Before I mention some of the analyses that anticipated this development, Jon Walker gives a good summary of the dilemma Obama has created for himself by his negotiating with the Republicans over the last couple of years in It is Very Difficult to Believe Obama on the Debt Ceiling 01/14/2013. Let's hope that developments on the debt ceiling represent a recognition on the part of himself and his team that the previous approach had real problems.
Stan Collender took a look at the likelihood that the Radical Republicans would try to call Obama's bluff on the debt ceiling in Here’s Why Republican Talk About Default And Shutdown Is Not An Empty Threat Capital Gains and Games 01/15/2013.
Paul Krugman writes today in Extortionists Versus Con Men 01/18/2013:
It’s looking increasingly as if House Republicans won’t crash the world economy by refusing to raise the debt ceiling, at least not right now. Score a big one for the White House (provisionally); its bet that it wouldn’t need a way to bypass the ceiling is looking like a winner (although it ain’t over until the tanned guy cries).And later in the day (Not With A Bang But With A Whimper), he gives a sigh of relief, "A good day for sanity, all around."
It’s important, however, to be clear about what's going on here, and in particular about the nature of the debate within the GOP. Some commentary depicts it as a debate between radicals and moderates; but it's actually a debate between extortionists and con men.
Unfortunately for the Republicans — and fortunately for the rest of us — neither approach seems to be working (although a combination of stealth and extortion came alarmingly close to getting Obama to raise the Medicare age in 2011 and reduce Social Security benefits just a few weeks ago). But there is no hint at this point that anyone in the party is willing to consider the possibility of not demanding policies the public hates.
Gene Lyons made the case that Obama Has The GOP Right Where He Wants Them National Memo 01/16/2013. Gene's analysis is right, if Obama is willing to go down to the wire with the Republicans over this. i.e., flatly refuses to negotiate with the Republicans over the debt ceiling even if they push it to the point where the federal government hits the current ceiling.
Mike Konczal in The Game Theory of the Post-Platinum Coin Debt Ceiling Rortybomb 01/14/2013 offers a game theory discussion that essentially backs the analysis Gene Lyons makes. But he does assume that Obama would still have the platinum coin option in reserve if the Republicans insist on pushing the issue to the point the US has to stop paying its bills.
Both Gene and Mike are right in saying that Obama has a strong negotiating position. And the Republicans latest reactions seem to validate it. But for it to work, he still has to be willing to face down the Republican to the very last on the debt ceiling. He hasn't shown that kind of gumption in dealing with the Republicans on most questions, not even on the "fiscal cliff" farce. I hope they are right. I hope Obama has realized that these Republicans really are an intransigent lot. I hope the Republicans really have seen how bad an issue the debt ceiling is.
As Krugman reminds us, Obama has been pursuing a Grand Bargain to cut benefits on Social Security, Medicare and Medicaid. He's given no indication he's backing away from that. Aside from the debt ceiling, there are also deadlines coming up on the sequester and the continuing resolution that can become a platform for floating new cuts on Social Security, Medicare and Medicaid.
If we get through all those decision points without Obama backing down on his insistence he won't negotiate over the debt ceiling and without cuts benefits on Social Security, Medicare and Medicaid, I'll start to feel easier about the approach Obama is taking on economic/social policy. But he still needs to prove it to us.
Tags: austerity economics, barack obama, debt ceiling, grand bargain, social security