How Harry Reid caused the debt-ceiling debacle

By Felix Salmon
July 26, 2011
Ezra Klein reckons I'm wrong about the tactical failures among Democrats which led to the current debt-ceiling fiasco and the probable loss of America's long-prized triple-A credit rating.  

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Ezra Klein reckons I’m wrong about the tactical failures among Democrats which led to the current debt-ceiling fiasco and the probable loss of America’s long-prized triple-A credit rating. The big failure, he says, wasn’t at Treasury, and wasn’t at the White House: it was in the Senate. Specifically, this is all the fault of Harry Reid.

The reason we’re hitting the debt ceiling, remember, is that the budget passed by both Republicans and Democrats forces us to do so. As a result, the obvious time and place to raise the debt ceiling is when you pass the budget. This isn’t just obvious now, it was obvious then. And the person who thought it was a bad idea? Harry Reid. Here’s Reid on December 8, 2010:

Reid also said that he would like to push off raising the debt ceiling until next year — when Republicans control the House, but that he has not discussed the matter yet with his caucus.

“Let the Republicans have some buy-in on the debt. They’re going to have a majority in the House,” said Reid. “I don’t think it should be when we have a heavily Democratic Senate, heavily Democratic House and a Democratic president.”

This has to rank very highly in the annals of tactical own-goals. As Ezra explains:

The election was over. Nancy Pelosi was still speaker of the House. Harry Reid still had 59 Democrats in the Senate. The Bush tax cuts were expiring. And Democrats had a perfectly popular and intuitive position: Extend the cuts for the middle class but, in a time of deficits and sacrifice, sunset the cuts for the rich.

Republicans, of course, didn’t want to allow the Bush tax cuts for the rich to expire. They were, in fact, desperate to preserve them. Which meant Democrats had the leverage.

What was Reid thinking? Basically, he didn’t want to give the Republicans a stick with which to beat the Democrats at the next election. Voting for debt-ceiling raises is never particularly popular, and it’s an easy and obvious electoral strategy for any Republican running against an incumbent Democrat to wheel out her vote on the debt ceiling.

But as any bond-market borrower knows, the most expensive money in the world is the money you haven’t raised yet. In the case of the debt ceiling, it had to get passed; there was no point in getting greedy. And I’m sure that Reid is rueing his decision right now. Forcing a majority-Republican House to vote to raise the debt ceiling might have seemed like a good idea at the time. But it’s not exactly the epitome of leadership. Indeed, it seems to have led the country straight into something which risks being downright catastrophic.

Comments
18 comments so far

I’m sorry, but I don’t follow. While I am sure this would’ve gone differently had the debate been held then, I really don’t see the point in blaming this on Reid’s political incompetence. The reason why this has turned into a crisis is because Obama wants to push through his beloved gutting of SS and medicare, along with a few token tax hikes to be able to pretend he’s “really” a Responsible Liberal, while the other side just wants the cuts, but without being willing to accept even token tax hikes. Neither of these things has much to do with Reid, so the fact that Klein is focusing on that, rather than on the unprecedented scope of the cuts Obama wants to make to social security and medicare ($3T) should worry Klein’s readers.

On a related note: Matt Taibbi is asking how it is possible that nobody is talking about the tax repatriation holiday that is part of the debt ceiling debate now has bipartisan support, even though everyone knows it only benefits corporate America: http://www.rollingstone.com/politics/blo gs/taibblog/evil-corporate-tax-holiday-g ains-bipartisan-support-20110726

Posted by Foppe | Report as abusive

(Obama’s promise to gut — or, as he puts it, ‘make more responsible’ — social security is mentioned here: http://www.washingtonpost.com/wp-dyn/con tent/article/2009/01/15/AR2009011504114. html )

Posted by Foppe | Report as abusive

How about blaming the Republicans who are actually causing this fiasco?

Posted by 3oosion | Report as abusive

Perhaps it was not so obvious before that the Tea Party and new Republicans have a mandate that does not include well being of the USA and to have Government for the people and by the people.

The Republican agenda to destroy Obama and Obamacare has been heightened by the Tea Partyists agenda.

