Playing "chicken" with the debt ceiling
Two ideas that scare the left have been getting a lot of play this week: Raising the eligibility age for Medicare from 65 to 67, and something called “chained CPI”–which basically involves changing the cost-of-living formula in a way that cuts Social Security benefits and saves the government money.
Some knowledgeable Washington journalists say the Obama administration may be open to including one or both of these ideas in any fiscal cliff…er, fiscal slop deal with Republicans.
Let’s stipulate something up front: whatever negotiations are taking place between the president and Speaker John Boehner and whatever each side is prepared to give up is a matter of Papal-level security. We’re trying to interpret smoke signals here, so it’s totally possible that the White House actually has no intention of messing with the Medicare age or Social Security benefits formula.
But for the left, the chatter is ominous. It’s coming from well-sourced reporters, for one thing, and we’ve been down this road before: when he pursued his “grand bargain” with John Boehner in 2011, Obama was willing to make some serious concessions on entitlements, infuriating his base. So there’s reason to suspect there’s something to all this chatter, and the question becomes Why? Why would Obama–who simply by doing nothing these next few weeks could get the tax hike on the wealthy he’s been demanding without even touching Medicare and Social Security–possibly entertain such drastic changes to the safety net?
The most likely culprit is the dreaded debt ceiling. Here’s why: Republicans came to these talks with no leverage. The consequences of doing nothing before the December 31 deadline were–and are –a lot worse for them than for Democrats. But they looked a few months into 2013 and may have found some leverage there, with the country due to hit the debt limit once again. And they’re threatening again to hold the full faith and credit of the United States hostage to their policy demands–just like in the debacle of 2011.
Obama’s official position on this is that he won’t be blackmailed, that he won’t even deign to negotiate with Republicans over the debt ceiling. But this is a dangerous game, because if Republicans are serious about pulling a repeat of 2011, Obama can’t really ignore them: doing nothing would lead to a default that would wreak immediate havoc on the fragile economy.
Which may explain the talk of a deal that progressives would hate. The White House wants, at the very least, a long-term extension of the debt ceiling in any fiscal cliff deal. But Republicans now see the debt ceiling as their only leverage, they’re demanding a steep price to include it: big changes to Social Security or Medicare.
Who knows if Obama will ultimately go along with something like this. But it’s a reminder that for all the talk of the leverage that he enjoys in the current negotiations, there is still one crucial way that he’s at the mercy of Republicans. And it leaves him with a tough choice: to pay their price on entitlements, or to play debt ceiling chicken with them again–and to hope that sanity will prevail before the economy is wrecked.