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Endgame?

What will it take to end the shutdown?  There isn’t much that can be compromised in this situation, given that we have two issues at stake – the Affordable Care Act (aka Obamacare) on one side and the continuing resolution plus the debt ceiling on the other.  There’s just not a lot of give when you have this kind of asymmetry.  So it’s almost certainly going to be one side that caves.

As said before, it’s hard to imagine the President and his supporters in the US Senate giving in, so let’s just call that a low probability event.  It’s probably going to be a Republican give of some kind.  And one is brewing in the form of a general revolt of “pragmatic Republicans” who understand how dangerous this game is.

Rep Peter King.  He's an expressive guy (from New York, duh)

Rep Peter King. He’s an expressive guy (from New York, duh)

There is a growing and, more importantly, increasingly vocal group of Republicans who are apparently organizing in the US House.  Rep. Peter King (R-NY) held a meeting in his office to discuss a way out that 10 Republicans attended, but he claims that “about two dozen” support finding a way out of this.  “Maybe it’s because I come from New York. I rely on back room meetings to get things done,” he said. “I’m hoping someone’s going to meet behind the scenes somewhere and we’re going to make a deal.”

That deal, like the real fight, would be within the Republican Party as it looks for a way to declare victory.  It’s unlikely to come on the floor of the House, where a defection of only 15 Republicans joining 203 Democrats could put an end to this.  It would look very, very bad if it came down to that, however.

That’s the problem with High School civics – it all seems so reasonable in the abstract.  The reality of a two party system is far more complicated.

But what about those “pragmatic Republicans” who want to end this?  They are looking at a number of plans to make this about much more than the government shutdown.  Michael Grimm (R-NY) believes that a big deal that includes the continuing resolution to re-open government, debt ceiling, and even the sequester (!!) could be the way out of this whole thing.  That would be much more impressive, although it would probably take time to bundle it all together in a way that made political sense.  But it does change the issue and thus makes it more possible to declare victory.

Money talks, but bonds have a nationally syndicated show.

Money talks, but bonds have a nationally syndicated show.

King feels that it’s inevitable, however.  The questions he and his colleagues are asking are apparently “When they should do it, how it should be done, what process we should follow.”

The bond market apparently believes that a default is very unlikely, given that bond prices are not changing.   The rate for a 10yr Treasury has been in the 2.6-2.7% range for the last week and a half – and apparently even foreign bondholders are operating under the assumption that nothing crazy is going to happen.  Given how much money is at stake for them, their cool hand probably means that they know something that the rest of us don’t.

So how will this all end?  The long and short of it is that there is a faction of Republicans that are not going to allow a default, no matter what, and the bond market apparently believes that this is the case.  So it’s probably best to not panic and see how it all plays out.  Crossies?

This doesn’t answer what the fallout will be for the Republican party both in their primaries and in the general election.  As it stands right now, the 2014 elections are a year away – an eternity in current politics.  If nothing too terribly bad happens it’s not likely that voters will remember this as it stands now, so action as early as this weekend into next Monday probably means that this is a non-event.

Who doesn't enjoy a lovely tea party?

Who doesn’t enjoy a lovely tea party?

The question remains how the Tea Party will take it all, however.  It seems increasingly likely that they will not win, and Obamacare will indeed continue just as it is right now – the law of the land as the new exchanges are gearing up to a rocky start with a lot of people signing up.  What if it works and becomes popular?  The question becomes how rigid its opponents want to be through the next year, should the public decide that the changes to health care are either good or largely benign.  The Tea Party is still very much banking on a colossal failure – which is unlikely to happen.

Will this fight continue a year from now?  They’ve been pretty stubborn so far, so probably.  But that might mean it’s the last time we hear from them as a national force.

That would give a lot more room for those “pragmatic Republicans” to flex their muscle.  A guy can dream, can’t he?

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14 thoughts on “Endgame?

  1. To negotiate in good faith there has to be movement among the 3 sides. It should be a mutual convergence. There is nothing sacrosanct about the Democratic positions. I expect President Obama and Majority Leader Reid to offer positions that will help a bill to pass the House.

