Update, 9:30 a.m.: As of early Tuesday, sources now say Senate Democrats have agreed to drop the reinsurance fee delay from the debt limit framework because of GOP objections. Thus, unions won’t be the unexpected winners of the fight, though the framework still upholds the Democrats’ principle that they will not offer unrequited concessions in exchange for Republicans agreeing to increase the debt limit.
Original post: If three months ago I had told you that the debt-limit fight would end not with Democrats offering a concession to Republicans but with Republicans teaming up with Democrats to provide a concession to dreaded labor unions, you would’ve laughed me out of my job, and rightly so.
But here we are.
On Monday, congressional aides began leaking details of the framework Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell have settled upon to resolve the debt-limit crisis and reopen the government, which has been largely shuttered for two weeks.
The plan is tentative. McConnell will officially brief Senate Republicans on all of the details later this morning, and it’s possible they’ll demand changes. But realistically, time is up. McConnell spent much of Monday briefing his members about the negotiations in smaller groups, and if any of them are planning to stage a rebellion, they showed no signs of it yesterday. The shutdown has been absolutely devastating for Republicans as a national party, and two weeks into it their appetite for further battle is severely diminished.
The question the emerging deal poses is, How long will Republicans’ conciliatory spell last? Or rather, how long will it take for them to heal and return to their nature?
Reid and McConnell have conditionally agreed to fund the government through mid January — before the second year of sequestration’s indiscriminate cuts begin savaging government agency budgets — and to increase the debt limit until early February. Republicans might be ready to surrender now, but will they return to form early next year? Will primary season make them fight more aggressively next time, or will their proximity to midterm elections suppress their tendencies.
Some Republicans — hint, the ones with primary opponents — will be under tremendous pressure not to cave again. But it’s unclear whether the new debt-limit deadline will be absolute, or whether the Treasury Department will be able to undertake “extraordinary measures” to delay the X-date, as they have through the past two debt-limit fights. That would probably push the deadline into spring, when some in-cycle members will be past their primaries, and eager to avoid damaging brinksmanship. But Republicans are somewhat puzzlingly proposing to prohibit Treasury from using those measures.
In either event, Democrats are effectively challenging Republicans to pick the same fight again next year, much closer to the election. They’re confident they’ve either beaten the GOP into submission or will win all over again if Republicans choose to replay it.
Which brings us back to the unexpected conclusion of round one. How are unions the unexpected winners here?
In addition to increasing the debt limit and reopening the government, the Reid-McConnell plan will also include a couple of sidecar provisions. Republicans will be able to say they didn’t accept a literally clean debt-limit increase, but the provisions in question won’t be policy concessions, or measures and trades Dems would have opposed outside the context of a default threat.
One of them is likely to be the delay of a fee on group health plans, which is intended to finance a temporary “reinsurance” fund — a backstop for ACA insurers whose plans attract disproportionate numbers of older, sicker consumers. Here’s a helpful explainer from your good friends at Aetna. It’s unclear what’s going to happen to the fund itself. Insurers won’t be happy if it gets delayed, because it’ll leave them vulnerable to adverse selection in Obamacare’s first year.
But unions have been demanding an exemption from the fee for months.
“[E]ven though non-profit plans like ours won’t receive the same subsidies as for-profit plans, they’ll be taxed to pay for those subsidies,” three key union leaders wrote in an unusually harsh letter to Reid and House Minority Leader Nancy Pelosi in July. Unions are actually demanding three Obamacare changes. Two of them, including their opposition to this fee, amount to requests for special treatment. Congressional Democrats haven’t shown much interest in sticking their necks out to provide favors to unions so nakedly, and the Obama administration has declined to torture its interpretation of the law to grant union wishes administratively.
But in the context of the debt-limit fight, incentives change. Republicans need fig leaves to mask the extent to which they’ve capitulated. Democrats can only agree to policy changes that they would support on neutral terms — that Republicans aren’t mugging them to get.
Delaying the fee meets both parties’ requirements. Dems get to give unions something they want, without backing a special carve-out, and Republicans get to delay an Obamacare tax. Strange bedfellows save the day.
At a superficial level, this appears to be a violation of President Obama’s pledge not to negotiate over the debt limit, and thus an invitation to Republicans to return for more ransom early next year. But I don’t think that analysis flies. Remember, Democrats have rejected repeated Republican attempts to delay a similarly sized tax on medical device manufacturers, even though many Democrats support repealing that tax on the merits. It might fall in future negotiations, but Democrats were unwilling to give it away to the GOP in exchange for simply increasing the debt limit.
President Obama’s principle is essentially that any policy ransom, no matter how small, is too large a price to pay for increasing the debt limit. Consensus items are fine. So are mutually agreeable swaps: Republicans could’ve gotten the device tax repeal now if they’d given up something themselves, but if Dems had given it to them for free, they’d come back the next time asking for more.
The deal under consideration upholds that principle, despite the rhetorical ambiguity over the reinsurance fee delay. If it creates a precedent, it’s that Obama will reject all debt-limit demands, no matter how trivial, if he doesn’t support them independently or they’re not paired with counter concessions from the GOP. Republicans can spin away that they got an Obamacare scalp if it’ll help them manage internal politics, but they certainly won’t leave this bruising fight with the expectation that they can get anything in exchange for increasing the debt limit that Obama wouldn’t willingly part with.
And that was what Obama really wanted.