Debt ceiling = the new bailout?
Three years after members of Congress cast a vote in support of the Troubled Asset Relief Program (TARP) that cost some of them their political careers, there’s a sense of déjà vu all over again when it comes to the coming vote to raise the debt ceiling.
By about May 16, Congress must decide whether or not to increase the amount of money the government can borrow beyond the current $14.3 trillion or run the risk of the country defaulting on its debts for the first time since the Great Depression.
Comparisons between TARP and the debt ceiling vote are already being made. MSNBC’s Joe Scarborough mentioned it this morning on Morning Joe, and Politico noted Monday that the debt ceiling vote has the same “stink bomb aroma” of the TARP vote.
“I think this is an apt comparison, and I think in particular it presents a major political problem for Republican incumbents, especially those facing strong tea party challenges in their primaries,” said Democratic pollster Fred Yang.
One GOP pollster who was granted anonymity to speak candidly told The Fix that “there is a good chance the debt ceiling vote will be far bigger than TARP.” (Remember that the TARP vote was a political death sentence for a number of GOP incumbents in 2010 including Sens. Kay Bailey Hutchison, who ran for governor of Texas, and Sen. Bob Bennett who los a bid for re-election in Utah.)
Is this an apples-to-apples comparison? Only time will tell, but there is plenty to suggest that voting ‘yes’ on raising the debt ceiling could have very similar effects as voting ‘yes’ for TARP.
* Both are seemingly simple: It’s simple to understand why giving $700 billion to banks when normal Americans are struggling is politically dicey. It’s easy to explain in political terms. Ditto the idea of allowing the country to go even further into debt at a time when many people are very concerned about that the impact the debt will have on their lives and, more importantly, their childrens’ lives.
* Both are unpopular: The vast majority of people are clearly opposed to raising the debt ceiling just as they were to TARP. And yet, both were/are presented by politicians as must-pass pieces of legislation in order to stave off economic catastrophe. Much like passing a budget to avert a shutdown, members of Congress know they have to raise the debt ceiling. Even House Budget Committee Chairman Paul Ryan (R-Wis.) has admitted this. But, average people don’t understand why — and are not going to like it when their elected leaders go against their will.
* Both are political poison for GOP: If TARP taught us anything, it’s that votes like this can be a scarlet letter in a Republican primary. Otherwise solidly conservative Republican lawmakers watched their political careers go down in flames by voting for TARP — as their argument that it was a necessary evil was belied by the number of conservative lawmakers who voted against it. It’s a near-certainty that some tea-party aligned Republicans like Sens. Jim DeMint (S.C.) and Rand Paul (Ky.) won’t vote to raise the debt ceiling, a reality that could set up a political dynamic for the likes of Sens. Orrin Hatch and Dick Lugar similar to that of TARP.
Not everything about the two votes is similar., of course.
While the bailout vote was one-of-a-kind for its scope and circumstances, the debt ceiling is something Congress re-visits every few years and has voted on many times. (President Obama voted against raising the debt ceiling in 2006, and most people didn’t know that until Monday when the White House distanced itself from that position).
The tea party is making the debt ceiling vote a bigger issue this time — and that means something. But if people didn’t care much about this vote in the past, why would they start now? Sure, some people — particularly in the Republican base will care deeply but the question is how widespread that feeling will be. Rivaling the passion stirred by TARP will be tough.
Another main difference is the absence of a bogeyman. The big banks were almost a perfect foil at a time when many ascribed the financial meltdown to sub-prime lending. The government, which many Americans admittedly aren’t big fans of, isn’t quite as easy to demagogue. Language is key here. Will opponents of raising the debt ceiling suggest this is, in effect, a bailout of our government? If they can make this about bloated government asking for more of our money, then it becomes more of a TARP-like issue.
There is also the possibility that Republicans can use the debt ceiling to earn some concessions. The TARP vote was an up-or-down vote, but if Republicans who vote to increase the debt ceiling can point to concessions from Democrats – spending cuts, a balanced budget amendment, a cap on debt as a percentage of gross domestic product, or a cap on spending as a percent of GDP — it won’t be so cut-and-dry.
“Those types of conditions have the potential to make the debt limit a more palatable vote, even for Republican primary electorates,” said another GOP pollster, granted anonymity in order to speak candidly about party strategy.
Regardless of the similarities and differences, this is vote that many in Congress are not looking forward to. We’ve seen plenty of members of Congress pay a political price for voting ‘yes’ on the TARP bailout, and it wouldn’t be surprising to see the debt ceiling vote take its place as TARP fades from memory.
At the very least, the debt ceiling vote should be more politically interesting — and with far broader electoral implications -- than the votes on the budget compromise this week.