07.15.11

The Debt Deal Will Be Painful

After Obama’s press conference, finally an agreement on the debt ceiling is in sight. But let’s not forget that any deal will keep the economy struggling for the rest of the year.

A less-combative Barack Obama was on display at Friday’s press conference than at the one he gave two weeks ago, but something tells me this performance might have been more effective—a bit more attuned to the wavelength of public opinion. For the first time in several weeks, I now think it more likely than not that there will be a debt-ceiling deal, and it’s important to remember through it all that any deal will probably be bad for the economy.

First, the press conference. When Obama said “the American people are sold” on a balanced approach that includes revenue, he was speaking the obvious truth, according to numerous polls, and everyone knows in their bones that it’s true. That doesn’t mean Obama is going to get a deal with revenue. I still doubt that he is. The Republicans just won’t budge on that, and it’s a battle that will have to be fought another time. But it does mean that some Republicans will recognize that public opinion is on Obama’s side, and for reasons of self-preservation if nothing else they won’t want to be seen as too out of step with majority opinion.

But how should we define “some” in that last sentence? That’s what all this hinges on now. How many Republicans, especially in the House, are hard-shell extremists who won’t vote to increase the debt limit under any circumstances, and how many have started to come to terms with the fact that a default (“repudiation,” more accurately) really would precipitate a disaster and would be willing to cast a yea vote? And there is another, and tantalizing, question: How many would vote to permit a vote but then still vote no when the actual vote came up for a vote? (I tried to get a sixth “vote” in that sentence but couldn’t quite see how.)

This raises a somewhat overlooked point in the saga. I speak here of the Mitch McConnell proposal to raise the debt ceiling via a “disapproval resolution” mechanism. As many news stories have by now noted, this process would involve the president proposing to raise the debt ceiling and suggesting a broad outline of new cuts. For that to fail to pass, both houses of Congress would have to vote no in sufficient proportion to override a presidential veto. In other words, two-thirds of both houses. So any Obama plan brought forth under the McConnell process could pass with 34 votes in the Senate and 145 votes in the House.

However—this is the overlooked part—how does the disapproval resolution process start in the first place? Both houses have to vote to use it, a vote that needs just a simple majority. That’s a done deal in the Senate, obviously, where the Democrats have 53 members. But in the House, where the Republicans have the majority? Different matter.

If the deal McConnell and Harry Reid are discussing—$1.5 trillion in cuts to be decided on later by a bipartisan and bicameral commission of 12 members, arrived at through the disapproval resolution process—then it seems to me that the House vote agreeing to the process is the sticky one. How do 218 people vote to agree to a process that most Republicans consider something just short of a criminal act?

It’s important to remember that any deal is good in that it averts thermonuclear economic collapse—but it’s also going to slice at least $1.5 trillion out of a struggling economy.

I don’t know honestly know. But it stands to reason that the vast majority of the 192 Democrats, not wanting to embarrass their president, will vote for it. Let’s say 172. That means 46 Republicans need to join them. Sounds like a tall order. But I think out of 240 members, there’s a decent chance that there are 46 who have one foot on planet Earth. And remember: They don’t have to vote for raising the debt ceiling. They just have to vote for initiating the disapproval resolution process. They can then go back and vote against increasing the ceiling. That will still earn them scorn, and maybe ensure that a few of them get sent weasels in the mail, but it’s not the same as voting to raise the limit.

That’s where I now think this may go. But I’d still only put it at a likelihood of about 57 to 43. There are still loads of ways this could collapse. And finally, it’s important to remember this bottom-line fact. Any deal is good in that it averts thermonuclear economic collapse. But any deal is bad because it is going to slice at least $1.5 trillion out of a struggling economy. That’s extremely likely to keep the economy struggling for the rest of the year.

And don’t forget: There is going to be another big budget negotiation in just two months, in advance of the start of the new fiscal year on October 1, when even more money is presumably going be cut out of the economy. If I were a Republican, I’d size this up and say, “Well, my party is now not going to get blamed for a financial meltdown, and we’ve got a Democratic president cutting trillions of dollars out of the economy and talking about the importance of fiscal austerity. I think I’ll go get a drink.”