Lessons from the Debt Ceiling Crisis: Bipartisanship in the Tea Party Era

(originally published September 6, 2011)

On the day that the bipartisan debt ceiling deal was announced in August 2011, the flurry of comments from lawmakers included two that stood out, both for their candid assessments of the agreement, and for the stark contrast between them. While Speaker John Boehner (R-OH) declared that, “I got 98% of what I wanted; I’m pretty happy”, Rep. Emanuel Cleaver (D-MO) lamented that the deal amounted to a “sugar-coated Satan sandwich”. The two views could not be more diametrically opposed.

They illuminate the disequilibrium within the final deal, despite President Obama’s determined efforts to craft a balanced solution. They show the absence of bipartisanship in the content of the deal, even though the looming consequences compelled bipartisan votes for final passage.

This outcome was principally due to the obstinate position of the Tea Party faction in the House (rather than Republicans in general). Their actions also troubled many Republicans who were concerned about the consequences of inaction. The Tea Party’s role displays the power of a sizeable extremist faction to reject bipartisanship and impose its demands at any cost, in this case jeopardizing the nation’s credit rating and overall economy, with ominous future implications.

How could such an outcome have occurred in the era of President Obama’s tenacious emphasis on bipartisanship and post-partisanship as cornerstones of his Administration and its policies? Does this mean that bipartisanship and post-partisanship are antiquated concepts? What does this portend for the prospects of bipartisanship in the future, starting with the “super committee”?

Factionalism Surpassed Partisanship in the Evolution Toward a Deal

Among the many twists and turns leading up to the resolution of the crisis, a few dynamics which curtailed bipartisan efforts were paramount in the evolution of the final deal:

• The Tea Party faction in the House Republican Caucus took an extreme position, maintained uncompromising allegiance to that position, used their leverage as a voting bloc, and refused to negotiate on anything that wasn’t in their wish list, even refusing to consider compromises proposed by Senate Minority Leader McConnell, the Simpson-Bowles Commission, and the conservative Republican Senators in the “gang of six”.

• In contrast with battles between opposing policies (which lead to compromises among policy options), the Tea Party faction shifted the terms of debate to a battle between Democratic policy and the Tea Party’s unwillingness to negotiate at all. Their notion of compromise was to require total capitulation by the Democrats on the substance of the bill in exchange for the procedural concession of allowing a bill to proceed. They simply did not care if there was no action on the debt ceiling, and, regrettably, those who don’t care have a tactical advantage.

• The Tea Party House-members co-opted the agenda of grass roots Tea Party activists to advance a different agenda. Whereas the objective of the grass roots movement is to get the government’s fiscal house in order by reducing the debt and eliminating borrowing for deficit spending, the objective of many in the House faction is to minimize – some would say deconstruct – the federal government. Rep. Cantor’s call for FEMA disaster aid to be offset by cuts in other programs exemplifies this. The objective of the grass roots activists can be achieved through balanced solutions (combining spending reductions and revenue enhancements), while the House faction’s objectives are thwarted by this approach.

• Speaker Boehner and Minority Leader McConnell understood the importance of raising the debt ceiling, and the dire consequences for the country and the economy if it were not raised. Although McConnell’s workable solution and Boehner’s negotiations with the President did not come to fruition, their influence was vital in reaching the eventual agreement. Yet, in the months leading up to the August 2nd brink of disaster, they utilized the Tea Party members’ intransigence to strengthen their own bargaining leverage, which intensified the impasse.

• Once it was clear that Tea Party faction was not willing to negotiate or compromise on any elements that were critical to a balanced solution, Speaker Boehner faced a choice between advancing legislation that could be supported by a coalition of (a) the Tea Party members and the rest of the House Republican Caucus (many of whom recognized the perils of an extended crisis), or (b) the majority of House Republicans and the House Democratic Caucus (as well as the Senate Republicans and Democrats).

• Speaker Boehner chose to advance legislation with a coalition of Tea Party members and the other House Republicans, even though he knew it wouldn’t pass the Senate. His bill (prior to the final deal) met all of the Tea Party members’ escalating demands, from the inclusion of a balanced-budget amendment to the exclusion of any revenue increases, without any compromises. Yet, in the Tea Party’s eyes, it was a compromise, simply because it included a rise in the debt ceiling, which is normally non-controversial.

