Dem 51
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GOP 49
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The Game of Debt Ceiling Chicken Just Got Real

The President and the members of Congress thought they had multiple months left to move and counter-move, spin and counter-spin, feint and counter-feint, and go on Sunday morning talk shows to explain how the politicians on the other side of the aisle are crazy people determined to destroy the U.S. economy. Not so much, as it turns out. Yesterday, Secretary of the Treasury Janet Yellen announced that her current program of smoke and mirrors could stop working as soon as June 1, meaning a potential default is less than a month away.

It should be noted, at the outset, that Yellen is just making her best guess here. Further, if careful juggling does work for just a little bit longer, the government will get an infusion of cash in the first couple weeks of June thanks to the Q2 tax payment deadline. On top of that, there are a couple more bookkeeping tricks that become legal once the calendar year is half over (i.e., on June 30). So, it is at least possible that actual armageddon doesn't arrive until July or August. However, Joe Biden and the members of Congress have to proceed as if June 1 is the date, because it could well be. Further, merely approaching the deadline does harm. So, they really need to think of May 21 (or so) as the real deadline to lift the debt ceiling.

What happens now is anyone's guess, but let us note the imperatives for Joe Biden. As we've written several times, he simply cannot teach the Freedom Caucus the lesson that they can hold the debt ceiling hostage every year and get whatever they want as a result. In case the President has any doubts about that, he can remember back to his time as Barack Obama's VP. In 2011, extreme Republicans (they were called tea partiers back then) held the debt ceiling hostage, Obama gave in, and Democrats were furious. Then, those same extreme Republicans went back on their word and initiated another debt-ceiling hostage situation in 2013. This time, Obama said "fool me once, shame on you; fool me twice, shame on me." So, the then-president refused to budge, and the GOP was compelled to cave.

It's also worth noting that the bill that passed the House is utterly unreasonable, and that in exchange for less than a year of debt-ceiling relief, Biden and the Democrats would not only be giving way nearly everything they accomplished during their 2 years in power, but would also be setting the stage, over 10 years, for non-military spending to be cut to the bone. This is just not a real opening bid, and for Biden to treat it as such would be violating every precept of Negotiation 101, since the GOP has "anchored" the negotiations at a place that can never produce anything close to an amenable result for the Democrats.

And then there are McCarthy's imperatives. Thanks to the manner in which he acquired the speakership, he is in the thrall of a small number of extremists. These extremists aren't especially bothered by the possibility of crashing the U.S. economy, either because they think (probably wrongly) that Biden would get the blame, or they are Steve Bannon types who want to burn it all down. If McCarthy betrays these extremists, and agrees to a clean debt-ceiling bill, or to anything less extreme than what has already passed the House, well, it takes just one of the extremists to trigger a vote for his ouster, and it theoretically takes just five of them to join with the Democrats to actually boot him.

In short, we may well be in a situation where an immovable object has met an irresistible force. It is still well within the realm of possibility that if negotiations fail (and Biden has already asked the four party leaders in Congress to come to the White House for a chat), the administration will move on to extraordinary measures, like invoking the Fourteenth Amendment or minting a trillion-dollar coin, or maybe a fist full of them so this problem goes away for many years.

However, our guess is that the more plausible way forward looks like this: The Senate (with some Republican votes) passes a clean debt-ceiling bill. Then, House Democrats get a handful of those Republicans in districts that Biden won to agree to it. If the House Democrats plus a handful of Republicans form a majority, they can file a discharge petition and bring the bill to the floor and pass it, even over McCarthy's objections. And while the Speaker would undoubtedly hoot and holler about the whole thing, to anyone who would listen, he would likely be privately relieved, since this would solve his headache without his having to take personal responsibility. In any case, the eyes of the world are now on the two ends of Pennsylvania Avenue. (Z)

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