Take the High Ground

The Washington Post says that the White House will veto any Republican bill that requires a balanced budget amendment to the Constitution before the nation’s debt ceiling can be raised.

Boehner said the House would “proceed as planned with its vote on the Cut, Cap and Balance Act.”…

Under the measure the House will consider Tuesday, spending caps would be applied over the 10 years that match outlays included in a budget written by Rep. Paul Ryan (R-Wis.) and passed by the House earlier this year.

But the bill would also require passage of a Constitutional amendment that would mandate spending caps and require a two-thirds vote of Congress for any future tax increase.

“Let’s let the states and the American people decide,” said Sen. Jim DeMint (R-S.C.) on NBC’s “Meet the Press” on Sunday. “It wouldn’t happen until about 10 years out, but it gives us time to fix our tax code, to fix Social Security and Medicare. And that’s what we have to do.”

How will this work, and more importantly, what are the advantages to each in this situation? Dr. Philip Neches, writing in the Huffington Post believes the debate is not about the deficit but the 2012 elections. Obama is trying to trap the Congress into a position he can use the press to portray as over-reach.

Obama picked this battle because he thinks he will win. Winning has little to do with the deal cut, because all the implementation and most of the details will be punted into the future. They will start to change even before the ink is dry. Winning is about positioning the opposition party in 2012.

Harry Reid, perhaps in the belief that the Republicans are feinting prior to caving in, announced that the Senate would meet everyday, including weekends, until Congress gave President Barack Obama legislation to make sure the government doesn’t default on its obligations. Meanwhile, Democrats and Republicans in the Senate are said to be pushing “the McConnell-Reid plan to raise the debt ceiling”, but it is said to have scant support among House Republicans.

But Reid may be optimistic about an an outright, unconditional surrender. From the looks of the Cut, Cap and Balance proposal, the Republicans have drawn a series of defensive lines, the outermost one being the Balanced Budget Amendment. If pressed, they may sacrifice some of the BBA characteristics or give it up entirely. That will still leave them with the Cut and Cap parts of the bill.

Keith Hennessey analyzes the Cut, Cap and Balance act in detail. The bill is enacts a scheduled drawdown of expenditures until it meets the target of reducing government spending to 20% of GDP. It has provisions that provide for a default distribution of cuts within a budget (sequester) unless the legislators vote to move around the pain. Basically government is handed a smaller loaf each year but it has the power to slice that smaller loaf around in politically acceptable ways. Hennessey explains:

The bill consists of three parts. Cut – The bill provides specific numbers to limit both discretionary and mandatory spending for FY12. These numbers would drive further Congressional action this year or else force a Presidential sequester. (I explain a sequester below.) The intent of this section is to force Congress and the President to cut spending immediately.
Cap – The bill would establish a new enforceable limit on total federal spending as a share of the economy. The new caps are designed to phase federal spending down to just below 20% of GDP by FY17 and then hold it there through the end of a 10-year budget window in FY21. Put more simply, this is a new enforceable aggregate spending cap.
Balance – The bill would increase the debt limit by $2.4 trillion after the House and Senate have passed a Balanced Budget Amendment (of a certain type).

Hennessey says the Balanced Budget Amendment “must not just guarantee a balanced budget. It must also limit spending as a percent of GDP as in the Cap section of this bill, and it must raise the legislative bar for tax increases to a two-thirds vote of both the House and Senate. And he knows it is disposable.

All that is irrelevant, however, because even if this kind of BBA did pass both Houses of Congress, it would take many years for three-fifths of the States to ratify it as an amendment to the Constitution. Federal budget problems are upon us now – we can’t wait for a Balanced Budget Amendment to be ratified. While this part of the bill is useful to make a point, I fear it serves as a distraction from actually cutting spending.

The point of the BBA may simply be to bring other actors into the picture, like the states. It is a process-changer, not a content-changer. The entire point of the BBA outer defense shall may in fact be to divert part of the game into a place where the states may enter the fray.

This defense in depth means that the President will have to match those concessions with some of his own, otherwise he will seem unreasonable. That is probably what Ryan and the Republican strategists are hoping for. They are hoping to hang him up on the wire as he advances. At each stage the President can have the money necessary to keep things going anytime he wants, provided he accepts the conditions.

But this runs counter to his demand for a “big solution”. Congress will be in the position of doling out a daily allowance to the President and the President would be in the position of demanding the PIN to the ATM card. But since Congress constitutionally controls the purse it is had to see how the President can have things entirely his way.He has to give the Congress something in the end, a concession he sought to avoid by rushing into a “default or the PIN” situation. Ryan is saying, “here’s a few hundred billion to tide you over but you can’t buy that Ipad you wanted.”

Given the way Ryan has constructed the defense line, it is not at all certain that Obama can take it by frontal attack — even with extensive media support. He will at all events have to expend time and reduce each strongpoint in detail. The time will cost him politically just as much or more as it will cost the Republicans. If things get too hot for the GOP, they can fall back in good order to next line back. It looks to be an interesting fight and more importantly, at test of the President’s actual strength. He has won most of his previous campaigns by a kind media blitzkrieg. Now he is facing an opposition that has some logic behind its defense. Ultimately the Cut, Cap and Balance is playing for time. Its architects believe they will win the fight, if they can hold out.

But then again, maybe Washington is broken.