The debt ceiling deal: What should we have expected?

by James Fearon on August 2, 2011 · 20 comments

in Legislative Politics,Political science,Presidency

This is basically a small plea for insight from the Monkey Cagers and commenters who know more about US politics than I do (it’s not my field of study by a long shot).

I’m seeing tons of assessments of “who won” the debt-ceiling bargaining, with basically every single one saying the Republicans did much better.  The analyses stress that the Republicans got no tax increases (or even loophole closures) and lots of cuts, thus not anything like the more balanced deal the President had argued was fair and best for the country.  Even commenters who think the Dem’s didn’t do as badly as the consensus view seem to believe that the administration would be just terrible at buying rugs in Morocco.

But I’m wondering, What should we expect in terms of bargaining power here? 

Isn’t it the case that when it comes to making laws, the Constitution gives “Congress” the power to make take-it-or-leave-it offers to the president?  (That is, the president’s only formal power over legislation is the veto.)   That’s all the structural bargaining power.  “Congress” should be able to extract all the surplus if it wants to, which is to say it should be able to make an offer that makes the president just prefer not to veto it.  In this case, since a veto could have had terrible economic consequences and probably saddled Obama with a lot of the public blame for them, “Congress” could get practically anything it wanted.

Ok, it’s not “Congress,” instead it’s two chambers.  So the law that gets through has to get the median dude in the House, and 60th most liberal senator.  The 60th most liberal Senator is not all that liberal, no?  Is the argument that even that guy preferred some increase in tax revenues, but lousy bargaining skill meant that the Dem’s didn’t get that?

Or is the idea that Boehner was able to use an implicit threat that he would be deposed by his caucus if the deal had tax increases (or other stuff hated by his radicals) to credibly commit to only pass a bill somewhere off to the right of the House median?   If so (or under some other party cartel sort of story), the argument would be that the administration could have extracted more from Boehner because they were misjudging what his red lines were?

I know another common argument out there is that Obama didn’t have to choose between veto and sign—he could have invoked the 14th amendment or made some other emergency claim, or have just threatened  to invoke it.  Again, I’m no American Politics expert, but I’m wondering if that’s actually realistic.  In addition to setting a terrible precedent, everyone could see that that could be a very messy course for Obama, so it’s not clear that it would have been a particularly credible threat.

Further, suppose he had made such threats anyway, in attempt to gain bargaining leverage.  Mightn’t this have made some on the other side even more intransigent, since if Obama dropped the bomb it could relieve them of responsibility for raising the debt ceiling?  (I’m guessing that’s one reason why the administration was so insistent about rejecting the 14th amendment route; they wanted to keep the pressure on Congress.)  If so, then not so clear he could have gotten much bargaining leverage out of that move.

So I don’t know, maybe Obama is bad at legislative poker, but I’d like to know more about how the argument works.   Seems to me that he has very little bargaining power to begin with in a legislative situation like this one. And this is not so much because the economy is terrible and his favorability ratings are low, but because the U.S. Constitution has it that Congress organizes its own procedures and makes the laws, basically.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

{ 20 comments }

Dan Miller August 2, 2011 at 12:50 am

From a purely theoretical point of view, you’re right–this is roughly within the realm of what you might expect, given the relative positions of the 60th senator and 218th House member, and Obama’s unwillingness to allow a default. But US politics runs on norms, even in this day and age. Before 2011, as far as I know, the debt ceiling was never used as a bargaining chip. It’s been used as a tool to embarass the other party, but there was never any suggestion that one party was actually willing to default in order to get what they wanted. It’s the shift away from that norm that’s shocking.

So I’d say that what we should have expected is the same thing that happened the last dozen times the debt ceiling needed to be raised–some political grandstanding, followed by a clean debt ceiling increase. To make default a hostage is a new and fairly disastrous development.

Bear Braumoeller August 2, 2011 at 1:38 am

I think the first big surprise is that we’re even negotiating a package of debt reductions to accompany the ceiling increase in the first place—to stay with the analogy, the first surprise, before we get to how the pie was divided, is that we even find ourselves dividing a pie at all at this point.

