Up Front

Web Chat: Winners and Losers in the Federal Budget and Debt Debate

Darrell M. West

Recent polls show that partisan wrangling over raising the nation’s debt limit and the broader budget debate has harmed the approval ratings for both members of Congress and President Obama. But when the smoke clears, who will be held responsible for the success or failure of the negotiations to avoid the first default on financial obligations in U.S. history?

On July 27, Darrell West took your questions in a live web chat on the potential winners and losers in the blame game over the federal budget impasse.

The transcript of this chat follows.

12:30 Erika Lovley: Hi everyone, welcome to the chat. Let’s begin.

12:30 [Comment From Randy: ] The million dollar question. Will the 2 parties EVER put politics aside to get this done? It’s an awfully dangerous game of chicken.

12:32 Darrell West: It is a dangerous game. As my Brookings colleague Bill Gale points out, the debt ceiling has been raised 74 times since 1962 and 10 times since 2002. But these are no ordinary times. The parties are going to have to put their respective electoral interests aside if there is to be an agreement.

12:32 [Comment From Clem Dinsmore: ] Are not the principal losers those in the Congress, who are most uncompromising in their positions especially the Tea Party caucus members and Republican Study Group in the House and equivalent persons in the Senate? They may not be losers in their districts but are the members, who are most likely faulted by others in our country.

12:33 Darrell West: ABC News and the Washington Post have been polling the question of voter perceptions about the parties. They found that 77 percent of Americans felt Republican leaders have not been willing enough to compromise, while 58 percent felt that way toward President Obama. So many more people feel Republicans have been overly rigid in their policy stance than the president.

12:33 [Comment From Guest: ] How real is the possibility that social security checks may not be issued? The fact that many government obligations to write checks on August 3 has been pushed to the back burner. Yet many people are anxious about what could truly happen! The media tends to think this is not important. Yet it would be a legal default and a serious default for 50 million people who apparently do not matter.

12:35 Darrell West: There is a real possibility that social security checks, military pay, state and local government, and thousands of businesses across the country won’t be paid in a timely manner if there is no agreement by next week. It would be absolutely devastating to the overall economy as well as the affected individuals and businesses for this to happen. Our leaders simply have to reach an agreement!

12:35 [Comment From Stacey: ] How strong is the “who should pay” aspect of this debate? I don’t feel like I’ve heard enough analysis of regressivity vs. progressivity in the tax code, especially as burdens are shifted in ultimate hour deals?

12:37 Darrell West: The question of “who pays” is central to the budget debate. In any budget battle, there are winners and losers. The public has pretty clear views on the various options. In the ABC/Washington Post survey, 26% supported cutting Medicaid spending, 43% wanted to cut military spending, 46% wanted to gradually raise the Medicare eligibility age from 65 to 67, and 72% preferred raising taxes on Americans with incomes over $250,000.

12:37 [Comment From Becky V.: ] Do you think Obama has done a good job of getting both sides to the table? Or do you think the lack of a deal is an example of poor leadership?

12:39 Darrell West: The president has gotten congressional leaders to the table on many occasions, but has not been able to negotiate an agreement. House Republicans are the big obstacle right now. It is clear that Speaker Boehner has lost control of his Republican Caucus. Every time he inches close to an agreement with the president, his Caucus cuts him off at the knees. Boehner is nearing the point where either he risks a default and relies on House Democrats to pass the debt increase and deficit reduction package.

12:39 [Comment From Rex: ] What do you make of Obama’s speech the other night and Boehner’s rebuttal?

12:41 Darrell West: On the Friday night press conferences, I thought Obama was as good as he was during the 2008 election. He returned to his populist roots and talked about the importance of protecting ordinary folks. In this week’s speeches, though, I was not as impressed. His speech was good at rationally explaining his position, but it didn’t have the same emotional wallop in driving his message home. Whatever happens this week, he needs to be clearer in his communications message.

12:42 Darrell West: With Speaker Boehner, I thought he didn’t do a very good job in the Friday night press conference in explaining why he was walking away from negotiations with the President. But he was clearer during his Monday night speech to the nation.


12:43 [Comment From Guest: ] What are the probable consequences of a AAA rating downgrade from a domestic perspective? Is the doomsday scenario as likely as some claim? With that, how likely would a downgrade be even without a default?

