Today is an aggravating day for the Obama administration. The U.S. will hit its debt ceiling, which means that the Treasury must begin to take "extraordinary measures" to prevent default. Although the president, Democrats, and most of the market want to raise the debt ceiling immediately, Republicans will not agree to do so without broader long-term spending cuts. Should the president concede?
President Obama is in a tough spot. He knows that the debt ceiling debate is rather crazy. Republicans will inevitably vote to raise it, but they're using the necessity of doing so as a bargaining chip for broader spending cuts in the name of deficit reform. That essentially leaves the president with two options: either concede at least in part to their demands or try to call their bluff and face very ugly consequences if they stubbornly hold their stance.
Econo-columnist Paul Krugman says that Obama should call their bluff. In an article today, he concludes:
According to Harry Reid, the Senate majority leader, Mr. Obama has told Democrats not to draw any "line in the sand" in debt negotiations. Well, count me among those who find this strategy completely baffling. At some point -- and sooner rather than later -- the president has to draw a line. Otherwise, he might as well move out of the White House, and hand the keys over to the Tea Party.
But how hard a line can the president really draw? The fact is that he has no leverage. As explained yesterday, many Republicans likely see no huge downside from their standpoint if they wait for the president's will to crumble. Even as the Treasury is forced to cut other obligations to continue to avoid default, Republicans will remain patient. They aren't bluffing.