Albert R. Hunt: Obama, GOP brace for new game of chicken

08/07/2013 5:07 PM

08/07/2013 5:08 PM

Democrats and Republicans, bracing for a game of chicken over a possible government shutdown and a debt-ceiling default, should watch the 1955 movie “Rebel Without a Cause,” starring the American icon James Dean.

A thug challenges Dean’s character to race their stolen cars toward an abyss. The first driver who jumps out of his speeding vehicle is a coward. Dean leaps just as his car is about to go over the cliff; the other guy’s leather jacket gets ensnared in the door handle, and he plunges into the void.

In Washington, D.C., both sides anticipate a huge fight this autumn over the budget, the mandatory spending cuts under the so-called sequestration, and the debt ceiling. They’re expecting the other guy to jump first.

House Republicans think President Obama is bluffing when he says he won’t negotiate on lifting the debt ceiling. They contend that the president’s position isn’t nearly as strong as it was at the end of last year, when the tax cuts enacted under President Bush were about to expire. Obama, who had lots of leverage then, got half a loaf.

The White House recalls the discomfort of House Speaker John Boehner, R-Ohio, with the game Republicans played with the debt ceiling in 2011, which hurt the economy and their party. Privately, administration officials say Boehner doesn’t wish to wage that fight again when the limit is reached late this year and that his demand that any increase in the debt ceiling be matched by comparable spending reductions is a bluff. That position is unacceptable to Obama and Democrats.

The stakes are high in this game of chicken; a miscalculation could send shock waves through the economy.

Much of the negotiations when Congress gets back in September are likely to focus on the sequestration, which was adopted only because any agreement on regular spending measures collapsed. The sequestration is indiscriminate, makes for poor policy and is ridiculed by most members of Congress, from defense hawks to domestic policy progressives. It’s just that they can’t agree on a replacement, as House Republicans continue to pretend that the Pentagon will largely be spared.

There is a rational replacement that makes for better economic and fiscal policy and addresses top political concerns – for the Democrats, the necessity of more revenue, and for the Republicans, to start addressing entitlements. The cuts in discretionary domestic programs – which as a percentage of the economy are headed to the lowest level since the Eisenhower administration – would be replaced with cuts in entitlements, principally health care, that the White House would accept.

Higher revenue would substitute for the defense cuts. Given the political realities, that solution probably couldn’t fly for more than a year. At this stage, it’s doubtful even it could get through the House.

The cherished, elusive grand bargain – significant cutbacks in entitlements and more revenue, coupled with short-term stimulus spending on infrastructure and selected other programs – would boost the economy, increase market confidence and perhaps reduce some of the political pettiness that engulfs Washington. But the partisan-inspired paralysis makes that a nonstarter.

There are two possible outcomes from this game of chicken. The first is a one-year arrangement containing small, cosmetic changes that postpones bigger decisions. The other is going over the cliff, a la “Rebel Without a Cause.”

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