Tuesday, May 31, 2011

More on the Politics of the Debt Limit

On ABC’s “This Week” program on Sunday, Tim Pawlenty, the former governor of Minnesota now running for the Republican nomination for President, said that the debt limit should not be increased.  Here is the transcript of his responses to some of the questions Christiane Amanpour posed to him on the subject:

PAWLENTY:  I don't think we should raise the debt ceiling.  And if the Congress moves in that direction, the president, they better get something really good for it.  It better be permanent, and it better be structural, like a balanced budget amendment and like permanent caps and limits on spending that are specific, not just aspirational.
AMANPOUR:  Are you being political right now or do you really, really mean that one should not raise the debt ceiling, given the fact that most economists say that it would -- it would make a cascade of catastrophic economic situations?
PAWLENTY:  Well, there are some serious voices challenging that very premise.  And the answer is nobody really knows, because we've not been at this point before.
This is not a new position.  Mr. Pawlenty wrote an article espousing this position for the Washington Post in January.  To make sure that potential supporters don’t miss this, there is a link to the Washington Post on his website.
The press has told us that Pawlenty is one of the frontrunners for the Republican nomination and is a serious candidate.  But this is not a serious position, though the fallback of budget concessions from the Administration in return for passing the debt limit is probably his real position.  However, the Republicans in Congress have also to deal with Congressional Democrats as well as the Administration, including the Democrats who control the Senate.  The House Democrats may also be significant, since there may not be enough Republican votes to pass debt limit legislation in the House, especially after the Senate has reworked it and perhaps even before then.
But Pawlenty should know better than to rely on “serious voices” for his announced position of not raising the debt limit.  This is all about politics, as he knows, and it is hard to attribute any seriousness to a position that Treasury should default on its obligations.  After all, credit judgments are partly based on character, and what type of character does it show if a country willing does not pay its bills, even though it has the wherewithal to do so?
Pawlenty’s position on the debt limit demonstrates a perceived need to pander to the Tea Party elements of the Republican electorate.  On the surface, at least, Pawlenty is showing them more deference than he is to Iowa farmers, now that he has announced that he believes federal ethanol subsidies should be phased out.  (However, this may not be as courageous as it first appears and as the editorial page of The Wall Street Journal would have us believe.  The politics of ethanol are changing, and, in any case, Governor Pawlenty found a way to help the ethanol industry in a way that does not involve subsidies – he proposed and signed into law a Minnesota requirement that gasoline sold in that state for use by motor vehicles contain 20% ethanol by 2013.  Who needs subsidies when you have that type of mandate?)  
The Tea Party movement is causing some schisms to become apparent in the Republican Party, and Mr. Pawlenty and others are not showing much courage in dealing with it.  Nick Carey writing for Reuters discussed this in a May 17 article: “Special report: Stuck between the Tea Party and a hard place.”  According to the article, at an April 25 meeting with Tea Party activists in Ohio, House Speaker John Boehner replied “yes” when asked if Republicans would vote to increase the debt limit.  The article goes on to describe what Boehner subsequently said and the reaction to it:
“And we're going to have to raise it again in the future,” he added.  With the mass retirement of America’s Baby Boomers, he explained, it would take 20 years to balance the U.S. budget and 30 years after that to erase the nation's huge fiscal deficit.
That answer incensed many of the Tea Party activists, for whom raising the debt limit is anathema.
Concerning the Tea Party’s pressure to move the Republican Party to its beliefs, the article comments:
That leaves Boehner stuck between the Tea Party and a hard place.  If he pushes too hard on cuts, that will rattle the Republican Party's powerful Wall Street wing, potentially roiling the markets and unsettling the broader electorate.
But backing down will also hurt him.  “After accusations he didn't do enough in the budget battle, Boehner has to have something real to take back to conservatives or he's in trouble,” said James McCormick, a professor of political science at Iowa State University.  “He’s boxed in between two components of the Republican Party. Obama knows that and is not under the same pressure.”
In other words, as Speaker of the House, Boehner has a responsibility to get debt limit legislation passed, whatever the Tea Party might think.  He is hoping that to negotiate a deal that will make this easier.  President Obama has the stronger hand, and has the ability to appear totally unfrazzled no matter what is happening, but we will have to see what he and the Democrats in Congress are willing to give Boehner.  Unless the Administration wants to play real hardball, which may disconcert the markets and may not be politically wise, the Democrats will need to give Boehner something to sell to his caucus.  

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