Web Chat: The High Stakes of the Debt Limit Negotiations

The stalemate over the debt limit persists as the clock ticks on the deadline for default. On July 20, Brookings expert William Galston answered your questions on the high stakes of the negotiations and the political and economic fallout in a live web chat moderated by POLITICO.

12:29 Erika Lovley: Hi Everyone, Let’s get started.

12:31 [Comment From Jim C. Kennedy: ] Would it have made sense for President Obama to insist from the beginning on a clean debt ceiling bill? Would that strategy have worked if Obama had stood by it firmly? (By “clean” I mean a bill authorizing the raising of the debt ceiling, period –no policy or budget or spending or cutting provisions attached to it.)

12:31 Bill Galston: That’s the strategy he pursued at first, but it quickly became clear that he couldn’t sustain it. He could have tried, but I doubt that it would have led to a better result.

12:31 [Comment From Raymond C: ] Moody’s is suggesting the U.S. eliminate the debt ceiling all together. What do you think about that?

12:33 Bill Galston: I’m in favor of that. To the best of my knowledge, no other country has an equivalent requirement. If Congress authorizes a certain level of spending and taxing, the Treasury should automatically have the authorization to issue whatever debt may be necessary to carry out the terms of the legislation.

12:33 [Comment From Raymond C: ] Similarly, former President Clinton suggests that Obama exercise the constitutional option and make the call himself without Congressional approval. Thoughts?

12:35 Bill Galston: That’s a tough one. The constitutional basis for doing that is shaky and has never been tested in court. Going down that path would lead to an uproar that would bring everything else to a halt for a long time, and you might even see an effort to impeach the president. Nonetheless, if I were sitting in the Oval Office on August 2 staring at a possible catastrophe, Id seriously consider doing it.

12:36 [Comment From Maria: ] If the debt negotiations fail, who do you think will shoulder the blame?

12:37 Bill Galston: The survey evidence I’ve seen suggests that the Republicans will be blamed more than the Democrats, because the American people want compromise and are more likely to see Republicans as the obstacle to achieving it. Obama’s stance is playing better with the voters than is either party in Congress.

12:37 [Comment From Wesley: ] Raising the debt ceiling seems like it has to happen. Are the American people generally for or against it?

12:39 Bill Galston: Opinion has shifted substantially. A month ago, most Americans opposed raising the ceiling. But today, it’s about even, and the percentage expressing fears about the consequences of not raising it is way up. In that respect, Obama is winning the message war.

12:39 [Comment From KL: ] If a debt ceiling agreement isn’t reached, what do you think the odds are that the government will furlough federal employees, if not immediately, at some point?

12:40 Bill Galston: Without an agreement, the government won’t have the money to pay federal employees, and most of them would have to be furloughed immediately, or within a few days.

12:40 [Comment From Patrick Roberts: ] If the House GOP rejects the “Gang of Six” budget deal, will this be devastating to Republicans’ chances in 2012?

12:43 Bill Galston: It won’t help. The Tea Party and its supporters amount to a quarter of the country, according to the latest surveys. Rejecting the Gang of Six approach would make them very happy but would antagonize the large middle of the electorate. The Speaker of the House may be faced with a fateful decision: to go with the majority of his caucus or to serve the long-term interests of his party.

12:43 [Comment From John Ericson: ] Your thoughts on the Gang of Six plan?

12:44 Bill Galston: From my standpoint, a large step in the right direction. Once we get the framework right, which the G6 plan does, the details can be worked out.

12:44 [Comment From Jennifer S.: ] I’m afraid I don’t see how the plan from the Gang of Six gets us any closer to the debt ceiling endgame. Is this hype? False hopes or real?

12:46 Bill Galston: That depends entirely on whether the House Republicans maintain or soften their current stance. If John Boehner wants to gamble with his Speakership, he could tried to lead a minority of his caucus to join forces with a majority of House Democrats to push it through.

12:46 [Comment From Mark, Greenbelt: ] The debt limit has been raised something like 75 times over the years. Why is it so different now? Is this the triumph of self-interested politics over any semblance of government responsibility?

12:47 Bill Galston: The two parties are more polarized today than they have been for more than a century, since the 1890s. What used to be easy is now hard, and what used to be hard is darn near impossible.

12:47 [Comment From Trex: ] is it Obama’s stimulus that jacked up the debt level so much? or our ongoing wars…perhaps both?

12:49 Bill Galston: That’s a long story. Without going into details, decisions made by both parties since 2000 have made things worse. But underlying these recent decisions is a longer-term fact: our society is aging, and programs for the elderly are rapidly expanding. That’s the major driver of alarming fiscal predictions for the next decade (and generation).

12:49 [Comment From Michael Stevens: ] If the debt ceiling is raised, could any states still default in the near future? If so, what impact would the default of one or two states only have?

12:50 Bill Galston: Experts on state finance with whom I talk regularly don’t expect any defaults. (There were almost none, even at the local level, during the Great Depression.) But many states are in for a few more tough years.

12:51 [Comment From Jim: ] Are there enough pragmatic Republicans in the House to win approval of any sort of genuine compromise plan (such as that of the Gang of 6), or have the non-compromising ideologues got enough votes to block any deal?

12:51 Bill Galston: That’s the $14 trillion question. Your guess is as good as mine. But we may have the opportunity to find out very soon.

12:51 [Comment From R. Rodriguez: ] It feels like this fight has been more about the prospects for re-election for all parties than anything else. Is there any chance the voters will remember what really happened by the 2012 elections? Will we see another “a pox on all their houses” election?

12:53 Bill Galston: If the election were held tomorrow, the “Pox on Both Your Houses” Party would win in a landslide. But if we get through this self-inflicted crisis without doing any more damage to ourselves, I suspect the focus will shift back to the real economy–growth, jobs, and inflation.

12:53 [Comment From J.B. Matthews: ] How much pressure do the recent polls put on congress to make a deal?

12:54 Bill Galston: More and more with every passing day.

12:54 [Comment From Harry Soames: ] KL asks a good question. We’ve all heard threats that people might not get their Social Security checks, but wouldn’t this mean a whole government shutdown again? If we don’t have money to pay our bills, do we have money to run the day-to-day operations of government?

12:56 Bill Galston: From August 3 to August 31, we’ll take in about $170 billion, versus about $300 billion in legal obligations. The Republicans want the Treasury Secretary to choose which obligations to honor. He says he doesn’t have the legal authority to do that. On August 3 alone, he’ll have $12 billion in his cash register but is scheduled to send out $23 billion in Social Security checks. What is he supposed to do?

12:57 [Comment From Sally: ] Do you think it’s possible to get to a deal with shared sacrifice – i.e., tax increases plus entitlement reform?

12:59 Bill Galston: That’s the underlying issue. Some Democrats oppose serious changes in Medicare, Medicaid, and Social Security, while others are willing to support such changes as part of a grand bargain that increases revenues. But the Democrats who are willing to compromise can’t do it by themselves. So once again, the behavior of House Republicans is the crux of the matter.

12:59 [Comment From John: ] Is the lack of cooperation in congress the worst display of partisan problems ever?

1:00 Bill Galston: A seasoned Congress-watcher and scholar, Norm Ornstein, has just published an article arguing that this Congress is the worst ever. It’s not easy to argue the contrary case.

1:01 Erika Lovley: Thanks for tuning in, everyone!