In any high-stakes conflict in which combatants have taken diametrically opposed positions, avoiding a destructive outcome depends on equivalent risks and rewards. If failure to reach an agreement is an unmitigated disaster for one side and something less than that for the other, the latter is very likely to win any game of chicken.
The comforting conventional wisdom about the rapidly impending debt-limit collision in Congress is that the House Republicans (and their largely passive Senate GOP allies) precipitating the crisis have as much to lose as the White House and Senate Democrats. If there’s any doubt that Kevin McCarthy will ultimately find some way to avoid a debt default, it’s because the wildly reckless House Freedom Caucus, whose members seem to relish a national or global economic calamity, hold his continuation as Speaker in their hands. So from the point of view of Democrats and allegedly responsible Republicans, the game has been to find some face-saving way for McCarthy to do the right thing, as he surely wants to do, without losing his precious gavel.
But what if the assumption that we’re in a mutually assured destruction scenario is not exactly right? What if McCarthy or the Freedom Caucus or some other strategically positioned group of Republicans is convinced that disaster for the economy and the country could produce an electoral victory for the GOP? If so, that would destroy any incentives for compromise: Republicans will either win important concessions from Joe Biden and his Democrats that would gratify potentially rebellious MAGA types or they’ll inherit a damaged country in November 2024 amid the sort of radically diminished expectations that ease the burden of governing.
One danger sign Democrats should note is public-opinion research indicating that Americans are inclined to apportion blame equally for the debt-limit crisis even though they favor the Democratic position on how to avoid calamity, according to a new ABC/Washington Post survey (a flawed but nonetheless influential poll):
A 58 percent majority of Americans say the debt limit and federal spending should be handled as separate issues, down from 65 percent who said this in February. A much smaller 26 percent of Americans say Congress should only allow the government to pay its debts if Biden agrees to cut spending, the same share as February….
The poll finds 39 percent of Americans say they would blame Republicans in Congress if the government goes into default, and 36 percent say they would blame President Biden and 16 percent volunteer that they would blame both equally. (That dynamic is similar to the 2011 debt limit showdown, when 42 percent said they would blame congressional Republicans and 36 percent said they would blame President Obama. Lawmakers averted a default that year.)
The 2011 analogy is important from the perspectives of both parties. As Obama advisor Dan Pfeiffer recalls, the 44th president’s standing going into a reelection year was almost fatally damaged even by a near-miss of a debt default:
In 2011, [Obama] spent months negotiating with Speaker John Boehner to strike a “grand bargain” that would help solve America’s longstanding fiscal problems. But Mr. Boehner couldn’t deliver his caucus in support of the framework, and the nation hurtled toward default. With only a few days to go, negotiators were able to strike a smaller agreement that satisfied no one, left both sides angry about the result and was damaging for the country. The United States’ credit rating was downgraded for the first time in the nation’s history, and borrowing costs for the government went up.
Mr. Obama’s approval rating slumped, even dipping below 40 percent in Gallup polling. Our internal polling in the White House showed the president losing re-election handily to a generic Republican.
Barack Obama managed to claw back much of his popularity and was reelected in 2012, but it was a near thing. Republicans may calculate that an actual debt default, likely followed by a recession, would doom any incumbent president, particularly if voters are inclined to blame that president at least partly for a debt default triggered by the other party.
The abiding truth is that chief executives who preside over a major economic contraction do not often get reelected. This phenomenon dates all the way back to the administration of Martin Van Buren and shortened such recent presidencies as those of Gerald Ford, Jimmy Carter, George H.W. Bush, and arguably (though a lot of other things were going on) Donald Trump.
The possibility that at least some Republicans may glimpse a silver lining in a debt default is all the more reason that their buddies on Wall Street (who literally cannot afford to be so sanguine about a market meltdown) should be making it very clear they’ll never see another campaign contribution if they run Biden and the U.S. economy right off the road.
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