The outcome of the actual negotiation may or may not be a surprise depending on where you think the median House member / 60th Senator is, ideologically, as you point out, Jim. But my sense (as another non-specialist!) is that the outcome was more extreme than anyone would have predicted based on those two points, a priori (see e.g. http://voteview.spia.uga.edu/blog/?p=299 )… indeed, that the inclusion of any provision related to a balanced budget amendment, in the face of the implications of a possible nonagreement outcome, was a sign that something was amiss.

It seems that, as polarization and gerrymandering increase in lockstep, candidates run more to win the primary rather than the general election. The implication of that may (?) be that the within-party bargaining game may, increasingly, matter more than the between-party bargaining game. Which is a pretty alarming thought… but might explain this outcome?

matt w August 2, 2011 at 9:02 am

How would invoking the 14th amendment have set a terrible precedent? In many respects it would’ve set a wonderful precedent; a successful invocation would have meant that the debt ceiling would have been abolished, and that would be great. As has often been observed, requiring two votes — one to spend the money, one to actually pay the bills you’ve run up on pain of default — is a terrible idea, and one that no one would defend if not for status quo bias.

You might say that it would be a terrible precedent to invoke some kind of extraordinary presidential power in a dispute with Congress. But again, this would be a wonderful precedent; it would show the president could take any legal means possible to avoid surrendering to a hostage-taking strategy. The terrible precedent was set when Congressional Republicans decided to threaten to force the country into default in order to extract concessions that they could not get through ordinary votes. (The nature of the concessions is not important here; using the threat of default to force them is important.) As Bear said, the surprise is that there’s a negotiation at all; and as Dan said, the move away from the norm is shocking.

It’s not a strictly conventional norm, either, like the notions of senatorial courtesy and (e.g.) judicial blue slips that have also been trampled over the last couple of decades. Viewed apart from the history of the American political system, one political party here threatened to force a catastrophic outcome — one that neither party wanted* — in order to force through major budgetary changes, and absolutely refused to include anything that the other party desired in those changes. It does not take an expert in American politics to see that this is very dangerous behavior.

*Except for some shockingly ill-informed radicals, who seemed to think that default would bring down the debt through some sort of magical process.

jron August 2, 2011 at 10:56 am

I think this is about as good as we can expect. I always like to put these kinds of negotiations (improperly) into car-buying terms, and here’s how I see it:

A guy needs to sell a used car, let’s call him, oh, say “Barack.” Barack has only one person to sell it to; let’s call him “John.” If Barack doesn’t get rid of the car by August 2nd he’ll have all sorts of problems (don’t ask me why, this is about negotiating, not about cars, maybe his wife hates it).

John knows that Barack has only one buyer but he wants to make the deal, too. He’d be fine with Barack facing personal ruin, but he’s worried it could take him down, too. After all, they work together and have to collaborate on things. John’s wife, let’s call her “Teaparty”, doesn’t want a car at all. She thinks they have too many things already and wants to move into their RV, and frankly hates Barack’s guts and is pretty angry with John for even talking to the guy. So John’s got a lot of pressure not to buy. Even taking the car for free will make his wife angry, and so John insists that Barack pay him to take it off his hands.

So what can Barack do? Well, he can threaten to force John to buy the car for a high price but that’s never been done before, even though Barack’s friends think he can do that. They even find something in the law that says that John has to have a car. (The law doesn’t say how he’s supposed to get it or even if Barack has anything to do with unfortunately.) However, if he tries that, then John would clearly say he doesn’t want it, and would have to walk away from the deal.

John insists Barack pay him to take the car off his hands, and wants him to promise more payments in the future– he knows the position his neighbor is in, but Barack refuses to do that. Barack continues to try to negotiate a good price and treat John like he’s a good neighbor, in order to get out of this situation.

Finally, after a lot of back and forth negotiation, Barack simply gives John the car, with the promise of future business dealings. John’s wife Teaparty is furious, because she wanted Barack to be ruined, consequences be damned. John is relieved, and he does sort of like the car anyway. Barack’s friends can’t understand why he didn’t just yell louder and get blue book value and thus are annoyed with him.

Meanwhile, that was simply the best deal Barack could get. No one had to buy at all.

