We Are Reaping What We Have Sown—The Debt Standoff

On this blog a month ago, I said the politicians were starting to scare me with the apparent eagerness of some to actually take the government to default to make a political point.

For weeks we have heard political leaders on both sides tell us there would be no default.

But the two sides have so backed themselves into opposite corners that they have left no opportunity to meet in the middle. Democrats say they have to have a tax increase, or failing that no cuts to entitlements. Republicans say absolutely no tax increases and they need to see entitlement cuts.

This only gets fixed if somebody capitulates. The consequences for any side doing that might be the loss of their own base going forward.

There isn’t any middle ground here because there is no middle ground left in Washington, DC. The last few elections have seen the replacement of “moderates” by evermore far right or far left senators and representatives. This process has only been exacerbated by the gerrymandering of Congressional districts to ensure they were safe for either side but at the same time leading to their coming under the control of party activists pushing their representatives either far left or far right. It also hasn't helped that each side is so certain of their cause and only has to dial their favorite channel to be assured of that.

Yet, ironically, the last three elections have been decided by where independent voters have gone—not by the far left or the far right.

Obama and his leadership can’t afford to offend their base and Boehner and McConnell can’t afford to offend theirs. Boehner’s biggest problem right now is not Nancy Pelosi, it is his Tea Party wing that, as of this writing, is so far denying him the votes he needs for his debt limit proposal. Already, a few of the Tea Party folks are whispering that they need to get rid of Boehner because of his latest debt proposal.

Both sides also believe a standoff helps them in the next election. I don’t think it helps anybody. My sense is that the first Wednesday of November 2012 neither side will have the votes to unilaterally drive their agenda through.

Many on both sides have recently argued that compromise is what has gotten us into our fiscal problems (and that might be right) and that compromise is now the wrong thing to do. But it will be impossible for either side to "fix" things their way unless they come to dominate the Congress and capture the executive branch--something that is mighty hard to do in the American political system.

The fact is no progress can be made in a divided government without compromise.

But leaders on both sides are all confidently telling us a debt limit deal will get done.

I will tell you that all over corporate America companies are thinking through their liquid cash positions and getting any borrowing done before August 2nd.

I suggest you also be ready just in case.

It looks like we are on the way to reaping what we have sown--not just this month but for some time to come until both sides finally come to the conclusion they will have to work together.


Earlier post: The Debt Ceiling Debate—Some of These People Are Nuts

The Awful Dichotomy Between Health Care Politics and Policy

Amy Goldstein has an important article in today’s Washington Post detailing the place Don Berwick, the Medicare and Medicaid administrator, finds himself in.

It is all but certain he will have to leave his post at year’s end, when his recess appointment expires, because the Senate will not confirm him for a lack of Republican support.

Berwick is one of the most respected health care experts in the country—his career has been dedicated to improving quality first and with that the cost of care. With the new law giving his agency more opportunities to experiment with new approaches and the ability to more quickly implement the things that work, he was the ideal choice.

But with the Democrats ramming the law through without a political consensus to support it, Berwick also became the political whipping boy for opponents to pile on. That he has been willing to point to the things that work in places like Britain only gave the political opportunists plenty of red meat to throw into an already red hot ideological debate.

In my mind, the great frustration in health care is that we really aren’t so far away from being able to make the system far better than it is—in both its quality and its cost. To test and perfect the best ideas we need to be willing to try new things—many of which won’t work but can form the basis of finding out what does work.

His proposed Accountable Care Organization (ACO) rules were a disaster and he should have known better. But there is also no reason why that failure can’t lead to a better outcome—if finding the right answer is what we are all ultimately interested in.

But, particularly in this red hot political environment made more red hot by one side always more willing to jam their ideas down the other side’s throat—whether that be a new health care law or a debt ceiling solution—people like Berwick get caught up in the bigger political fight.

My sense is that a Republican President, as much as a Democratic one, could have as easily appointed Don Berwick CMS administrator.

People say Don Berwick’s failing is that he is a “political neophyte.” It is the reality that once you get to Washington having the right answer isn’t enough—you have to be able to get it through the system. What does it say about Washington when a first class expert speaking what he sees in good faith as “truth” is seen to be naïve and can be quickly dismissed for “having a record on rationing care?”

But Don Berwick never had a chance in an environment where trying to find the right answers takes a back seat to scoring political points.

With health care costs and the nation’s debt crisis now coming to a place where change is unavoidable, we can’t afford this toxic take no prisoners political environment much longer.

In fact, August 2nd might be the day it all comes home to roost.