• The net result is that the Tea Party members first caused the problem and then castigated President Obama for presiding over a problem. The Tea Party faction entered an arena that was always governed by certainty, injected uncertainty into the process, and then wailed about businesses facing uncertainty. Their rebukes are disingenuous at best, since the Tea Party faction created the problems which it claims to abhor.

Lessons Learned for Future Bipartisanship

Some suggest that the prospect for future bipartisan / post-partisan efforts (both procedurally and substantively) has been debilitated, since the politicization of the debt ceiling sacrificed problem-solving in favor of ideology. But that view disregards the evolving nature of bipartisanship, the lessons learned, and the opportunity for progress. Bipartisanship remains possible, following adjustments that have been necessitated by the Tea Party faction’s tactics.

Bipartisanship based on rational policy, pragmatic problem-solving, and a spirit of goodwill should give way to a revised practice of bipartisanship based on the exertion of strength and strategic leverage. In the new incarnation, the fundamental tenet of collaboration – that all parties will be sensibly motivated by mutual benefit to negotiate toward pragmatic results for some of their desired outcomes – should be replaced by a real politik principle – that political power must be used to pressure parties to negotiate in good faith. At that point, benevolent negotiations can ensue in which parties relinquish some ground to achieve bipartisan prioritized objectives.

The lessons learned from the debt ceiling debacle include the revised approach to bipartisanship and a number of mechanisms that could enhance bipartisan outcomes, even when legislative efforts are obstructed by the intransigence of the Tea Party or other factions:

1. When the Tea Party politicizes or intensifies an issue, the President could develop and publicize a purist solution of his own that could be implemented by Executive Order, which he keeps in his back pocket in deference to bipartisan solutions. Doing so will show the Tea Party what could happen if they do not join bipartisan negotiations in good faith. It will motivate their participation and minimize their intransigence. Since those who do not care about inaction have a tactical advantage, this approach will give the Tea Party faction an incentive to care and negotiate meaningfully.

2. When the Tea Party faction makes an issue contentious, others should link the issue’s underlying policy and values with the grass roots Tea Party activists’ principles. By linking the two, the Tea Party House-faction’s obstruction of progress on the issue would make them vulnerable to criticism from Tea Party activists that they are violating their own principles. The inherent inconsistency would also illuminate ulterior motives.

3. When Tea Party members are intransigent, Democrats should welcome other Republicans, whose goals or values are obstructed by Tea Party positions, as negotiating partners. Focus should be on areas of potential common ground, where a failure to act would pose tangible risks). This could isolate Tea Party members, transcend their opposition, encourage them to come to the negotiating table, and achieve substantive results where consensus is possible.

4. Speaker Boehner has relented to the Tea Party faction to hold his caucus together, both for party unity and to solidify his position at the helm. Yet, he also has an interest in Republicans not being seen as extremist, retrogressive, and dogmatic, which could alienate Independents and swing voters. When facing Tea Party extremism and intransigence on major issues, he should craft bipartisan coalitions rather than allow the Tea Party faction to drag other Republicans into precarious positions. By reaching across the aisle instead of succumbing to Tea Party demands, he can advance solutions and sound policy with broader benefits.

5. In addition to a legislative or “inside” strategy, a public opinion or “outside” strategy can focus public attention on the risks to individuals, families, and businesses of relenting to Tea Party recalcitrance. Outside-strategies could target the districts/states of key legislators and clearly communicate the benefits of stymied legislation, especially when bipartisan values are at stake. Public support can urge Republicans to repel policy and political risks of inaction and obsequiousness to Tea Party agendas. Democrats and Republicans can even collaborate when Tea Party members threaten basic principles or vital programs. Tea Party members may not need the support of independents and swing voters, but many other Republicans do.

6. The outside-strategy can also expose the motives, extreme positions, and intransigence of the Tea Party faction by drilling down to granular explanations of their underlying goals, and the short- and long-term consequences that their policies would cause. Critiques should impose transparency and accountability on the Tea Party faction, enhance scrutiny of its judgment, and increase pressure on others for bipartisan, balanced solutions.

7. The Senate leadership sometimes foregoes floor votes due to the likelihood of Tea Party-led filibusters (and insufficient votes for cloture). Yet, deferring floor votes sends the wrong message. Senate leaders should bring legislation – especially when crafted with bipartisan input – to a vote, even if there will not be enough votes to proceed. In the debt ceiling crisis, doing so would have shown: (a) the efforts being made to find bipartisan common ground, (b) the policy solutions that could be adopted if intransigence were overcome, (c) which Senators are willing to take action, and (d) the Tea Party’s hold on Republicans, forcing them into obstructionist roles as “the Party of No”. The McConnell-Reid and Gang Of Six proposals could have been advanced in this way, intensifying pressure for a bipartisan solution.