Scott Monje August 2, 2011 at 11:42 am

matt w

It’s hard to see how invoking the 14th amendment would turn out well. The amendment doesn’t expressly transfer responsibility for the budget from the Congress to the president. Republicans would add “authoritarian” to “socialist” in their denunciations of Obama from now until the next election. The Tea Party would press to have him impeached, and even though the Senate would not convict, this would be the sole topic of politics for months. The likelihood of any further compromises on anything (already not high) would be nil. The Republicans would be relieved of responsibility for the consequences, and Obama would be blamed for virtually everything that goes wrong.

Andrew Rudalevige August 2, 2011 at 12:48 pm

The original post is, I think, very much along the right lines. The idea that the president is able to compel positive cooperation from Congress runs against the structure of the Constitution, especially when it comes to the budget. Obama had to decide whether the new bill was better than the status quo. The fact that the status quo was catastrophic meant that – if you discount the 14th amendment argument, which I’m afraid I do — he had to sign even a bad bill. (Though whether it turns out to be bad, politically or substantively, will presumably depend on the second round of this.)

Rob Mellen Jr. August 2, 2011 at 1:00 pm

I must agree with Andrew from the perspective of what the president had to do. Allowing default would have been catastrophic to both himself and the country, thus even a bad bill is better than the status quo. The mistake, I think, wasn’t that the president didn’t scream loud enough…it is that he has established a pattern of appeasement when it comes to Republican demands if they take hostages and threaten to shoot them. Further, the president received little help from his party on this one. Senate Democrats were far too submissive instead of hammering out a good deal and putting it out there as the best we could get.

Sanchit Kumar August 2, 2011 at 2:04 pm

Me and my professor were arguing about this a few weeks back, we actually emailed Monkey Cage to settle the matter (and thank’s to John Sides for responding!).

I agree with you, that from a theoretical perspective we would expect the dynamics from Median Vote Theory (or last-vote preference, call it what you will) to play out. This makes Obama a marginal player in the debate; the key negotiators would be vote 60 in the Senate and vote 218 in the House. We clearly didn’t see that dynamic in this debate.

Me and my professor differed on why MVT failed. I argued that MVT underestimates the influence of party politics, so the median voter’s bargaining power is eroded by party preferences. Therefore, the median voter’s preferences will be closer to the median of the Republican Party, rather than the median of Congress.

My professor believed that one of the fundamental assumptions of MVT – that preferences were unidimensional – has failed, because of underlying ideologies on taxes and spending, like ‘no taxes’, ‘shrink government’, ‘cut spending’, or ‘balance the budget’. As a result, the debate gets distorted to the extent to which no negotiation is possible since the median voter on no new revenues/cut govt spending/balance budget is not necessarily the same person; in other words, my professor’s argument is that that there is no possible deal which is reconcilable with the preferences of the median vote.

In both theories, Obama ends up losing. In theory one, the final deal falls in line with the median Republican voter’s preference, which is different from the actual median vote, which is already off of Obama’s perceived preference (I say perceived because his statements in December-May differed from June-now; I took his December-May positions as his preference). In theory two, the final bill has to factor in one (or more) of the ideological arguments that distorted the debate, and the final bill is again different from both the actual median preference and Obama’s perceived preference. That could be the reasoning behind claims that Obama (and perhaps Democrats, who do hold the median vote in the Senate) lost in this debate.

Trying to extract compromise from Boehner also wouldn’t work, in either theory, since his preferences didn’t matter. Remember, he was closer to Obama than the raucous Republican side back in March/April; yet even he didn’t have enough power as a leader of House Republicans to push a deal that was closer to the median Congress preference than the median Republican preference.

Obama did have a legislative backdoor that would have made the prospect of not passing a bill worse for people who wanted to cut spending. My sense is that a majority of Congressmen would rather have struck a deal than let Obama invoke the constitutional option. I think knowledge of the 14th amendment workaround would have increased the incentive for Congress to push a deal through.