    • They may give up something token. One thing under consideration is the Medical Device Tax, which was never all that important anyway. But the revenue would have to be made up somewhere else should that happen. At least it will be a budgetary kind of discussion, so it’s far less asymmetric and could indeed be he subject of bargaining.

  2. One of the open secrets of Democratic success is that they usually don’t wish to change any entitlements. That’s good politics but probably not good for the budget given we would need more revenue to back up current spending commitments.

    So if I was a Republican leader I would ask Democrats where they would cut entitlements. I would want to see if they want to bargain fairly.

    Defaulting is not good policy but can Democrats loosen their hands from the cookie jar of entitlements?

    • It’s hardly a secret of any kind. And given that Medicare hits the wall between 2020-24 there is going to have to be a serious reduction or increase in allocated funding, neither of which are good. So yes, the Dems do have a lot to give on the budget generally and that fight would be a very good one to have.
      Once again, the Simpson-Bowles framework seems to me the only logical way to approach that, but … we are so far from even starting that discussion at this point.

  3. Seems simple to me …….. stop buying Tomahawk Missiles for the next 10 years.
    Entitlements? If we can borrow from the Chinese to blow up the world why not borrow to help those people that we owe?

    • $700B per year on just the Defense Department, not including Homeland Security and so on, is a lot of money. It’s also about 40% of the planet’s total expenditure on defense, about 6X our nearest competitor (China, interestingly enough). So I would say there has to be some room to give. Before we cut the cruise missiles, how about we have a major consolidation of European bases? I’ve seen estimates that this alone could save up to $50B a year, although I can’t vouch for the accuracy of that (and it seems high).
      But yes, given that we have 10 of the planet’s 20 aircraft carriers (all but 4 of which are operated by our allies, the others being Brazil, Russia, India, and China interestingly enough) and 20 B-2 bombers that have to be about an aircraft carrier equivalent except they can strike anywhere without any warning, there have to be more places to trim without actually harming our proper defense.
      That’s all another good fight that we should be having, but aren’t. I’d love to hear someone defend why we spend all this and have all this, I really would.

  4. There is no reason we can’t have a balanced budget, they just have to make tough choices. Maybe that isn’t what we should do in this economy and all that but we certainly can make better choices. The closure shows that the reason they don’t do that is that they don’t want to. It’s all a game to them and something you use for power or get votes, yes democrats are guilty of that too. I think that’s the real lesson of this shutdown so far that they don’t care about the priorities.

    • This is why I reposted the old piece on Opportunity Costs, and y’all are right where I have been on this topic. We know there is an infrastructure deficit, for example, which is the fancy way of saying bridges are falling down. Rather than pay people unemployment bennies, why not spend a little more and pay them to fix things? It seems reasonable to me in a depression, but we haven’t made that choice on a basis big enough to affect either the unemployment rate or the net deficit in infrastructure.
      So yes, we have tough choices to make and we simply aren’t doing them. Note that I don’t think Congress should ever do this in a vacuum, but should get the discussion going and really engage the public. The economy is changing rapidly and people need to be connected to what’s going on, IMHO.

  5. Let me say I support a 100% decrease in military spending.

    But: won’t that increase the unemployment rate for those engineering graduates of Carnegie Mellon University?

    Some of those engineers have children by God, going to college. And their spouses won’t like it when they can’t go on their second honeymoon to Europe to see the sights.

    • This isn’t about me, and I see no reason why my personal life should be a part of this discussion. It borders on stalking, and it frankly says more about you than me in the end. I will say that personally I don’t care the slightest bit where an interesting argument comes from, whether it’s Adam Smith, John Maynard Keynes, Milton Friedman, Irving Fisher, or Karl Marx. Going after the person seems very lazy at worst and pointless at best.
      So if you really want to go after me, by all means do. But you only weakens your arguments. I’d much rather that everyone, even those I don’t agree with, have the strongest arguments possible.

    • That’s really all I care about, too. The rest is a game – although the shutdown does hurt a lot of people and is terribly inconvenient to just about everyone.

  6. Pingback: The Tough Quarter Starts | Barataria - The work of Erik Hare

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