Deal Makers

An improving economy makes a government shutdown less likely than ever.

Barack Obama. Click image to expand.
President Obama

Will there be a government shutdown? No, but check back with me at the end of this sentence. Republicans and Democrats are negotiating in earnest, but figuring out whether they are making any progress is hampered by different kinds of complexity: about numbers, about policy, and not insignificantly, about politics. Not only do both sides have to agree on how much to cut and where to cut it, but each side hopes to improve its negotiating position by declaring in public that the other side is being misleading or inflexible.

In this sea of uncertainty, let’s haul out the scales and see what we know.

On one side, we have the many reasons a shutdown is likely. Senate Democrats and House Republicans might not be able to come to an agreement on the size of spending cuts and the so-called policy “riders” related to hot-button issues like funding for Planned Parenthood, the EPA, and Obama’s health care plan. Or maybe they will reach a deal, and House leaders of both parties will lose enough of their ideologues that there won’t be enough votes for the compromise to pass. Or, time could simply run out. The deadline is April 8, but to make good on the House promise to post all bills three days ahead of time, a deal has to be worked out by April 5.

On the other side, arguing against a government shutdown, is one big reason: the economy. It’s getting better. On Friday the Labor Department announced that 261,000 new jobs were created last month. That’s 500,000 in the last three months. Policy makers on both sides believe that shutting down the government could risk the recovery, and no one wants to get stuck with the blame for that. There are plenty of theories in both parties about how they can turn a shutdown to their advantage, but leaders in both parties really don’t want to risk it.

Is there a logical connection between a shutdown and the health of the economy? You can argue that interest rates are low because the market thinks that, when push comes to shove, Congress and the president will find a way to work toward a balanced budget. When a shutdown proves markets wrong, they will charge an Irretrievably Incompetent Premium (IIP), causing rates to rise. That will increase borrowing costs for business.

Whether any of this makes economic sense doesn’t matter. The president and House Republicans have been arguing about economic fragility for so long that, as a political matter, the relationship between the economy and a shutdown is a certainty. President Obama cited the fragility of the economy as a reason to extend the Bush tax cuts. The health of the economy will be the single most important factor in the president’s re-election. He can’t risk a shutdown. That’s why Chief of Staff William Daley called Boehner this week to move the deal along. According to one source familiar with the details of the conversation, Daley said the president would support significant cuts but wanted to see the final compromise largely free of policy riders.

The president also knows the economy worries Boehner. On the good news about employment, Obama used the opportunity to send a little shot across the bow. “Given the encouraging news we see today on jobs, it would be the height of irresponsibility to halt our economic momentum because of the same old Washington politics,” he said in a statement.

Republicans have argued for months that the economy is hurt by uncertainty. Shutdowns create uncertainty. If the GOP is blamed for creating uncertainty, it can hardly argue with the premise.

Negotiations are at the barroom-and-backroom stage. Lots of people in the barroom yell and accuse each other of bad faith and lack of seriousness. In the backroom, the real work goes on. Leaders from both parties negotiate about the size of the cuts and the riders. They’re connected by a seesaw that is driven by what each side can sell to its members. If the riders are watered down or eliminated (as many Democrats want), then Republicans are going to need a bigger total number in cuts to sell to their side. Occasionally the spectators out front pound on the door, and someone from one of the two sides negotiating comes out to please the crowd with partisan talk. Then he returns to the hard business of negotiating.

This week has been consumed with a public fight over whether in the backroom a deal was reached over a “target number” of spending cuts. Democrats say there was a deal. One reason it is important to insist on this is so that if negotiations break down, they can say Republicans were just too ideologically rigid. Boehner has insisted that no number was cast in stone, and that he and Republican leaders are fighting to wring every spending cut they can out of the negotiations. Boehner would like the cuts to be as large as possible. That’s his policy preference, and it’ll make his ultimate sales job easier. But since he knows the total cuts won’t be as big as some House Republicans would like, he knows they might accuse him of selling out too early, so he must work extra hard to show he’s shedding his last ounce of blood to get a deal with spending cuts as large his conservatives want.

The fact that negotiations are even taking place helps Democrats with a previous political problem. When the debate over funding government for the rest of the year started, Democrats felt pressure because Republicans had characterized them as unwilling to cut government in the slightest. But now Democrats are now considering substantial cuts in this fiscal year, which means this is no longer an argument about whether to cut but what to cut. Republicans may still win that fight, but it’s a harder one, because it devolves into a comparison between actual programs to cut.

If there eventually is a deal that Boehner has to sell to his conservative members, he will rely on a variety of arguments. The first is that they’re winning. Whatever the deal is, it will be far more in cuts than Democrats originally said they’d go for. Second, he’ll argue that Republicans need to show they can govern by meeting their commitments to keep government open. The third is that if they have to go hunting for Democratic votes, that will require making the bill more attractive to Democrats, which will necessarily be less conservative. And Friday Boehner offered a new one: A shutdown will actually cost the government because of broken contracts. 

Boehner can also argue that Republicans will be able to continue the fight to shrink government next week when they begin debate on federal spending for the coming decade. House budget chairman Paul Ryan is expected to offer a budget Tuesday that should please fiscal conservatives.

As Boehner negotiates, he is keeping some important numbers in his head. He can lose 23 members of his caucus before he has to start depending on Democratic votes. Democrats have been pushing the idea all week that the crazy Tea Party members will desert Boehner en masse, which means even if he can agree to a deal, it won’t pass the House. As my colleague Dave Weigel reports, the caricature doesn’t fit. One senior House aide said that it’s possible there will be enough in the compromise so that Boehner can make the sale to his caucus without needing Democratic votes. (This would be the equivalent of an inside straight in poker.)

If he does need Democrats, there are 29 fiscally conservative Blue Dogs who might be available. If he gets all of them, he can lose 52 members of his caucus. He lost 54 the last time he asked his members to temporarily fund the government. Some of those conservative members might get back onboard now that the stakes are higher. On the other hand, as one veteran Republican vote-counter pointed out, they’ve all been home since that vote and been heralded as heroes for sticking to their principles. In the end, Boehner will have to rely on the president and Democratic leaders to persuade their members to join in. 

The speaker is also keeping some other things in mind. He doesn’t want to fail on his first big test as speaker. A shutdown would be a failure. He also doesn’t want to be seen as a captive of the Tea Party-backed members of his caucus. This would make him look weak. Also, the Tea Party is unpopular, as a CNN poll out this week pointed out.

Late Friday afternoon, Senate Democrats were continuing the barroom portion of the theater, accusing Republicans of being fixed on “these ridiculous riders,” as Senate Majority Leader Harry Reid put it. Still, he said, progress was being made but more slowly than he’d like. There is a possibility that if the deal isn’t reached until later next week, the House three-day deadline might require the government to shut down for the weekend. Or, a temporary funding resolution might come up that funds the government for a couple of days. 

If a government shutdown is averted, it will be the third time the fears about a crisis will have been unfounded. The reason will have been the same all along. Despite all of the talk and threats of a government closure, both sides have always known that a shutdown would be disastrous for everyone.

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