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Which Side is Really Playing Chicken?

With eight days to go until the August 2 deadline to raise the deadline and with no solution apparently in sight, the spin contest is going full tilt. The White House is blaming House Speaker John Boehner and the Republicans of irresponsible obstructionism by refusing to accede to the president’s demands for higher taxes while the GOP blames the White House for not accepting their plans for a debt ceiling increase accompanied by budget cuts but no new taxes. On the surface, it looks like both sides are being stubborn.

But if you want to know who is really playing chicken with the debt and the future of the U.S. economy, perhaps the answer can be found by asking which side is doing the most to use scare tactics to get their way in the negotiations: President Obama.

By doing his best to inspire fear about the future of the markets, the president is playing the same card he has attempted to put into the game for the last two months. We have long suspected the president was using the 1995 government shutdown as his political model. Like President Clinton, who used that impasse to portray the GOP and its feckless leader as petulant extremists, Obama has been hoping to fit either Boehner or House Majority Leader Eric Cantor for the Newt Gingrich clown suit. He hoped either the Republicans would buckle rather than accept blame for a financial meltdown or reap the political benefits if the deadline passed without an agreement.

House Republicans are being accused of being extremists, but all along it has been Obama who refused to either accept a short-term solution based on cuts or a grand deal that would not saddle a faltering economy with crippling tax increases.  While Obama will take heat from liberals who don’t want any move toward reform of entitlement spending, there are still enough Democrats who understand such expenditures are the heart of the problem and must be addressed. Obama has plenty of room to move to make common ground with the GOP if he wants to.

By contrast, Republicans know accepting tax increases would be considered a betrayal of their voters and doom their efforts to hold onto their majority next year. The media may dismiss such concerns, but the House leadership knows it simply cannot give in on taxes and survive.

So while it is true the Republicans’ unwillingness to give in on their principles is an obstacle to an agreement (albeit that a deal on those terms would be harmful to the economy both in the long and short term), there should be no doubt about their sincerity. While both sides appear to be dug in, only President Obama is actually playing chicken. He is the one daring the other side to drive over the cliff, not Boehner. But right or wrong–and I believe their position is right–the GOP leadership won’t jump.