Foppe if the tax repatriation holiday is truly in there, it sounds like another shameless nod to corporations under the facade of making jobs. Tax cuts should only be for those Corporations who make jobs on American soil for Americans and not for sneaky &%$#$#$ Corporations who use the likes of Bermuda tax havens and cook their books to not pay taxes.

http://www.googlemonopoly.eu/index.php/2 011/07/19/cisco-wants-tax-repatriation-h oliday-will-create-jobs-but-now-massive- laying-off-employees/

http://www.rollingstone.com/politics/blo gs/taibblog/holiday-in-scambodia-2011072 0?link=mostpopular1

Posted by hsvkitty | Report as abusive

Speaking of own goals, there’s a tactical element in play now that it seems to me the parties may be getting wrong.

Democrats (well, Obama in particular) want to raise the ceiling high enough to cover expected borrowing through the 2012 election; Republicans want to raise it some, but force a reopening of this discussion next year. Polls suggest that Republicans are getting more of the blame than Obama is for any impasse. It seems likely to me that that sort of blame is likely to be attributed and remembered for a little while, but perhaps not 15 months; in 15 months, the episode will be further in the past, and the general tendency to blame the President for current conditions seems likely to take hold. It seems to me that if we do go past the brink, fallout that lasts until next fall is likely to hurt Obama, whether he gets more than half of the blame now or not; if a deal gets passed with little long-term fallout, everyone forgets about it in 15 months. A similar situation next spring would have different ramifications; it’s easier for Obama to make blame stick elsewhere up through the day after the first Monday in November.

Posted by dWj | Report as abusive

the house had the gephardt rule, which said that a vote for a budget was also a vote for a debt increase. the house abandoned it in 1995 and this year, and what happened – debt ceiling cisis? Both in 1995 and now that was the plan. The house was looking for a fight, Reid knew it.

I know it seems strange, but IMO Reid is winning. the dems have managed to paint the tea party house as intransigent right wing nutbags, and Obama as a centrist. Perfect going into the election!

On the plus side, tea party is mostly bluffing IMO. maybe the right wing wants us to believe that they really think there will be no impact from a default. maybe a few actually believe this. But quite a few won by a slim margins and I doubt they will stake their future on it when push comes to shove. It’s a great bluff! The dems are *counting* on the tea party to overplay their hand, which it looks to me like they just did.

Posted by dwb3 | Report as abusive

Reid didn’t foresee crazy.

Reid went to GW Law. The law is based on foreseeability and reasonableness. Crazy is almost by definition unforeseeable and unreasonable. That is unless you follow Charles Manson’s dictum, “No sense makes sense.”

Posted by jomiku | Report as abusive

Well I guess Reid made two mistakes if this is true. One he let go til later, which is not really a big dea. And two, the big deal, he assumed Republicans were human, sensible, intelligent, and decent. Just like most people. That is were he made the big mistake. Somehow, he thought that Republicans would be patriots and would never have imagined there would be this kamikaze attack on the President. One that leaves the American economy, the world economy and especially the American people as just so much collateral damage. Frankly this is not something that I blame any one person for. I do blame a whole group of people, mostly ther right wing Republicans and also Boehner and Kantor, who have offered extremely poor leadership. Indeed they have been the anti thesis of leaders. They are trying to satisfy the lowest theoretical and ideologic common denominator in their so called party. And that is what is “at fault” and leading to default. God help America, theis whole act and all the players are showing just how far into Wonderland America has gone and how intractable her political problems have become.

Posted by paulstewart | Report as abusive

Harry Reid, like President Obama, most of the rest of the Democratic Party and virtually our entire punditocracy and Media Elite, still harbor delusions that Republicans are sensible and rational people.

But they are not. The Republican Party is dominated by zealots, and those few sane Republicans left in Congress are out-shouted and out-maneuvered by the Tea Party nuts. There is no such thing as a moderate Republican any more because even those few that exist must do the bidding of their increasingly volatile, angry base of nutters.

Yes Harry Reid miscalculated but so did every other Democrat and so does our media on a daily basis. Those of us who have been saying this for months now are never listened to, we’re discounted as a fringe element. Wake up and smell the coffee, people. The GOP is dead, and in its place we have zealots.

