The Republicans are playing chicken with the world economy over the debt ceiling. They are trying to extract as much as possible in spending cuts and permanently shrink the government by appearing more willing to go over the edge than the Democrats without actually going over. That’s why they have rejected and will continue to reject everything the Dems’ offer until the last possible moment.
The Dems have responded by offering a huge win to the GOP – $2.7 trillion in cuts (some of it pretty wishful thinking) and no tax hikes. This is the most they can cut without cutting core social spending: pensions and Medicare. Now, they’ve got to hold their position and hope the Republicans leap for compromise in time.
The Republicans’ rhetoric remains very hostile and irresponsible. It’s like Nixon’s line that he wanted the Reds to believe he was mad, because that made the possibility he would push the nuclear button much more real, which would mean he could win more concessions over Vietnam. The crazier the Republicans act, the more chance the Dems will crumble and give them the cuts to those core services they really want.
But the Republicans need to be able to leap when the time comes. Their current offer is to lift the debt ceiling in two stages now and in 2012 for maximum political impact, which the Dems won’t accept, but it does include some tax hikes. At the last minute, this is meant to be melded with the Dems offer by the Republican offer being passed through the COP-controlled House and the Dem offer going through the Senate, where they have the majority. These two bills would then be melded together by a joint committee and go through the two legislative chambers.
The problem is, the Tea Partiers, who don’t get the gamesmanship involved and simply refuse to compromise or support any tax increases. They won’t support their own leadership’s offer, meaning it doesn’t have the numbers to get through the House. The Republicans have no offer they can put on the table and they can’t accept the Dems’ one. The GOP has been able to play chicken so hard and win so many concessions because its position has been steeled by the Tea Party zealots, but they now threaten to be lead weights, preventing the GOP from leaping at the last moment.
Many Tea Party congresspeople have stated they will not vote for any increase in the debt ceiling, regardless of what is offered in return. And the rhetoric still coming from the GOP leadership will only make it harder for the zealots to understand the need for compromise at the last minute.
So what’ll happen? I think there’s a very real possibility that no deal will be done, which will unleash all kinds of hell when the US can’t borrow anymore to pay its bills.
Or, the Republicans might split, with the old guard making a deal with the Dems that the Tea Partiers won’t touch. What happens to the Tea party then, does it become irrelevant or does it become even more powerful and overthrow the old guard in 2012? And what if the Dem Left-wing (yes, it does exist) also refuses to play ball?
Whatever happens, a lot of damage has already been done. The rest of the world does not want to be so exposed to politicians that are willing to play such high stakes brinksmanship over what is, let’s not forget, a purely arbitrary and unique debt ceiling. They may lose their credit rating no matter what happens.
The US’s elite is hastening its own decline, as is often the case at the end of an empire.