been serious about reining in spending because doing so fundamentally compromises his political philosophy. So even as he offered platitudes about debt, he spoke enthusiastically of new “investments” to “win the future.” His State of the Union, previewed by his advisers as a serious speech about Washington profligacy, also included his push for another “Sputnik Moment.” More spending.

In the face of a fiscal crisis, his budget in February contained billions in new spending on high-speed rail, solar shingles, and various pet agencies. His budget director, Jack Lew, defended the new spending and tried to argue that Obama’s lack of leadership on entitlement reform was really the essence of presidential statecraft​—​sort of the domestic policy equivalent of “leading from behind.” In an interview on NPR, Lew said: “History shows us that when presidents put proposals out that have been shot down, it slowed the process down, it didn’t speed it up.”

Adding to Republicans’ potential advantage, the administration had boxed itself in. Top officials had been saying for months that failing to raise the debt limit would be cataclysmic, an abdication of responsibility that would lead to economic ruin. These dire predictions carried with them an obvious implication: The Obama administration would do anything to prevent such an economic meltdown.

The Republican challenge was to come up with a plan to cut spending and reform entitlements​—​a proposal aggressive enough that it could get enough votes from conservatives in the House but still pass in the Senate and get a signature from the president. There were discussions for weeks about presenting such a plan. Some in the Republican leadership opposed offering anything at all, pointing to the complications that arose from doing so during the fight over the continuing resolution earlier this spring. In that debate, however, the White House was choosing between cuts and a short-term government shutdown that likely works to their benefit. In this one, the White House itself had portrayed the choice as one between austerity and calamity. 

The plan with the most support from Republican freshmen and other conservatives, “Cut, Cap, and Balance,” would slow spending more aggressively than the Ryan budget passed by the House earlier this year. The “balance” component, a balanced budget amendment to the Constitution, would require a two-thirds vote in both the House and Senate​—​not easy. In the end, there was no plan and the president didn’t have to make that choice.

Stepping into the breach last week, Senator Mitch McConnell went public with what he called a “backup plan.” Through a series of complicated legislative maneuvers, the McConnell proposal would allow the White House to raise the debt limit in three increments between now and the election while simultaneously allowing congressional Republicans to formally disapprove each raise. The proposal would require the White House to submit spending cuts greater than the amount that the debt ceiling would be raised in each of the three requests. But those cuts would be suggestions rather than requirements. Thus, it would be possible for the president, with some support from congressional Democrats, to get his debt hikes without agreeing to any actual cuts.

The political upside of the plan, according to its supporters, is that it would assign responsibility for the growing debt to Obama and his party. That’s debatable, considering it was conceived and announced by the leader of Republicans in the Senate, later blessed by the Republican speaker of the House, and would require at least some Republican votes to pass.

Beyond that, there are two main problems with the McConnell plan, however noble its intentions: (1) It came too early, and (2) it’s unclear how it will pass the House. By releasing his last-resort plan three weeks before the August 2 deadline for the debt-limit increase, McConnell ensured that whatever tougher measure might emerge from the House Republicans, it would be less appealing to the White House than the McConnell plan. On Friday, July 15, with their leverage severely diminished, House Republicans finally announced that they would try to pass “Cut, Cap, and Balance” and a balanced budget amendment.

Others have urged Republicans to “call Obama’s bluff” and pass a short-term hike in the debt ceiling. The idea is that Republicans would present a short-term extension with spending cuts equal to the debt ceiling increase and dare the president to reject it, in effect trying to restore the leverage they had before the McConnell plan. But it’s still unclear such a measure could pass the House.

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