JONATHAN CHAIT JULY 15, 2011
[Guest post by Matthew Zeitlin]
Lawrence Kudlow, as pure a supply sider as there is, makes noises that sound like what a decent number of Republican congressmen describe as “alarmism”:
Senator McConnell is determined to produce something from this grand-design package. He’s a smart guy. He may be saving the GOP from itself. McConnell believes that debt default must be completely taken off the table. That’s the thinking behind his debt-ceiling proposal, unless overturned by two-thirds of a congressional vote.
He strongly believes that Republicans must disassociate themselves from any debt default or downgrade by the ratings agencies. And he recognizes that the monthly revenue and spending numbers are so unbalanced that the idea of revenue allocations in the event of no debt-ceiling hike is simply not feasible or desirable.
Other Republican sources are telling me they do not want to risk the destruction of the dollar as the world’s reserve currency by allowing a debt default or a downgrade. Eighty million checks have to go out. Otherwise the GOP could be blamed.
So one way or the other the tide is turning toward a deal. Credit McConnell’s uber-clever stratagem.
When Mitch McConnell, Lawrence Kudlow and Bill Gross are all agreed that failure to raise the debt limit could lead to economic disaster, and for the first two, a huge political loss for Republicans, the rationale for the McConnell plan becomes very obvious. Now, it seems, there is not only a wedge driven between the business community and the base of the Republican Party, there is now a division between the supply-siders and the base, and even between those who prioritize Republican political power over all else and the Republican base.
Look, Lawrence Kudlow understands that there is no chance of tax cuts in a debt ceiling deal, and from the Republican perspective, things were getting uncomfortable with talks of any revenue increases. Moreover, he says what I imagine many Republicans already know: that the GOP would likely be blamed for the resulting downgrade, interest rate hikes and chaos that resulted in a failure to raise the debt limit.
These considerations are what have lead supply siders and Republican loyalists like the Wall Street Journal editorial page, Fred Barnes and Jennifer Rubin to praise McConnell’s plan so passionately. And yet there is still a sizable section of the Republican caucus that simply will oppose any plausible deal.
A split between the business wing of the party and the base is certainly unexpected, but not totally impossible to fathom. The split we seem to be seeing now, between a base that does not think failure to raise the debt ceiling is a big deal and those conservatives who are primarily concerned with low taxes and/or the continued electoral viability of the Republican Party, is truly something to behold.