Tuesday, July 26, 2011

The two sides of the debt ceiling discussion (and not the two you are thinking of)

I was thinking about the debt ceiling debate a bit (hey, isn’t everyone) and I started thinking about how I would vote on the Reid or Boehner plans and how I would explain my vote to someone and I concluded something that I haven’t seen written about much.

In short, there are only two principled (not political) stands on how to vote on the debt ceiling…either you vote yes on both the Boehner and Reid plans or you vote no on both of them.  Voting yes on one and no on the other serves no principle of which I can think.

Let me try to unpack that a bit.  As I see it, there are two competing priorities here (maybe 3).  The first is the notion that the US should not (soft or hard) default on its debt.  No, I’m not interested in hearing the argument about how we could scrape by for a while in some alternative theoretical universe spending 60% of what we spend today.  That’s a fantasy perpetrated by people who don’t understand the process and are mistaking what they wish were true for what is actually true.  If this notion that the US should not default is your highest principle, you vote for either the Boehner or the Reid plan.  Sure they are different but not really in any way that matters to you.  Both avoid default now.  Both have the risk of default later (one in 6 months and the other a year after that).  Indeed, what you would most like is to eliminate the debt ceiling altogether.

Now maybe you are in the other camp, that this is really about restoring fiscal sanity to Washington via “a big deal” or some other approach.  In this vein, the President’s speech last night and the tea party Republicans are on the same page.  They want major reforms that start to address the root cause of the debt ceiling.  They disagree on the best way to do this (a balanced approach versus a balanced budget amendment); but fundamentally, they are chasing the same principle.  If you are in this group, you find the Boehner and Reid proposals equally awful because neither does a lick (absent a promise of a future commission solving the problem) to address your primary concern.

Now there may well be a third group that believes that the primary goal here ought to be to limit the size and scope of government.  I believe this but I also believe that it is entirely irrelevant to the discussion of the debt ceiling, namely you believe this whether the debt ceiling exists or not and thus, it ought not drive your vote on either the Boehner or the Reid bill.  Again, you could be in the crazy group that views the debt ceiling as a way to slow spending (which it is) but that is truly cutting of your nose to spite your face.

So then I’m left wondering who are the principled people left in the room.  The President is for both a “big deal” and the Reid plan.  In reality, I think the President fits the first group when push comes to shove.  He’d sign the Boehner plan if the alternative were default regardless of whether he’d like a larger, more substantive deal.  That said, it’s disconcerting that he makes a large distinction between the two because as a matter or principle, there really isn’t one.

What’s truly odd is the very large number of people who claim to be for the Boehner plan but against the Reid plan or vice versa.  These people seem completely odd to me because what’s the principled reason to oppose one and support the other.

It certainly isn’t the magnitude of the cuts…the real cuts are about the same in both proposals.  The timeline?  Absent the politics of it, I think it pretty hard to argue the validity of a 9 to 12 month difference before the next vote.  Certainly I don’t think the market will care since the market is for the most part thinking long term.  Nope.  My conclusion is that people who like one and don’t like the other are political rather than principled.

So at the moment, Washington seems to me divided into two groups…the entirely unprincipled (which seems to be 80 plus percent of the folks there) and the principled but, in my opinion, wrong (the House Republicans who are going to vote against both plans).   Not a very inspiring place to be.

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