President Obama has repeatedly said in the last several days that he will not compromise on funding for Obamacare in the battle over keeping the government open and he will not compromise again over raising the debt ceiling. Great. He shouldn't. Threatening to shut down the government unless a three-year old law, upheld by the Supreme Court and which the GOP has unsuccessfully tried to repeal through 42 congressional votes and one presidential election, is weakened and threatening to default on our debt are both kinda crazy. A government shutdown would actually cost American taxpayers more money per day that the government is closed, as NBC's Chuck Todd pointed out on Twitter yesterday, than if the government was kept open. Further, the GOP's tactics here are a bit weird too since the "defunding" of Obamacare their House caucus included in the CR actually would not affect the central elements of the law (i.e. the Medicaid expansion and the subsidies for uninsured Americans). Needless to say, not paying our nation's bills by raising the debt ceiling would also be very, very bad. The White House has even employed the head of the Chamber of Commerce - not someone who sees eye to eye with them on most issues - to make the case to the congressional GOP.
However, these developments beg the question: why did the President then compromise on the debt ceiling at all in 2011? If he believes, rightly so, that negotiating over the debt limit is perilous and can have horrible effects on the economy - as it already did in 2011 when S&P downgraded the U.S. credit rating, markets tanks, and employment stalled after an OK start that year - then why did he seek compromise in 2011? The answers are varied and of course they include the fact that Obama was seeking a "grand bargain," partly for his legacy and partly because it's clear he genuinely believes in a "balanced approach" to cutting the deficit. He emphasized that language again and again in 2012 and has sought a mixture of spending cuts and tax increases since he was freed from the burdens of reelection. It is also true that a grand bargain, though it would've included awful ideas like chained CPI (Social Security benefit reductions), would've had some pretty good ideas in it too such as closing tax loopholes that benefit the wealthy and means-testing entitlement programs. In the end though, it really was not worth it for Obama to pursue so vigorously an effort to reach such a bargain in exchange for raising the debt ceiling. As we know now, the White House meetings with Speaker John Boehner in the summer of 2011 accomplished basically nothing thanks to the intransigence of the far-right GOP House caucus which refused to accept meaningful tax reform. In the end, the negotiations led to the the downgrading of the credit and it temporarily damaged an already slow economic recovery and it created the toxic mess that was the Budget Control Act of 2011. Some important savings were made in that law but the worst part of it was the inclusion of sequestration. Despite the President's efforts in early 2013 to urge Congress to repeal the sequester, the repeal of these arbitrary and dangerous cuts never came to fruition.
Consequently, the Democrats in Congress have already essentially ceded the sequester cuts as part of a CR because the Republicans will not give in on Obamacare thus far. Therefore, the Democrats have concluded that if they at least give up on repealing the sequester (for now), they could get a "clean" CR that doesn't include defunding of the Affordable Care Act, the President's signature domestic policy achievement. It is great that the White House is now saying Obama will not negotiate on the debt ceiling (or on Obamacare as it relates to a government shutdown). He should've said that two years ago as well though. In fact, two years ago, he would've had more political leverage if he made that case too. Currently, the President's job approval rating is at 44 percent, according to the RealClearPolitics.com polling average, but in late May 2011, when his administration was heading into the debt ceiling negotiations, his job approval rating was at 51 percent (thanks to the boost from the killing of Osama bin Laden). At that time, he could've taken advantage of the public goodwill towards him to stand firm against the congressional Republicans on the debt ceiling, refuse to negotiate, and thus we would have avoided the sequester, probably ultimately would get a clean raise of the debt limit once Republicans inevitably realized the catastrophe of a default, and would've avoided the economic harm the country was inflicted in August 2011. This time, my guess is that a government shutdown will happen but a "clean" CR (with sequester-level funding but no defunding of Obamacare) will pass as the public blames Republicans for the shutdown - as they did in 1995 - and the GOP will also cave on the debt limit because they'll realize we can't afford default. The next few weeks will be pretty interesting.
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