Much of Washington — not to mention the financial markets — is taking comfort in the belief that they’ve seen this movie before.
In 2011, House Republicans threatened to shut down the government and breach the debt ceiling unless the Obama administration made substantial concessions. Though the negotiations were tense, the two sides ultimately came to an agreement. There was no shutdown. There was no default. The lesson most everyone took away was that Washington always figures it out in the end.
But this isn’t 2011. It’s potentially much worse.
What’s lost in the comforting analogy is how much the two sides agreed on in 2011:
1) Republicans had just won a massive victory in the midterm elections, so both sides broadly agreed that Republicans had a mandate to cut spending.
2) Both sides agreed that there should be negotiations over the debt ceiling. Indeed, by the time the debt ceiling was reached, negotiations had been going on for months.
3) Both sides agreed that the aim of those negotiations was reducing the budget deficit.
As deep as the disagreements over policy were, these broadly shared premises led to negotiations that brought an agreement that reduced the budget deficit by cutting a trillion dollars in discretionary spending and another trillion dollars through sequestration cuts.
The ultimate deal, in other words, precisely tracked the issues on which the two parties agreed.
In 2013, however, the parties don’t agree on anything:
1) Republicans believe Obamacare’s unpopularity gives them a mandate to defund or delay the law. Democrats believe that their victory in the last election gives them a mandate to implement their agenda.
2) Republicans believe there should be negotiations around raising the debt ceiling. Democrats emphatically don’t. Currently, there are no negotiations, nor any plan for them.
3) Republicans believe the aim of these negotiations should be defunding or delaying Obamacare. Democrats say they will not, under any circumstances, delay or defund Obamacare.
There is, quite literally, no shared ground for a deal. Democrats and Republicans disagree on everything, from the principle of negotiations to the potential objective of those negotiations. And “disagree” is almost too light a word. They hold mutually exclusive positions that neither can abandon without sparking an overwhelming backlash from their base and seriously harming their credibility in negotiations going forward.
The GOP is operating by analogy to 2011, assuming that the Obama administration — or at least Senate Democrats — will eventually crack and offer concessions. The Democrats are also mindful of 2011, but for them, it’s an object lesson in why they can’t negotiate: Otherwise, the GOP will keep taking the debt ceiling hostage, putting the United States at a permanently higher risk of default.
Making matters even worse, it’s not even clear who represents the Republican Party in 2013. House Speaker John A. Boehner already had to pull his favored continuing resolution from the floor and replace it with a bill that met the demands of Sen. Ted Cruz of Texas. Senate Minority Leader Mitch McConnell is facing a tea party challenge in Kentucky. It’s not clear whether either leader has the flexibility or authority to credibly negotiate on behalf of the GOP, if negotiations were even taking place.
Most in Washington and on Wall Street hold to a serene faith that the two parties will figure something out. And that’s probably right. But in interviews with both Democratic and Republican staff from the House and Senate leadership, as well as the White House, I have yet to hear a plausible story for how they figure something out. The grounding of the scenarios ranges from the unlikely — Republicans expect Senate Democrats to force the White House to delay the individual mandate, while Democrats expect Boehner to simply fold and absorb the backlash from his party — to the nonexistent.
“I don’t know the end of this movie,” says Rep. Chris Van Hollen (D-Md.), ranking member on the House Budget Committee. “I don’t think anybody knows how it ends. And that’s a very dangerous place to be in.”