However, assuming ideal MVT (same conclusions if you apply the imperfections from above), the final deal would still have corresponded with the median vote; Congress would just have reached the median deal much faster. There’s no reason why the final bill would be negotiated closer to the President’s preferences; like before, he still has no bargaining power,even if you factor in the veto threat, prisoner’s dilemma suggests that Congress’ bill goes through with no veto. For the record, I honestly believe that if Obama made a legitimate threat to invoke the 14th amendment, Congress would have concluded this deal much more quickly.

matt w August 2, 2011 at 3:33 pm

Scott Monje — Everything you say may be true, though in some ways I think most of the bad things have already happened; compromise is already completely impossible, and a conversation about whether the Republicans should be able to force default might not be to Obama’s disadvantage. And it wouldn’t so bad for Obama if he had to bear the consequences of a clean debt ceiling increase, because there wouldn’t be any economic consequences.

But even granting all you say, none of it supports James’s original point, that invoking the 14th amendment would “set a bad precedent.” The bad precedent was set by the Republicans’ attempt to use the threat of default to extract policy concessions, and an even worse precedent was set by its success. How would using the 14th amendment set a bad precedent? By establishing that the United States will not default on its actions? By establishing that unprecedented tactics by one side may be met by unusual tactics by another?

I’m deeply disappointed by the reaction of the political scientists on this site to the debt ceiling debate. It does not take any sort of specialist in US politics to understand that the Republicans’ tactics were irresponsible to an unprecedented degree, yet the only value judgment James was willing to express is that the use of the 14th would set a terrible precedent. That’s the sort of mushy centrism I expect from the Washington Post, not from a scientist.

Scott Monje August 2, 2011 at 5:26 pm

I agree with you about the Republican strategy setting a bad precedent. My concern is an accelerating spiral of bad precedents.

matt w August 2, 2011 at 9:15 pm

But where does the bad precedent lie in the 14th amendment option? What are we afraid of future presidents doing because of this precedent?

I’m not as concerned about an accelerating spiral of bad precedents, because the Republicans are setting an accelerating one-way ratchet of bad precedent of their own (and have been since their complete rejection of bipartisanship in 1993-4, in my opinion; and certainly since the 1995 government shutdown). The most effective way to stop bad precedents is to ensure that those who are attempting to set them are punished.

Scott Monje August 2, 2011 at 8:28 pm

Of course, if the two parties never do come to an agreement again in this Congress, then I guess the consequences will be $1.2 trillion in automatic spending cuts and $4 trillion in added revenues when the Bush tax law extension runs out. Not exactly stimulative, though.

Tracy Lightcap August 2, 2011 at 5:23 pm

Well, I said that Obama might invoke the 14th and turn the politics around on the Pubs as a result. But he didn’t. Originally, I said that his life as a con law professor was working against this, but I think that isn’t deep enough. So why not go for the nukes?

First and foremost, I think the Obama White House is much more aware then we realize of the potential for the president to forfeit votes by looking like an angry black guy. Racism is alive and well in this country and we know that a sizable group of our countrymen think Obama has it in for white folks. Given the economic situation, I would guess that Plouffe and co. think – probably correctly – that if the president moves off his “Mr. Reasonable” persona that there is another good sized tranche of public opinion that could be persuaded that he really is like what they think black folks are like. What’s interesting is that his supporters seem to think that this kind of reaction is just too off the charts to pay attention to. Yet they continue to castigate the right for it. Obama has been dealing with this his entire political career; I trust his reactions on this and I wish there was more research on it.

Second, I’m pretty sure that members of his own party in Congress told Obama that a 14th option was not something they would support. Since it would almost certainly lead to an impeachment in the House, that would be enough to make anyone (especially our first black president) think twice. True, such a move would have failed, but the real question would be by how much. I’m pretty sure Obama still thinks – again, probably correctly – that he’s going to win next year. As was pointed out above, a drawn out impeachment over a constitutional issue where the president couldn’t depend on solid and vocal support from his own party was probably enough to insure that he would balk at the possibility.

Now, in policy terms and as a constitutional argument, evoking the 14th might have been a good idea. Politically, and this is on second thought, I no longer think it was worth the risk.

matt w August 2, 2011 at 9:18 pm

Tracy, I’d like to hear more about your view that Congressional Democrats wouldn’t have supported Obama — it seemed to me that Congressional Democrats were some of the most vocal advocates of the 14th amendment option.

