Shut It Down, John – The Dress Rehearsal Is on

“There’s absolutely no reason for us to assume that the Germans are mounting a major offensive. The weather is awful and their supplies are low. The Germans haven’t mounted a winter attack since Frederick the Great. Therefore I believe that’s exactly what they’re going to do.” – George C. Scott as George Patton, Patton

The shutdown is on, and the sides are digging in and slinging mud and accusations. If you had asked me a week ago I would have said there’s no way it will come to a shutdown. John Boehner has proven time and again that he is unwilling to stand firm in negotiations, and I would not have guessed he would let this go all the way to shutdown. But, it seems that when you least expect it …

What if the government shut down and nobody cared?

“Oh no, the government’s shut down!? Now who will spy on me, waste my money, and hold me in contempt and disdain?” – internet snark

Government shutdowns are an exercise in testing political mettle. Each side hopes the “blame” for the shutdown will fall with the other, and hopes they can hold their group together in the fray. This, of course, assumes that there will actually be “blame” – but with trillion dollar deficits, who knows?

Both sides thought the “pain” of sequester would cause a public outcry, offering them political cover to get a deal through. This didn’t happen, of course, as the country embraced the paltry cuts of sequester. The same could happen here.

Battle lines and Boehner’s limited options

The sides are pretty far apart right now, or at least they are acting as such. President Obama and Harry Reid have refused to negotiate. (This is, of course, for the cameras – of course they’re still talking to each other.) Boehner has very limited room to maneuver here. He has to get a bill through that takes something, anything, away from Obamacare – or he may well lose the speakership as the Tea Party has had enough. Now, I don’t take Boehner as a prideful man, but I also don’t think he wants to lose the gavel right now.

I think his only winning argument with the American people right now is the “fairness” one, which is the one he is attempting to make. Obamacare has forced participation of all Americans – except those who have been given “waivers” by the administration. These wavers have gone, as you might imagine, largely to political cronies and big-time donors. The winning argument for Boehner is that this is absurdly unfair and un-American. Either nobody gets and exemption, or everybody gets one. One of those is the bill he has to pass and peddle to the American public. I prefer the latter, but I think he has a better chance with the former.

Dress rehearsal

The “cataclysmic” shutdown, which is embraced by the right, is really just a dress rehearsal for the next battle. Boehner is seeing if his side can hold firm in the face of a shutdown, so he will know if they can hold together over a debt-ceiling impasse. That one will have real consequences. We hit the debt-ceiling somewhere between October 17 and October 22. If Boehner can hold the shutdown together until then (which I still doubt he will) and make the argument to the American people based on fairness, then he has won leverage in the debt-ceiling debate and may actually take it down.

Full faith and credit

For his part, the president has been out there arguing that he will not negotiate over the “full faith and credit” of the American government. He is hinting here that a shutdown could lead to a default on the debt. This line is being repeated far and wide by friendly media sources, claiming that the Republicans are going to discredit the currency (as if Ben Bernanke wasn’t hard at it already … and I haven’t heard them complain about that).

These arguments are both patently absurd and a touch scary. First,  the shutdown will not trigger a default. Second, a debt-ceiling impasse, where the Federal Government is disallowed from borrowing any more money, will not trigger a default. In a debt freeze, the Treasury will have to pay bills based solely on revenues coming in. But the revenues coming in tend to exceed interest payments by an order of magnitude (that’s a factor of 10, for the non-mathematicians in the room). In 2012 total tax receipts were $2.45 trillion, while total interest was $223 billion. We are WAY ahead of the game on that front.

Of course, we won’t be able to pay everything. Something will have to be cut. But there is no reason to think we would default. And that is what makes the argument slightly disturbing.

The president is a smart guy, and has smart folks around him. Whatever my disagreements with him over policy, I don’t take  him for stupid. He knows full well that there is no reason to even think of a default. And yet, he’s pushing that line of rhetoric every chance he gets, trying to blame a potential default on John Boehner and the Republicans. I can come up with two plausible explanations for this (perhaps there are more). Either it is simply rhetorical flourish and a political trick – which makes plenty of sense and is the most likely explanation – or worse, far, far worse.

You see, congress cannot (in this instance, by simply shutting down or refusing authority to borrow more) force a default. The only entity that can make that happen is the Treasury, by refusing to pay the interest on the debt and choosing to pay other bills instead. The Treasury is part of the executive branch and answers directly to the president. So the only person who can turn this into default is the president himself. And in the most sinister explanation of his rhetoric, that is exactly what he means to do. Refuse to negotiate, hope this goes to the debt-ceiling, force a default, and pin it on the Republicans. It is absolutely crazy, I know, and it is not the most likely explanation. I’m hard-pressed to believe that the president, bought-and-paid-for by Goldman Sachs (as they all are) would let the country go into the chaos of default. But, it’s always when you least expect it …

Endgame

This probably ends quickly, following the “Boehner folds like a cheap suit” narrative. He has the weaker hand, controlling a majority of one house of one branch. Furthermore, a vote on a clean continuing resolution would pass the house if it happened, with enough moderate Republicans joining Democrats.

But there is always a chance that we go further with this. Boehner has an inflexible wing of the party that is ready to bolt on Republicanism altogether. A fold here and I suspect the Republican civil war is on. If the shutdown makes it to the debt-ceiling, with the Republicans holding firm, then there will be fireworks. Heck, if they hold out this whole week I suspect the fireworks will get started, just for fear they might make it to October 17.

Time will tell. The game is afoot …

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