Obama's Weakness Made Debt Crisis Worse

In my latest column for CNN, I discuss how president Obama's weakness in his negotiations over the debt ceiling have made the debt crisis worse:

Why aren't the Democrats rebelling?

The debt ceiling negotiations have amounted to a succession of retreats and concessions by President Obama.

At this point, the president confronts two possible outcomes in the coming weeks:

Outcome 1: The president and congressional Republicans reach agreement on a budget package weighted overwhelmingly in favor of the GOP. The president opened negotiations by offering $3 of spending cuts for every $1 of tax increases. His current offer tilts even further to the GOP: $6 of spending cuts to $1 of tax increases.

Better still (from a Republican point of view), the spending cuts come from programs Republicans dislike, like Medicaid, rather than programs they like, like the farm budget. The tax increases meanwhile are designed to be as acceptable as possible to the GOP: no increases in tax rates, but instead trimming some of the less defensible deductions in the tax code.

Outcome 1 represents a very big win for Republicans over the future shape of the federal government, and a correspondingly big defeat for the president.

Outcome 1 also represents the president's best-case scenario.

The worst-case is Outcome 2. Republicans reject the president's concessions as insufficient. They refuse to lift the debt ceiling. Denied the legal authority to borrow further, the federal government exhausts its cash sometime in the next three to four weeks.

At that point, the United States will face some kind of federal bankruptcy: paying some claims, deferring others, plunging the U.S. government into financial crisis and probably plunging the whole world into renewed economic crisis.

How in the world did the president arrive at this disastrous predicament?

You can blame his opponents if you want. Yes, the House Republicans have played politics very rough. Not since the era of the Vietnam War has a house of Congress used the threat of national bankruptcy to gain its way on a policy point.

But the roughness of the president's opponents does not excuse the president's own mistakes and weakness. On the contrary: from the point of view of the president's supporters, the roughness of the president's opponents makes all the more inexcusable the president's mishandling of the situation.

As Marc Ambinder of the National Journal suggested at the time, the president could have included an increase in the debt ceiling in the December deal to extend the Bush tax cuts. The Republicans dearly wanted that extension. Obama did not use leverage when he had it -- and so he became a victim of leverage when he lacked it.

Then, as Republicans discovered the power of their new tool, the president decided to assume they were bluffing, that they would never actually do anything so reckless. Waking up to the reality of the situation too late, he commenced bargaining by offering what he assumed would be an irresistible deal. Wrong again. The Republicans did resist. So Obama offered an even better deal -- which predictably only whetted the GOP appetite for still more.

Obama never publicly branded the debt ceiling as "if the Republicans force this country into bankruptcy." He issued no public call to constituencies like the financial industry to bring pressure to bear on the issue. He did not warn that he would manage any crisis in ways that Republicans would not like. ("If the Republicans in Congress deny me the authority to pay everybody, then I'm going to have to choose some priorities. I don't think it's likely that Texas-based defense contractors will find themselves at the top of my list.")

Instead, he appealed again and again to Republicans' spirit of responsibility. Good luck with that.

Click here to read the full column.