Chess Match: The Debt Ceiling Death-Dance


This is the first post in a new series we’ve cooked up called Chess Match. The concept is pretty simple – we look at a contentious policy issue and try to decide what the best moves are for the conservative side. Then, you get a chance to give us your suggested moves in the comments. The best user-submitted strategy will get featured in the next Chess Match post. It’s armchair quarterbacking meets high-stakes politics, and you call the shots!

The Opening

You know those scenes in the movies where the plane is crashing and the desperate crew is pulling out all the stops just to keep the plane aloft? A similar scene will start unfolding in Treasury Secretary Tim Geithner’s office this fall if congressional leaders can’t come to an agreement on raising the debt ceiling for the eleventh time in the last 10 years. Geithner has already said the Treasury will run out of money before the end of the year, but he thinks he can keep the nose up a little longer by some creative – and desperate – accounting:

[The] Treasury Department can use so-called extraordinary measures to keep the debt from breaching the ceiling until early 2013. Such steps include suspending contributions to federal pension plans.

Other actions would include cutting funding for disabled workers and withholding payments for roads and bridges.

But the disabled, motorists, and Uncle Sam’s accountants wouldn’t be the only people hurt by a debt ceiling impasse. Economists project that failure to reach an agreement on raising the ceiling (along with the other components of the fiscal cliff) would remove about $7 trillion from an economy that’s been stuck in neutral for most of President Obama’s tenure. This makes blocking the debt ceiling increase a tempting target for Republicans, but there’s more to it than that.

The Mid-Game

Republicans and Democrats played chicken with the debt ceiling before back in May 2011. Since neither side blinked, the GOP won the war – but lost the peace. Republican representatives were able to guarantee $2.2 trillion in cuts without a single tax increase, which was their stated goal. However, the uncertainty over the raised limit led to the loss of America’s treasured AAA credit rating. President Obama and the Democrats share some blame for this, but the public (rightly or wrongly) assigned most of the rancor to the Republicans, who they viewed as obstructionists. What’s more, the Democrats finally have significant public support for their “tax the rich” initiative to cut the deficit – something the right hates.

The Move

 

This time around, the GOP should come up with a budget plan tailored for this occasion before the Democrats do and push it like crazy. It must be proactive and anti-deficit, and purely fiscal. This way, the Democrats will seem to have their feet in the cement – a reversal of last year’s roles.

Republicans (many hamstrung by a pledge to never raise taxes) can still get away with agreeing to raise taxes on the wealthy. By moving the tax increase threshold from those $250,000 to $1 million and pushing for corporate tax cuts equal in value to the tax hike, the GOP can save face, be cooperative, stimulate the economy and still argue that they never voted for a net tax increase.

 

The Checkmate

 

If the Democrats reject the GOP’s offer, they become the obstructionists. They’d also be hypocrites, which would make for some nice campaign commercials in closely contested districts. But perhaps more importantly, the blame for any economic fallout from the debt ceiling death-dance would fall on the left and President Obama. That issue alone will decide the election, so it’s likely the Democrats will agree to the Republican proposal. Both sides get a little of what they want, the ceiling moves, the debt shrinks, and we can all get on with our lives – with the added bonus that the Democrats had to use a Republican solution.

At least, until the next crisis calls for a rematch.

 

Like the analysis? See flaws? Got a better plan? Get someone to hold your beer and post your plan below. If it’s good enough, we’ll feature it with our next Chess Match article. Internet glory is yours for the taking!

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I'm a young guy with a news addiction. I love engineering, politics, and economics, and I have a mind built for analysis. Also, I write a lot, though I hate the paperwork... You can read my work at www.dynamopolitics.com !

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DYNAMOpolitics

DYNAMOpolitics

I'm a young guy with a news addiction. I love engineering, politics, and economics, and I have a mind built for analysis. Also, I write a lot, though I hate the paperwork... You can read my work at www.dynamopolitics.com !

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