In the beginning, the idea that any political party would actively hold the debt ceiling hostage to reduce the deficit was considered absurd. Mainly because all the top politicians have admitted they don’t want the country to default and that actually forcing a default would have the exact opposite affect of sending Treasury bond rates up, making the deficit problem dramatically worse. Only a year ago, the idea the debt ceiling must be raised was not just the broad centrist position, and it has been the common sense position for decades.
Instead of holding a firm line and pointing out that Republicans were flirting with incoherent madness related to the debt ceiling, Democrats ,lead by President Obama, choose to feed the Republican deficit hysteria by actively refusing to take a stand. This moved the debate radically to the right. It made it acceptable to hold America credit worthiness hostage to demand deficit reductions despite massive unemployment.
The debate was again moved significantly to the right when President Obama came out with his own deficit plan. First, it helped feed the silly idea that deficit reduction is critical right moment. Second, Obama’s “balanced” package contained two part cuts for every one part of new revenue. Having the top Democrat say any deficit package should contain significantly more cuts than new taxes, instead of, say, a 50-50 mix, moved the debate to the right some more.
Things moved from bad to worse when negotiations, lead by Vice President Joe Biden, got started. Democrats took increasing taxes off the table because the idea was anti-tax Republicans would be more willing to agree to closing tax loopholes. Accepting that any deal must bend to the Republicans no-new-tax framework pulled the debate even farther to the right.
This got worse when Eric Cantor (R-VA) walked out of the negotiations and Republicans declared that even closing tax loopholes as part of a bipartisan deal violated Republican principles. A smart political move by the GOP that has made the debate between a package of only very large cuts or a package of very large cuts plus a small handful of tax loophole fixes.
President Obama could have used Cantor’s walkout to pull the debate back to the original center, stating we don’t play unnecessary games with our credit worthiness. He could have pointed to it as proof of the Republicans lack of good faith and used it to justify ignoring the debt ceiling on Constitutional grounds.
Instead of taking a firm stand after Republicans demanded Democrats give up on any new revenue as part of deal, President Obama choose to become directly part of the negotiations. This show of weakness has provided an implied willingness to accept the Republicans newest demands.
Over the past few months the political discourse in Washington has been pulled rightward at a mind-boggling pace. Given how narrow and bizarrely focused the debt ceiling debate has become, regardless what the final package contains, it is assured to be a massive victory for the right.