Obama's refusal to negotiate on debt ceiling: Smart or risky?

With the wacky trillion-dollar-platinum-coin idea now officially off the table, Washington is back to its never-ending game of chicken over the debt ceiling.

President Obama has not budged from his stark line in the sand: When it comes to the debt ceiling, he will not negotiate. Period.

In a press conference Monday, he reiterated this position, stating: "Republicans in Congress have two choices here. They can act responsibly and pay America's bills. Or they can act irresponsibly and put America through another economic crisis. But they will not collect a ransom in exchange for not crashing the American economy." 

Mr. Obama made clear – as he did during the 2011 debt-ceiling crisis – that raising the debt ceiling "does not authorize more spending; it simply allows the country to pay for spending that Congress has already committed to." The difference this time around, however, is that while Obama says he's ready to have a "vigorous debate" on debt reduction, he also says that debate must be separate from Congress taking action on the debt ceiling. And if Republicans decide to block such an action, the consequences will be all on them.

The problem, of course, is that Republicans are taking an equally firm stand. House Speaker John Boehner has vowed to raise the debt ceiling – which could hit its limit as early as mid-February – only if he gets dollar-for-dollar spending cuts. Mr. Boehner reiterated this position in a statement released after the president's press conference, which read: “The American people do not support raising the debt ceiling without reducing government spending at the same time. The consequences of failing to increase the debt ceiling are real, but so too are the consequences of allowing our spending problem to go unresolved.”

No one knows how this crisis will unfold, of course, but here's our best guess: Republicans will eventually blink. 

In fact, we believe Obama pretty much secured this outcome from the moment he declared that he simply would not negotiate on the matter.

True, it's a potentially risky position to take – since, if Republicans don't back down, the president will either have to go back on his pledge or allow what he himself has described as a catastrophic economic event to take place.

And it is, of course, a far less conciliatory approach than the one the president took back in 2011. That time around, Obama was already in the middle of a tough reelection campaign, and the economy was more fragile. He couldn't risk even appearing willing to risk a default. As a result, Obama and Boehner spent months trying to work out a "grand bargain" on deficit reduction, which ultimately imploded.

But the president has clearly learned some lessons from the whole ugly episode – which resulted in a credit downgrade for the United States – and the follow-up "fiscal cliff" negotiations that took place last month. One is that a grand bargain may simply be impossible right now, given the divisions between the parties. While that doesn't mean those negotiations should be shelved, it doesn't necessarily make sense to keep tying them to economic deadlines that create crises.

The other is that, while these self-created crises have been politically damaging to both sides, they have been far worse for the GOP. A Washington Post poll taken right after the 2011 debt-ceiling debacle found, for example, that while 67 percent of Americans said they had little or no confidence in Obama when it came to making the right decisions for the country's economic future, an astonishing 81 percent had little or no confidence in congressional Republicans.

Current polling suggests that Americans are already inclined to blame Republicans more than Democrats for whatever happens with this latest debt-ceiling fight. And on the heels of a reelection victory in which Obama's economic vision received public validation, the president appears to be betting that, for all their bluster, Republicans won't in the end be willing to risk an actual default. The economic and political consequences of a default could be devastating.

That hasn't stopped GOP members from hitting the airwaves and publicly threatening to shut down the government by refusing to raise the debt ceiling. On Monday, Politico reported that "more than half" of Republicans are currently prepared to allow default, with Republican leaders warning privately that the White House "doesn't understand how hard it will be to talk restive conservatives off the fiscal ledge."

But in many ways, it all feels like a big bluff. Tellingly, the GOP leadership isn't out there advocating default – and many prominent Republicans have said they think it would be a mistake. The business community – including typical GOP allies like the Chamber of Commerce – is strongly opposed.

As Slate's William Saletan wrote last week, parsing statements by Senate minority leader Mitch McConnell about the "leverage" his party holds: "That isn’t how you talk when you have leverage. It’s how you talk when you know your leverage is fake. Republicans don't have enough members willing to tank our credit rating or shut down the government. They know it would be too painful."

The other point to keep in mind about all this is that the debt ceiling isn't the only card Republicans have to play. There is still the package of $1.2 trillion in spending cuts, known as the sequester, scheduled to hit in coming months, as well as the need to reauthorize the stopgap spending measure currently funding the government. The latter could offer Republicans another opportunity to shut down the government, as they've been threatening, without risking a credit default and the potential meltdown of the global economy.

And perhaps that's the real motive behind all these Republican debt-ceiling threats. In comparison to the prospect of default on the debt, a more straightforward government shutdown, à la 1995, seems practically tame.