8. Once the Senate brings up legislation, if it is halted by a filibuster, then its opponents will be identified and their motives will be on full display, facilitating an outside-strategy to mobilize public support. A filibuster is not a failure, but rather a speed-bump en route to the next stage of the process. If legislation reaches a vote and passes in the Senate but the House refuses to pass a bill that can send the legislation to a conference committee, then the Senate’s passage of its preferred policies still strengthens the President’s position, enabling him to convene a bipartisan group of Senate and House leaders to negotiate a solution.

The “Super Committee” for Debt Reduction

The “super committee” for debt reduction is an unusual construct with unique rules and incentives for action. The trigger will be a “sword of Damocles” that encourages its twelve members to find common ground for bipartisan solutions. Numbers 2 through 6, above, could play an important role and foster mutual respect. An outside-strategy, by which public support urges balanced bipartisan policy choices and illuminates the Tea Party’s objectives, can reinforce the need to choose options that distribute the fiscal pain of debt reduction fairly. As the “super committee’s” work product will affect every American, it is essential for their work to reflect the public’s sensibilities for fairness and not impair those who are lower on the socio-economic ladder.

The Challenge of Bipartisanship Going Forward

The debt ceiling crisis exemplified the challenges faced by those who seek to instill a bipartisan or post-partisan ethic of cooperation. Despite the set-back, prospects for bipartisanship remain, and may be more necessary now than ever before. It should, however, be viewed through a different lens. In contrast with bipartisanship motivated by Republicans’ and Democrats’ good faith cooperation to advance shared values for the common good, the Tea Party’s tactics necessitate the use of power politics to soften recalcitrance, compel bipartisan negotiation, and, at that point, collaborate to advance vital mutually-held objectives.

In essence, instead of starting off on a bipartisan path based on mutual respect and trust, given the current political climate, it seems necessary to work up to it.

Would the Sunset of the Bush Tax Cuts Be the End of a Tax Holiday or the Start of a Tax Hike?

As Republicans resurrect their favorite mantra in seeking to reduce taxes for the wealthiest Americans, the debate on the Bush tax cuts is escalating. It includes the economic debate over the impact of the tax reductions for high-income earners, and the political debate over the message that would be sent by either extending the cuts or allowing them to expire. Proponents must prove that the tax cuts will achieve their intended economic impact, and the tax cuts must not be mischaracterized for political purposes. With the midterm elections upcoming soon, there is a partisan overlay to this issue which deflects bipartisanship, and the issue must be addressed in this context.

The Economic Debate: Are Tax Cuts For the Wealthy Effective?

The economic debate is essentially an anachronism, the latest progeny of the “trickle-down” principles of Reaganomics. Republicans suggest that high income earners need the tax cuts to feel financially comfortable enough to invest in business, which then creates jobs and stimulates the economy. But this view is inherently flawed, and there are better alternatives to achieve the desired impact.

First, these tax cuts are based on a self-serving argument that was concocted years (maybe generations) ago – by the wealthy, for the wealthy – to justify their accretion of largesse. The “indirect benefit” notion is a messaging smokescreen, rooted in elitist ideology, which asserts that giving cake to the wealthy will enable others to gather some crumbs. If the ultimate objective is to help the non-wealthy, then such support should be provided to them directly.

Second, with or without tax breaks, high-income earners will invest where they find a good return-on-investment, which is driven by the business sector’s ability to attract investment through sound business practices. High-income earners already can accelerate the economy through investment of their vast resources, and their desire for good investments is not dependent upon a tax cut. Putting more tax cut dollars in their hands does not mean that they have to invest their money at all, thus negating the “trickle-down” assumption. They make their choices based on what is best for them, not what is best for the economy.

Third, a tax break for the wealthiest 2% of people is not the same – and not as effective – as a tax break for businesses. The proposal is for personal tax cuts, to individuals, and most high-income recipients do not personally own a business. If the goal is to stimulate business and economic growth, then the tax breaks should be directed to small and medium sized enterprises (SMEs) which fuel local economies, and which would then be able to hire more employees and grow their business. For even greater impact, Federal stimulus dollars can be applied to infuse capital much more directly into businesses and the economy.