12:44 Darrell West: The consequences of a rating downgrade would be traumatic. Not only would interest costs rise (thereby complicating deficit reduction), but there will be a bitter partisan war over who lost the AAA rating. That is something the US has had for more than 70 years.

12:44 [Comment From Guest: ] Why are cuts the only option being considered? Why isn’t more revenue being sought from the wealthiest and the loopholes closed? It seems the scales are tipping in the favor of the rich while the poor are going to suffer more at the same time the middle class keeps slipping into poverty?

12:46 Darrell West: Spending cuts are the major option now because Republicans have been intransigent in ruling out tax increases. Even though voters support the idea of increasing taxes on those earning more than $250,000 and closing corporate loopholes on oil companies and other special interests, the GOP won’t budge. That view certainly will be a major issue in the 2012 election and voters will have their say on what it thinks of this stance.

12:46 [Comment From Hans: ] Is there anything we can do as Americans to put more pressure on our government to solve this issue??

12:47 Darrell West: People can call their member of Congress to express their views. That has happened this week and congressional offices have been flooded with phone calls and emails. If you have a particular point of view, now is the time to express it.

12:47 [Comment From Tom: ] Any predictions on the vote in the House tomorrow?

12:49 Darrell West: The vote tomorrow on Boehner’s package is complicated because several House Republicans already have expressed their opposition and outside groups such as the Club for Growth have attacked his plan. Democrats certainly will not support the proposal in large numbers. The question is whether the Speaker controls his own Caucus anymore and is able to deliver votes from his own party.

12:50 [Comment From Sam: ] Interesting point about Boehner needing Democrats to pass his own legislation. Does that give Pelosi any leverage at all? Or is he trolling for votes from moderates who don’t really listen to her anyway?

12:51 Darrell West: If Boehner has to rely on Democrats to pass a debt hike, that will give Pelosi and Hoyer additional leverage. They will demand a more moderate package in order to deliver votes from their side of the aisle. This strategy is something Boehner had to use a few months ago on the last budget vote.

12:51 [Comment From Roberto Gonzales: ] Is our political system broken beyond fixing? It seems to me that there’s a clear call from the public to avoid this disaster, and they can’t seem to make the compromises required. This is, in some ways, a manufactured economic crisis – the debt ceiling is arbitrary. If they can’t take action here, how can they hope to take action on even bigger budget questions?

12:52 Darrell West: When political leaders are not able to address a problem that everyone views has of crucial importance, such as raising the debt limit, you can say the system is broken. But it is not beyond fixing. There are many actions members could take to improve the system. Perhaps the debt crisis will galvanize some action on governance issues.

12:53 [Comment From Wes: ] How is the debt ceiling struggle going to impact Obama in the next election? How will it impact the republican candidate?

12:55 Darrell West: The current debate over the budget will be central to the 2012 election. Along with unemployment and the various wars, it is clear the two parties have very different views. Obama will say Republicans are political extremists who are out of the mainstream, while the GOP nominee will say the federal government is spending too much. I would like to hear more from the current Republicans candidates how they would handle the current crisis. Several of them have been noticeably quiet on this subject.

12:56 [Comment From Luciana: ] Mr. West, Luciana Coelho, with Brazil’s Folha de S. Paulo newspaper. There’s been much ado about the US having its ratings downgraded, even if a default is avoided. This would have domestic consequences on the economy. On the other hand, you mentioned delays in pension checks, veterans benefits as other possible consequences. Politically, which would be worse, if they can be dissociated? Thanks.

12:57 Darrell West: A rating downgrade would be devastating not just for its possible impact on the economy but because it undermines the global leadership role of the U.S. If we can’t handle a basic issue like raising the debt limit, other countries will conclude they can’t count on America as they have in the past on a variety of other issues.

12:57 [Comment From MaryElizabeth: ] If there is no Congressional agreement by August 1, what options does Obama have to raise the debt ceiling?

12:58 Darrell West: As a last resort, President Obama could use the 14th amendment to raise the debt ceiling unilaterally. But no one knows whether that actually is legal and there likely would be a court challenge to that course of action.

12:59 [Comment From ally: ] As a follow-up — what are the longer run governance issues here? Will this Congress be able to do anything? Pass trade pacts? Create jobs?

1:00 Darrell West: If Congress can’t raise the debt ceiling, it is going to be difficult to address all the other issues that are out there from the trade agreements to other areas of domestic policy. Congress needs to get its act together if it wants the respect of the American public.

1:00 Erika Lovley: Great, thanks everyone!