Monday, January 07, 2013

Who's more scared of the sequester?

Since the limited fiscal cliff deal was struck, there's naturally been a ton of speculation whether the Republicans will indulge in a fresh round of debt ceiling terrorism when the treasury reaches the end of its rope in a couple of months, and whether Obama will blink if they do.

In a Wall Street Journal interview, John Boehner indicated that the debt ceiling may play more of a support role, and that the sequestered spending cuts postponed for just two months by the Jan. 1 agreement are the GOP's main source of leverage. Here's how he sketched out his alleged negotiating strategy, as recounted by the WSJ's Stephen Moore:
The real showdown will be on the debt ceiling and the spending sequester in March. I ask Mr. Boehner if he will take the debt-ceiling talks to the brink—risking a government shutdown and debt downgrade from the credit agencies—given that it didn't work in 2011 and President Obama has said he won't bargain on the matter.

The debt bill is "one point of leverage," Mr. Boehner says, but he also hedges, noting that it is "not the ultimate leverage." He says that Republicans won't back down from the so-called Boehner rule: that every dollar of raising the debt ceiling will require one dollar of spending cuts over the next 10 years. Rather than forcing a deal, the insistence may result in a series of monthly debt-ceiling increases.

The Republicans' stronger card, Mr. Boehner believes, will be the automatic spending sequester trigger that trims all discretionary programs—defense and domestic. It now appears that the president made a severe political miscalculation when he came up with the sequester idea in 2011.

As Mr. Boehner tells the story: Mr. Obama was sure Republicans would call for ending the sequester—the other "cliff"—because it included deep defense cuts. But Republicans never raised the issue. "It wasn't until literally last week that the White House brought up replacing the sequester," Mr. Boehner says. "They said, 'We can't have the sequester.' They were always counting on us to bring this to the table."

Mr. Boehner says he has significant Republican support, including GOP defense hawks, on his side for letting the sequester do its work. "I got that in my back pocket," the speaker says. He is counting on the president's liberal base putting pressure on him when cherished domestic programs face the sequester's sharp knife. Republican willingness to support the sequester, Mr. Boehner says, is "as much leverage as we're going to get."

That leverage, he reasons, is what will force Democrats to the table on entitlements. "Think of it this way. We already have an agreement [capping] discretionary spending for 10 years. And we're already in our second year of it. This whole discussion on the budget over the next several months is going to be about these entitlements."

The debt ceiling's role in this scenario seems to follow the blueprint laid out by Grover Norquist in late November:
MIKE ALLEN: This president is not going to extend [Bush tax cuts], he knows that he loses his leverage that way.

NORQUIST: Well, the Republicans also have other leverage. Continuing resolutions on spending and the debt ceiling increase. They can give him debt ceiling increases once a month. They can have him on a rather short leash, you know, here’s your allowance, come back next month.

ALLEN: Okay, wait. You’re proposing that the debt ceiling be increased month by month?

NORQUIST: Monthly if he’s good. Weekly if he’s not.

The sequestration cuts, split evenly between defense and domestic spending and described by Obama as a meat ax rather than a scalpel,  are supposed to be Mutually Assured Destruction, equal anathema to both sides.  When the Supercommittee that was supposed to negotiate a budget deal to render those automated cuts unnecessary failed in late 2011, Obama declined to intervene, so that was at least one trigger that he was willing to pull. For a while, too, Republicans made more noise about the cuts than Democrats, complaining that they would devastate defense spending. But is was Obama who wanted to postpone the cuts for a year as part of the fiscal cliff deal, and McConnell who said no, and it's Obama who still owns the economy that the cuts might well throw into recession.  Meanwhile, the plan seems to be to make debt ceiling brinksmanship a chronic rather than an acute condition.

Here's hoping that Boehner is bluffing about alleged Republican willingness to let the sequester occur -- or that Obama too is willing to go over that cliff -- or a ways down that slope, as these cuts, too, could be first delayed and then rolled back in the event of a deal.  The debt ceiling theatrics, meanwhile, may be a sideshow, or just a further source of incremental GOP sabotage.

UPDATE: Greg Sargent doesn't seem too worried about the sequester threat and pooh-poohs Boehner's stated debt ceiling strategy as untenable:
So Boehner is letting it be known that Republicans don’t see the debt ceiling as their primary leverage point in the battle to come.

Boehner does this by threatening to only agree to “monthly” debt ceiling hikes. But this should be read, if anything, as a sign of weakness. It’s essentially a concession that the debt limit has to be raised; Boehner is merely threatening to drag his feet as he allows the inevitable to happen. But it’s just nonsense. The business community is not going to go for such a course of action, to put it mildly. And it risks dragging the country through monthly threats of default, a terrible thing to inflict on the American people.
Perhaps, though, the GOP can impose a new normal re the debt ceiling -- fret a little/yawn, they're raising it a little again -- as they have with so many other governing norms.

UPDATE II: David Frum implies that Boehner won't be able to countenance the sequestered defense cuts so blithely:
There may be savings to be found in the defense budget, but this abrupt hacking to reach a pre-determined figure is surely not the way to find them. As recently as October, Mitt Romney slammed President Obama for seeking much smaller cuts in the defense budget. Chuck Hagel's willingness to countenance smaller defense cuts will become a big issue if the president nominates him as Secretary of Defense. Yet here is Speaker Boehner now trumpeting his eagerness for a sequester. 
 Chait is also somewhat skeptical, if agnostic as to which side will blink first at sequestration's edge: 
So the leverage game here centers on which party finds the automatic cuts more painful.

Boehner is asserting that Republicans don’t actually care that much about cutting defense — that replacing the sequester is something Democrats want. Just because Boehner says this doesn’t make it true. He may be holding his defense hawks in line publicly, but the question is whether he can keep them in line as the negotiations proceed and the prospect of implementing the cuts grows more real.

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