Yesterday, Treasury Secretary Jack Lew, in a letter sent to lawmakers, warned the federal government will run out of money to pay its bills on Oct. 17th at the latest. What is the impact of this impending deadline on the debt ceiling and government funding negotiations between the President and Congress?
It creates an increased sense of urgency and pressure for all the parties, especially those with weaker leverage. Conventional wisdom suggests the Republicans have weaker leverage because they’ll take more of the blame should the government default or shut down. It also increases the competitive nature of the process and creates an increasingly tense atmosphere. This can often backfire (if your goal is to reach agreement) by making it more difficult for the parties to work together, short-circuiting the creative process and leading to hard feelings.
The passage of time usually helps or hurts you from a leverage perspective. If it hurts you, set short deadlines, if it helps you, set long or no deadlines. Here, all of the parties involved seemed content to wait until now to really get down to business.
The closer you get to the end of the negotiation, the faster the concessions flow and the smaller they tend to get. Here, the Republicans are likely looking for last minute concessions, perhaps the postponement of the ACA’s individual mandate, in exchange for reaching agreement.
Deadlines also often increase the likelihood that the negotiations will move along at a more organized and controlled pace. Time will tell if the parties here exhibit this behavior.