Fourth, the suggestion that the Bush tax cuts for the upper 2% of earners cause sustainable economic growth is absurd. If they did, then our nation would not have faced economic collapse in 2008.

Tax cuts for the middle class and low-income Americans have a much more salutary effect on the economy. They boost consumption and broad-based consumer confidence, directly bolstering economic growth, which is why President Obama seeks to extend these tax cuts. Continuing tax breaks for the middle class would also spur investment, including in the business sector, with an economic impact like investment from high-income groups (i.e., less investment per capita, but from vastly more people), and more families would reap the benefits directly, rather than scavenging for crumbs.

Tax cuts for SMEs would also have a much more direct impact on economic growth than tax cuts for the wealthiest 2%. The latter would accrue to individuals who may or may not invest any of the money, and may or may not invest it in American-owned companies. A tax break for SMEs would directly accrue to businesses that could then hire employees, purchase capital goods, extend the reach of their marketing efforts, and take other actions that would directly grow the economy.

In short, the Bush tax break for high-income earners is bad economic policy that does not achieve its stated objectives. There are more effective means toward economic and job growth.

The Political Debate: Would It Be the End of a Tax Holiday or a Tax Hike?

The Bush tax cuts were designed to expire. Even many Republicans realized it was bad policy to make them permanent, causing President Bush to institute them through Budget Reconciliation, which limited their duration to ten years. So, since they would need to be reauthorized in order to continue, would the decision not to continue them be sound fiscal policy and social fairness, or a tax hike?

Republicans suggest that a decision not to extend the tax cuts for high-income earners would amount to raising taxes. Democrats suggest that the tax cuts were designed to expire, and that their expiration is merely the end of a tax holiday.

First, since these tax cuts were only a temporary benefit, arguing that they must be extended is tantamount to trying to create a de facto entitlement for high-income earners. The proposition of creating an entitlement for those who need it the least is prima facie unfair, unnecessary, and presents a stark irony (some might say inconsistency) in light of pervasive Republican aggression against entitlement programs for disadvantaged Americans.

Second, the business and investment communities quest certainty for planning and fiscal management. As Mayor Bloomberg put it recently, “…uncertainty is not good. You don't make spending decisions, investment decisions, hiring decisions…when you don't know what's going to happen.” Yet, the tax cuts for high-income earners provided such certainty, i.e., that the tax cuts would expire at the start of 2011. This was clear in the law that created them, and it enabled the beneficiaries of the tax cuts to plan accordingly Belief that the tax cuts would continue beyond 2010 is somewhere between wishful thinking and pure fantasy. Thus, it is a fallacy to suggest that not extending them equates to a tax hike.

Third, many who are calling for the extensions of the tax cuts for the upper 2% of earners are the same people who object to rising government spending by agencies that have their budgets increase but never decrease. They complain that a new, temporary budget increase does not entitle the agency to expect the same level of funding (or more) in the future. Yet, when it comes to tax cuts, they violate their own principles, by arguing that a temporary tax break should create an expectation of permanence.

Fourth, the Bush tax cuts triggered the decimation of the 2000 budget surplus and the upward spiral of the annual deficit, surpassing a trillion dollars by the end of the Bush presidency. Many opponents of the Bush tax cuts cited the impact that such an enormous giveaway would have on the national debt, and hence, on the American economy over the long term. With debt reduction being so urgent now, continuing to drain the Federal treasury by giving tax cuts to the highest income earners – which would necessitate borrowing to pay for them – would be irresponsible at best. In fact, it could destabilize our economy for decades to come, as an exorbitant share of Federal dollars are allocated to paying the debt service, rather than providing services to Americans. Even the proponents of these tax cuts recognize the debt problem and call for deficit reduction. Their call for tax breaks is inconsistent with their own stated priorities, thus illuminating the purely political objectives of alleging a tax hike.

Therefore, it is illusory to suggest that honoring an intended sunset of a tax break would amount to a tax hike, and a claim to the contrary is a mischaracterization. A tax holiday was given to high income earners, and insisting that it be extended is like requiring Macys to extend their Presidents’ Day sale.

The Bottom Line

Congress may still choose to offer new tax cuts to high-income earners. But it must first be fully satisfied that doing so would stimulate the economy in the manner and to the extent that its proponents allege, and that there are not other alternatives that would be more effective in achieving the desired results. This is a high bar to hurdle. If the economic and political factors are applied objectively, these tax cuts will fall short.