Tracy Lightcap August 3, 2011 at 11:36 am

They were, but notice who they were. Not, in any case, members of the Democratic leadership in either house. The strategic side of the question would be what precedent would be created for when their party was in the majority facing a president of the opposite persuasion. It’s very akin to the constant puzzlement in some quarters about continuing the use of filibusters in the Senate: that was pretty handy when the Pubs held majorities in both houses and the presidency and looked ready to use them to go after Social Security. If I’m a Democratic leader in Congress, I would be less then enthusiastic about deep-sixing a tool I could use to harass future Pub presidents and protect policy positions.

But this is all speculation, I admit. We’ll have to wait for the memoirs to get a straighter story.

matt w August 3, 2011 at 1:34 pm

“Not, in any case, members of the Democratic leadership in either house.”

I disagree — Schumer was one of the most prominent supporters, and he’s the third-ranking Democrat in the Senate; this article also says that Hoyer and Clyburn supported it publicly, and Pelosi supported it privately. Also, even if some Congressional Democrats didn’t support the use of the 14th amendment, I think it’s much less likely that they’d have failed to support Obama in an ensuing impeachment.

I’d also heavily discount the argument that — well, anything — creates a bad precedent for how Democrats could deal with a future Republican president. The Republicans have shown themselves completely unfettered by precedent; just because the Democrats have failed to use some tool against them doesn’t mean that they won’t use that tool out of Democrats in the future. The existence of filibusters may be different, because that involves a rules change which would bind future congresses beyond the force of precedent — though obviously the Democrats would’ve been well advised to filibuster every single thing Bush did that they opposed, since the lack of a precedent didn’t stop Republicans from filibustering every single thing Obama proposed.

Paul S August 4, 2011 at 12:15 am

Tracy is absolutely correct here. Obama’s (white) critics on the left grossly underestimate the magnitude of the “angry black man” problem. Obama, OTOH, has understood that problem all along. Read his first book (you know, the one written by Bill Ayers) where he explains it quite plainly.

He has managed to navigate around that problem to get himself elected president of the United States. That inclines me to trust his tactical political judgments on this one more than those of Paul Krugman, Jane Hamsher or any of his other white liberal critics.

Matt Dickinson August 3, 2011 at 12:14 am

James,
The outcome is precisely what we should have expected, and largely for the reasons you cite. I’ve made this point repeatedly during the last two weeks on my blog (and have incurred the wrath of progressives for doing so!) But the outcome was perfectly predictable. (Indeed, I predicted it!) For starters, see:
http://www.salon.com/news/debt_ceiling/?story=/politics/war_room/2011/08/01/obama_dickinson. The comments to the Salon post, almost all of which end with a variation of “Dickinson is an idiot!” are by far the most entertaining part. For more detailed analysis on the topic, see my posts during the last 10 days at: http://blogs.middlebury.edu/presidentialpower/

Scott Monje August 3, 2011 at 12:46 pm

Here’s an Op-Ed suggesting that the Democrats came out much better than the bargaining structure warranted, but it requires believing that the Republicans really saw default as close to their preferred policy outcome.

http://www.latimes.com/news/opinion/commentary/la-oe-markovits-demswon-20110803,0,2334100.story

Marie Burns August 3, 2011 at 11:39 pm

President Obama “… has very little bargaining power to begin with….” James Fearon

That clause is half-right. Obama curently has very little bargaining power. But last December, when (1) he knew the federal government would require a hike in the debt limit, (b) there was a substantial Democratic majority in the House, (c) the were 59 Democrats in the Senate, counting Bernie Sanders & the duplicitous camera-hog Joe Lieberman, (d) he had the ability to let the Bush tax cuts expire. In short, he had superb bargaining power. He could have nailed an adequate rise in the debt ceiling without breaking a sweat.

But at the time, when he was asked why he didn’t include a debt limit hike in negotiations for a continuing resolution, Obama said he was sure the new Republican Congressmembers would be “reasonable,” and Harry Reid told a reporter he thought it was a swell idea to let the new Congress “own” the debt ceiling increase. (I’d love to know what then-Speaker Pelosi thought of these bright bulbs.)

Now, tell us again how smart the Democratic leadership is. Yes, this was a “Manufactured Crisis,” as everyone says. But the engine-maker for the Crisis (to borrow jron’s automotive analogy) was the Democratic leadership.

Comments on this entry are closed.

Previous post:

Next post: