When House Majority Leader Eric Cantor walked out on the bipartisan debt ceiling talks in late June, all of Washington professed shock. For some cable news addicts, it rivaled the Casey Anthony trial in its titillation factor. Opinion writers and Democrats warned that Cantor was sacrificing the global economy for the sake of politics. The Republicans seemed to be playing brinkmanship with the debt ceiling, which the Obama Administration says must be raised by Aug. 2 to avoid a U.S. default.
It’s time to take a deep breath and stop the fretting. The likelihood of the U.S. defaulting on its debt obligations is slim. Very, very slim. Republican leaders may engage in some theatrics, but in the end they will almost certainly take their bows and allow the curtain to close without incident. Want proof? Look no further than the very public statements of the Republican leadership, which has professed loudly, often, and in unwavering terms that there will ultimately be a happy ending. “Nobody believes the United States is going to walk away from its obligations,” House Speaker John Boehner told Fox News on June 28. A month earlier, he reassured worried financiers at the Economic Club of New York that he believed letting the debt talks fail would be “irresponsible.”
Boehner has been hammering at the same point since just days after the November elections, which returned the Republican Party to power in the House. “We’re going to have to deal with it as adults,” he said to reporters then, explaining that he was already talking to newly elected Republican lawmakers to impress on them the importance of preventing a default. “Whether we like it or not, the federal government has obligations, and we have obligations on our part,” he said.
That sentiment is shared by pretty much the entire Republican leadership. Just a few months before his walkout prompted headlines, Cantor, the No. 2 Republican, was lecturing his party’s rank and file on why they can’t let the U.S. default. During a private January retreat attended by more than 200 House Republicans at a waterfront hotel in Baltimore, Cantor implored the politicians to view the debt negotiations as a “leverage moment,” according to a person close to the representative. Cantor never suggested that allowing a default was even a possibility.
Clearly the Republicans intend to use the debt discussions to score policy victories. They’re demanding big spending cuts from the Democrats and want to slash sacrosanct entitlement programs such as Medicare. And so far they’re holding firm against Democratic demands to increase government revenues by ending subsidies for oil and gas companies and tax breaks for businesses and the wealthy. Cantor said on July 6 that Republicans would agree to close tax loopholes only if they are “coupled with offsetting tax cuts somewhere else,” something the Democrats are loath to do. The GOP stand plays well with its base, especially budget-conscious Tea Partiers such as Michele Bachmann, the Minnesota representative and Presidential contender.
This is just politics as usual, albeit with higher-than-usual stakes. At the same time it is making demands, the Republican leadership is winking and suggesting that Tea Partiers shouldn’t expect to get everything they want during the debt ceiling negotiations. At the Baltimore retreat, Cantor urged his colleagues to think of the debt ceiling issue as the second of “three bites at the apple.” The first bite came in the form of the 2011 budget negotiations, which nearly ended in a government shutdown in April but instead resulted in a compromise that included $38 billion in spending cuts favored by Republicans. The leadership hopes to build on those gains during the debt ceiling negotiations but sees the 2012 budget negotiations as another chance to extract spending cuts from Democrats.
Republicans’ pragmatism is motivated in part by the memory of 1995-96, when a congressional budget impasse led to two government shutdowns—and the Republican leadership got the blame. That episode is “a scar that doesn’t go away,” says Michael Franc, president for government studies at the conservative Heritage Foundation. Then there is the money issue. In the 2010 elections, Republicans took in the majority of donations from the securities sector and hedge funds. Both groups sided with Democrats in 2008. That money is “up for grabs” again in 2012, says John Pitney, a political scientist at Claremont McKenna College in Claremont, Calif. The Republican leadership is eager for Wall Street to know the party won’t trigger a financial apocalypse, he says.
Republicans don’t have much incentive to strike a deal before Zero Hour. After all, brinkmanship worked well for them during the April budget negotiations, when they came to an agreement just hours before the deadline. One possible outcome: The two sides could make a temporary pact to delay the day of reckoning, forcing them to revisit the debt limit again before the 2012 elections. So look for plenty of prime-time drama on the way to the deal, with Democrats such as Senator Charles Schumer of New York accusing the other side of trying to sabotage the economy, and Republicans such as South Carolina Senator Jim DeMint saying the Obama Administration is “playing chicken.” In the end, one or both drivers will swerve.