Monday, August 8, 2011

The Administration and the Debt Limit Crisis

There is plenty of deserved criticism aimed at the Tea Party for its part in the debt limit fiasco. This post will make a few comments about the Administration.

The Administration made a mistake by abandoning its insistence on a clean debt limit bill. This validated the Republicans' linkage of the need for a debt limit increase to future budget cuts. It enabled Speaker Boehner to say that the Congress would not give the Administration a credit card with no restrictions. Of course, this is nonsense. The need to increase the debt limit was due to past decisions of Congress and the performance of the economy. The debt limit does not control government spending or receipts; the need to increase it is the result of other decisions.

Not only did the Administration embrace the linkage of the debt limit to budget decisions going forward, President Obama appeared to welcome it. Partly, this seems to have been viewed as a way to pressure Democrats to make concessions on programs they hold dear, such as Social Security, Medicare, and Medicaid. The President and his chief economic adviser, Treasury Secretary Geithner, apparently want as part of their legacy the reform of these programs. However one feels about that, this negotiating strategy was an attempt to be clever, and it did not work. What it did do is enable the President's critics to charge that he was threatening default in his negotiations with the Republicans, just as the Administration was charging the Tea Party as doing. At a minimum, the Administration should have said that a clean debt limit bill would have been acceptable.

Not only did the "grand bargain" the President wanted not materialize, this episode has caused many liberals to have serious reservations about the President. He is more conservative than many liberals thought when they voted for him in the primaries and the general election, and his leadership ability is now in question.

On that last point, the New York Times published yesterday a well-written article by a psychologist who is a political liberal, "What Happened to Obama?" It is well worth reading.

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