Two weeks or so ago I posted that this fall’s (and winter’s) budget debate could best be described as “budget bedlam.”
I was wrong.
Since that post the situation has taken a turn for the worse and “bedlam,” which sounds more like a Marx Bothers, Mack Sennett, or Three Stooges movie than a political event, may no longer be appropriate.
I’m using a new phrase – Fiscal Fiasco – to describe what could be ahead.
What’s changed? House and Senate Republicans are now threatening to use the debt ceiling increase that will be needed by the middle of November rather than the continuing resolution that will be needed by October 1 to make yet another stand on Obamacare.
This is more than just a timing shift for the fight: It actually significantly changes the probability that something economically disastrous could result.
Given that none of the individual appropriations for fiscal 2014 are likely to be enacted by October 1, refusing to pass a continuing resolution – the legislative equivalent of threatening to hold your breath until you turn blue – would be bad but not a disaster. Yes, federal agencies and departments would stop operating, it would be quite a spectacle and many individuals and government contractors would be harmed, but the damage to the U.S. economy would be relatively limited and short-lived.
The real harm from a shutdown would happen only if it continued for multiple weeks and, given the voter anger that would start and then steadily intensify after just a few days, that’s just not that likely to happen.
The opposite would be true if the debt ceiling isn’t raised when needed: the damage would be immediate and long-lasting. There could be actual defaults on the interest and principal due to bond holders and technical defaults on payments to contractors and employees. The government might also well have to pay an interest premium to borrow money from that time forward given that the previously unthinkable had just actually happened for the first time in U.S. history.
In some respects it’s actually hard to imagine that the debt ceiling has again emerged as the place congressional Republicans are thinking about making a stand because it didn’t work out all that well for them the last two times they considered it.
The debt ceiling debacle in August 2012 was the reason the anything-but-super committee was created and, when that failed, the fiscal cliff occurred. The debt ceiling fight during the fiscal cliff was then abandoned by the GOP because Wall Street told Republicans in Congress that it would abandon the party (or at least not contribute as much cash) if that happened.
So why now?
Using the debt ceiling has become newly fashionable among at least some congressional Republicans for three reasons:
1. They realized there likely is not enough support in their own party to shut down the government over Obama. As a result, the make-a-stand-on-the-CR strategy had to be abandoned.
2. The failure of the make-a-stand-on-the-CR plan has left many House and Senate Republicans desperate to find some way of showing their base that they have some political clout.
3. The unwillingness of many members of the non-tea-party wing of the GOP to support the make-a-stand-on-the-CR strategy is forcing the tea partiers to threaten other Republicans with an alternative that could be far worse.
If this fall’s budget debate is as much or more a Republican vs. Republican fight instead of a Republican vs. Democratic negotiation, the overall discussion will take much longer and be much more difficult politically because GOP leaders will have very little room to maneuver once they find something that is acceptable to their own caucuses.
That would be bedlam that leads to a fiasco.