GOP Won't Win Debt Blame Game

There may be less in Standard & Poor’s new negative outlook on US debt than meets the eye. There’s no actual downgrade of the US credit rating yet – only a chance of it happening a few years down the road. And even if the downgrade does in fact happen, there may be no effect on interest rates whatsoever (as Japan’s example clearly demonstrates). Nevertheless, it certainly isn’t good news for the country or for conservatives.

If the downgrade happens and rates do increase, the cost of debt servicing will increase significantly, and that will put a significant upward pressure on tax rates. Even if the downgrade does not cause any negative economic consequences, Republicans are likely to lose the blame game, and their reputation for economic competence will take another hit.

The anti-Republican narrative is very simple and easy to tell: Republicans took full control of the country at a time of budget surpluses, irresponsibly cut taxes and increased spending, and ran up huge new debt. Refutation of these charges is a much more complex argument (and who remembers the dotcom bubble anyway?). Besides, Republicans will also be blamed for obstructing Obama’s anti-deficit proposals.

For the House to win a message war against the president is almost impossible even under ideal circumstances, and to say that the current circumstances are less than ideal would be the mother of all understatements: House Republicans weren't even able to agree on a single response to the State of the Union address and ended up delivering two competing responses.

So it’s imperative for the Republicans to try to prevent the US credit downgrade or, as a bare minimum, at least to be seen as making a good faith attempt. Waiting until 2013 is pointless. Obama is very likely to be re-elected. Republicans may win the Senate. Or they may not. They may even lose the House. There’s no such thing as a safe Republican seat as long as the Club for Growth, Jim DeMint and Sarah Palin remain in the business of endorsing primary candidates (for those Republicans who are already counting Senate seats the GOP is sure to pick up next year I have just one word: Delaware).

Also, Republicans can count on Obama likely bringing millions of seldom-voting Democrats back to the polls again. He may even campaign for Democratic majorities in the House and Senate by scaring voters with worst case scenarios of the impending loss of AAA credit rating and pointing out Republican obstructionism on the deficit issue. All this means that Republicans better start doing something right now. If they don’t do something before Thanksgiving break, chances are nothing will be done until after the next election.

I’m not very optimistic about Republicans reaching a comprehensive budget deal with the Democrats (even despite the recent Gang of Six developments). However, maybe, they can at least negotiate an increase in the retirement age or a change in COLA, thereby reducing projected deficits by trillions of dollars over the next several decades. And maybe such measures will satisfy the rating agencies for now. But Republicans really need to negotiate in good faith, and everything should be on the table. The situation we’re in illustrates more than ever why having Republicans sign Grover Norquist’s no-tax pledges is irresponsible.

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