Biden’s debt ceiling strategy: Did he screw up talks with McCarthy?

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The administration didn't get everything right. But there was no realistic way to totally avoid this mess.

Amidst the continuing debt ceiling crisis and stop-start negotiations between the White House and House Republicans, a disappointing realization for liberals is sinking in: President Biden will likely end up making substantial concessions on spending cuts to avert the crisis.

So, many are asking: Did Biden and Democrats screw this whole thing up?

After the last time we had a showdown like this, in 2011, many Democrats concluded their own party had botched it. They believed President Obama should not have negotiated with Republicans on the debt ceiling, that he gave away too much on spending, and that he emboldened the GOP to make similar demands in the future.

Yet despite Biden's initial talk of holding firm and not negotiating, and despite liberal commentators’ dreams of using executive authority to defuse the debt ceiling bomb, things seem to have ended up in exactly the same place.

To understand why, it's worth retracing the tactical and strategic choices that the White House and congressional Democrats made over the past several months. Some indeed have held up poorly.

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But in my view liberals’ expectations of holding strong with a refusal to negotiate, or in circumventing congressional Republicans entirely, were untethered from reality. There was no obvious and achievable way to avoid this crisis. Spending cuts of some kind were inevitable once the GOP took the House, and the question remaining is just how bad they’ll end up being.

To avoid repeating what they saw as Obama's mistakes, Biden's White House started off with a two-pronged strategy.

First, they said they wouldn't negotiate over the debt ceiling at all, demanding it be off the table — though the catch here is that they always knew they’d have to negotiate with the GOP over spending later this year. Republicans control the House and government funding expires September 30, so there would always have to be talks about funding the government, which falls in the category of normal politics.

Second, Biden and his allies tried to call attention to extreme Republican policy demands, attempting to win a battle of public opinion so the GOP would back down.

We saw this strategy in action during the State of the Union address in February, when Biden claimed some Republicans wanted "Medicare and Social Security to sunset every five years." A few Republicans did back proposals like this, and the entitlement programs had been in the GOP's crosshairs in the past. But during Biden's speech, Republican members of Congress loudly protested the president's claim, and the chamber was soon filled with bipartisan cheers in defense of the two entitlement programs for seniors.

In March, Biden released his own budget, and started calling on House Republicans to come up with a budget of their own. Now, when the 2011 crisis took place, it had proven quite difficult for the GOP to agree on anything that they could pass through the House. This year, Kevin McCarthy's slim majority and his difficulty lining up the votes to become speaker seemed like it could herald similar disarray.

The White House bet may have been that McCarthy would fall flat — and that perhaps, as a result, moderate House Republicans would split from the party to pass a "clean" debt ceiling increase. Or maybe Senate Minority Leader Mitch McConnell would swoop in, cut a deal, and save the day.

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That's not how it worked out. Defying Washington's expectations, McCarthy passed his spending plan through the House in late April (containing no cuts to Social Security or Medicare), and GOP moderates and McConnell remained in lockstep with him.

McCarthy also began needling Biden over his refusal to negotiate over the debt ceiling. Suddenly it was Biden who looked like the unreasonable one — after all, McCarthy just wanted to talk (about major spending cuts while keeping the nation's credit rating hostage). Outside business groups and some Democratic moderates started pressuring Biden to talk.

So, eventually, he caved and did talk.

Yet there was a road not taken all this time.

Since the last crisis, liberal commentators have proposed various clever-sounding workarounds through which, they argue, the administration could effectively defuse the debt ceiling bomb without Congress at all. Perhaps the administration could cite the 14th Amendment in arguing the debt ceiling is unconstitutional, or they could issue a novel sort of debt, or they could mint a platinum coin worth $1 trillion.

The administration reportedly explored these options but concluded there were major legal, political, or economic risks for all of them. One fear was that the markets would react poorly and Biden would get the blame for having proposed some wacky scheme.

Another was that the conservative-dominated Supreme Court would never go along with any of these plans.

I agree with Ezra Klein that all these hesitations made sense — these ideas are fun for pundits to spitball but the president actually has responsibility for not blowing up the economy.

The problem is that admitting these ideas won't work makes for bad negotiating strategy. Rather than high-handedly saying they wouldn't deign to talk with McCarthy at all, in my view the better approach would have been to hammer home a different message all year: "We’ll talk about anything. We want a reasonable deal. But we’re exploring all our options in case Republicans simply refuse to be reasonable."

Rather than refusing to come to the table for so long, Biden should have talked but been prepared to walk away, as one leading authority on negotiations would advise:

"Know when to walk away from the table." The Art of the Deal

Instead, various Biden officials publicly and privately pooh-poohed the executive power options, and as recently as this Sunday Biden's comments were muddled. He claimed he was "looking at the 14th Amendment" and that "I think we have the authority," but probably that he couldn't settle that quickly enough to prevent a default on the debt.

"We have not come up with a unilateral action that could succeed in a matter of two weeks or three weeks," he said. (One motivation for this may have been to talk down Democrats on the left who are urging him to use the 14th Amendment.)

In continuing the second-guessing, it's also worth looking back further, before Republicans took over the House.

With Democrats in control of both chambers of Congress, why didn't they simply increase the debt ceiling themselves?

Theoretically, it would have been possible for Democrats to use the special "budget reconciliation" process to pass a debt ceiling increase with their party's votes alone — avoiding a Republican filibuster. Yet despite some discussion about this toward the end of 2022, including during the lame-duck session after the GOP's House win was clear, party leadership seems to have never really seriously considered trying it.

There were various reasons for hesitating. One such reason doesn't make Democrats look great — members of Congress generally like sharing partisan responsibility for a debt ceiling increase (not to mention that the budget reconciliation process is complex and it would have taken a while when Congress wanted to get out of town over the holidays).

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But the most convincing reason for not bothering was the overwhelming likelihood that Democrats would have failed to get the votes from their own party, and specifically from Sens. Joe Manchin of West Virginia and Kyrsten Sinema of Arizona for a party-line debt ceiling vote.

Manchin's whole schtick is that he wants more bipartisanship, and he was urging Biden to negotiate with Speaker McCarthy this year. So why in the world would he have backed a partisan debt ceiling effort months before the deadline?

Sen. Tim Kaine (D-VA) recently claimed to Politico that he thinks he could have gotten Manchin's vote, but this seems like utterly wishful thinking to me — Manchin is still considering running for reelection in his deeply red state in 2024, after all. Sinema, meanwhile, was quitting the Democratic Party to become an independent around this time, suggesting she likely wouldn't play ball with Democrats on this either.

Another reason for hesitation is that a likely failed partisan debt-ceiling push could have derailed year-end talks with Republicans over a government funding bill. Those negotiations ended up succeeding and included important election reforms aimed at preventing a repeat of the 2020 election crisis in 2024.

So in the end, Democrats decided to pursue policy that they thought (correctly) had a good chance of becoming law, rather than betting on their (highly dubious) ability to strong-arm Manchin and Sinema.

So getting to this point has been a bit of a mess. But it isn't yet clear how consequential these missteps were. Again, keep in mind that White House negotiations with Republicans over spending levels were unavoidable, since a government shutdown deadline looms later this year. They were already going to have to negotiate on the spending.

Now, Republicans hoped (and Democrats feared) that threatening economic calamity from a debt default might provoke Biden into making more serious concessions than he would have made in ordinary spending talks, if only a government shutdown was on the table. That is plausible, and explains why the White House didn't want to negotiate on the debt ceiling. But they failed to avoid that.

The question now is whether Biden will end up getting a worse deal because of these negotiating missteps — and to assess that, we need a deal.

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