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The Debt-Ceiling Debate and 2012

August 03, 2011

After big events like Tuesday's debt-ceiling vote, Washington goes into overdrive to declare who won and who lost. But politics is more complex and less binary than that. In this case, neither party helped itself with the public during this struggle.

But Democrats hurt themselves most of all. They made a huge strategic mistake by failing to raise the debt ceiling late last year when they still controlled Congress.

Instead, Democrats tried to make the GOP complicit in their spending excesses. On Dec. 8, for example, Senate Majority Leader Harry Reid explained his decision not to tackle the debt ceiling until the new GOP House took office by saying he wanted to "let the Republicans have some buy-in on the debt." This ended up giving the GOP months to leverage the debt ceiling into a battle over spending cuts.

President Obama paid the highest price during this long confrontation. By the time he signed the debt ceiling, he had enraged his own party, issued demands that were routinely ignored, reinforced his reputation as being obsessed with raising taxes, and failed to produce a concrete plan of his own.

At the start of last December, Mr. Obama's job approval rating in the weekly Gallup poll was 47% approve and 45% disapprove. Last week, it was 40% approve and 52% disapprove. If the election were held today, Mr. Obama and his party would be swamped.

For Republicans, the outcome was far more positive. House Republicans adroitly shifted the debate's focus from how much to raise the debt ceiling to how much should spending be cut. They achieved this even while the other two centers of power in any legislative struggle—the Senate and the White House—remained in Democratic hands.

In doing so, Republicans achieved roughly two-thirds of the spending cuts sought in the budget the House passed in April, cuts which would have gone nowhere in the Senate without the debt-ceiling battle.

Both GOP congressional leaders emerged with enhanced reputations. Senate Minority Leader Mitch McConnell's weirdly convoluted proposal to allow the president to raise the debt ceiling by asking Congress for permission actually helped lubricate discussions at a critical moment. The House GOP needed the prospect of something worse to provoke greater unity in their ranks. And giving Senate Democrats the hope of a Republican proposal that provided a way out kept Democrats from solidifying behind their own proposal.

John Boehner had the even more difficult task of fashioning a consensus among potentially fractious House Republicans after voluntarily giving up two of any House speaker's most potent tools—the blandishments of earmarks and spending increases or thinly veiled threats to jerk committee assignments or deny campaign assistance. Instead, Mr. Boehner used patient explanation of his proposal's merits and the policy realities.

The main danger for Republicans is that while 76 of the 87 House GOP freshmen voted with Mr. Boehner, a substantial minority of GOP activists did not want the debt ceiling raised regardless of what the consequences were for the economy. A dispirited base could generate costly primaries and depress turnout.

On the matter of substance, the legislation's $2.1 trillion in spending cuts only reduces Washington's spending by 4.8% over the next 10 years. The House Budget Committee currently projects that after the debt-ceiling deal, federal outlays over the next decade will still run $43.3 trillion with revenues at $35.5 trillion. So deficits will grow $7.8 trillion more by 2021, leaving the public debt then at roughly $18.2 trillion, or 76% of GDP. It is already 70% of GDP, up from 40% when Mr. Obama was inaugurated.

The cuts agreed to in the debt-ceiling debate are a down payment, but they are just a down payment. And they were the easier ones. Much more must be done by fundamentally reforming entitlements, especially Medicare and Medicaid. But there is no reason to believe Mr. Obama will expend an ounce of energy on systemic entitlement reforms. It cuts against his ideological grain.

Entitlement reform in the current political context can be achieved only by having a Republican Senate and a Republican president join the Republican House. This is not ideal, since reforms of this magnitude are better done in a bipartisan manner. But there doesn't appear to be any alternative. The crisis is real and the need for action overwhelming.

And so the GOP must take its case to the people in 2012 in the hope of earning a mandate. The prospects for this are much better than they were before the debt-ceiling debate—a clash from which Mr. Obama and his party might not fully recover before the election.

This article originally appeared on WSJ.com on Wednesday, August 3, 2011.

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