Posted by SouthernBeale | Report as abusive

SouthernBeale: have you read this recent Glenn Greenwald column: http://www.guardian.co.uk/commentisfree/ cifamerica/2011/jul/21/barack-obama-soci al-security-cuts
or this post by Auerback: http://www.nakedcapitalism.com/2011/07/m arshall-auerback-worse-than-hoover.html
or this post: http://www.commondreams.org/view/2011/07  /24
Because you’re wrong to note that only the GOP is ‘dead’. Both parties are.

Posted by Foppe | Report as abusive

Harry Reid punted on both the 2011 budget AND the debt ceiling; the least he could have done with Nancy Pelosi, was to try to bring both to votes, and force Republicans to register their votes to block legislation. It would have changed the narrative this year preventing Republicans from claiming that Democrats neglected their duties to the US.

Posted by GRRR | Report as abusive

Blame him for setting a trap for the Tea party to step into? There would have problems one way or another as no one can keep the determined from them.

Posted by MyLord | Report as abusive

Who will lose in the event of a debt default and economic crisis?

*Every single incumbent
*The idea of a responsible representative government
*Law and order

These are huge stakes, and it is ridiculous of either party to think they can game the system. It will collapse on top of both of them.

Posted by LadyGodiva | Report as abusive

He’s from Nevada (sin city) what do you expect? Look at Nevada’s stats-they’re #1 in nearly every category (social and finacial ills) No best practices to be had from these folks!
Over $10 Trillion in deficits is projected for the next 10 years and here’s the last 10:

2011 $1,500 Billion
2010 $1,300 Billion
2009 $1,400 Billion
2008 $240 Billion
2007 $161 Billion
2006 $248 Billion
2005 $319 Billion
2004 $412 Billion
2003 $374 Billion
2002 $159 Billion

What’s wrong with this picture?

Posted by DrJJJJ | Report as abusive

“Harry Reid, like President Obama, most of the rest of the Democratic Party and virtually our entire punditocracy and Media Elite, still harbor delusions”

At least that much of your statement is true. Democrats are most surely delusional. They really do believe that they are right and that the other side is evil. We on the other side however do not think you are evil, just stupid and delusional.

Obama and the completely Democrat controlled Congress put us on the path of deficit spending to the tune of 4.1 Billion dollars per day. Now they are fighting every effort to bring the spending under control. This cannot be blamed on Bush by any rational person so I conclude delusion. Obama and the completely Democrat controlled Congress increase the national debt by more in two years than Bush did in his entire eight years. Again, no rational person can blame this spending frenzy on Bush so again I conclude delusion.

Please, please , please stop drinking the koolaid or whatever it is that is making you so delusional and help save this country by voting Obama out before he and your delusions ruin this once great country.

Posted by Stock-MD.com | Report as abusive

Dr.JJJJ,
I am pretty sure the question is retorical but since we are dealing with so much delusion on the Democrat side, I feel compelled to answer it for them.

The problem is the last three years listed, which by the way are Obama’s years, and the ridiculous deficits.

Posted by Stock-MD.com | Report as abusive

Stock-MD.com, republicans are very adept at trying to fit square pegs into round holes.

How quickly you forget that Bush was not in a recession, had a balanced budget, gave tax credits whilst going to war, indulged in 2 fake wars to appease his father and his oil cronies, and happily washed his hands of his mess as he handed the reigns to Obama as the recession hit.

You may feel compelled to repeat your partisan prattle, but it wasn’t simply the last 3 years… Bush inherited a budget surplus which he squandered. Go back in time and let Bush hand that same inheritance to Obama, than you can give Obama the blame.

Otherwise, I would place a lot of the blame at the feet of Congress, who are actually responsible for the budget, REVENUE in the form of taxes, jobs and responsible spending.

Posted by hsvkitty | Report as abusive

America is under taxed. Remember that the biggest issue in the 2000 election was what to do with the budget surplus. Obama is right to want the upper brackets to return to the Clinton era. He’s wrong to exclude the supposedly suffering middle class. Half the revenues lost due to the cuts came from those coming from the middle class. America’s tax system is relatively progressive – it’s just too low. (Only in Obama-land is someone making $150,000 a year considered in the stressed-out middle class. Ridiculous.) Raise the rates across the board (the poor won’t pay anything anyway) and it will help a lot. As it stands the US taxation rates are the lowest in the industrial world: but our political desire is right up there with the Euros. Cut the budget for sure, but raise taxes on everyone.

Posted by ebergerud | Report as abusive
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