Sometime around the end of this year, the federal government will bump up against its $16.4 trillion borrowing limit, as a direct result of spending and tax laws enacted by Congress. To raise the limit, legislators must pass a separate law. In principle, the extra level of approval can serve as a useful mechanism, forcing Congress to debate its priorities. But refusing to raise the limit wouldn’t free the government of its existing spending obligations. Rather, it would leave the government with no choice but to default on its debts.
In other words, congressional Republicans are taking the government’s creditworthiness hostage when they threaten not to increase the debt ceiling. Politically advantageous as this may be, it is terrible economics. To understand why, let us consider the economic effects of last year’s debt-ceiling debate. If we know our history, perhaps we will not be doomed to repeat it.
Lofgren, in describing the reasons for his defection from the Republican party, describes a Republican camp that increasingly acts not like a traditional peacetime political organization, but more like an apocalyptic cult or one of the authoritarian movements from early 20th century European history.
In particular, the insane decision to turn the once-routine procedure of raising the debt ceiling (Lofgren notes it was done 87 times since WWII) into a political crisis revealed that the GOP party mainstream had sunk to the level of terrorism – holding our economic system hostage in exchange for political concessions.
This was a form of violence, and a serious escalation even from the days of George W. Bush, when the party was mostly limited in its willingness to use human beings as pawns in homicidal ploys for political power. Bush and Rove were willing to sacrifice Iraqi lives, and the lives of American servicemen, for oil and votes. But this current crew of Republicans shook canisters of kerosene over the entire American population and threatened to light a match if it didn’t get what it wanted.
As Lofgren notes, this was insurrectionary, revolutionary behavior. Only the massive scale of the gambit prevented it from being easily identified as terrorism and criminal blackmail. If in exchange for not defaulting on our debt Boehner, Hensarling, Cantor and the rest of them had asked for a billion dollars worth of gold bullion deposited in Swiss bank accounts, or the release of a dozen Baader-Meinhofs from German prisons, it could hardly have been much different from what they actually did.
I think most Americans can agree that reducing the public debt is a goal we can all share – and in the old days of thirty or forty years ago, when congress operated on a more collegial model that involved members from opposing parties getting together on weekends to achieve reasonable compromises over golf and highballs, the Rs and Ds could have found a way to press forward with reasonable deficit reduction plans without pushing us all to the edge of a cliff.
But for the new GOP, compromise of any kind defeats their central purpose, which is political totale krieg. This party’s entire reason for being is conflict and aggression. There is no underlying patriotic instinct to find middle ground with the rest of us, because the party doesn’t have a vision for society that includes anyone outside the tent.
I’ve always been queasy about piling on against the Republicans because it’s intellectually too easy; I also worry a lot that the habit pundits have of choosing sides and simply beating on the other party contributes to the extremist tone of the culture war.
But the time is coming when we are all going to be forced to literally take sides in a political conflict far more serious and extreme than we’re used to imagining. The situation is such a tinderbox now that all it will take is some prominent politician to openly acknowledge the fact of a cultural/civil war for the real craziness to begin.
Reading Lofgren’s piece, and a piece by John Judis of the New Republic, makes one realize that we came pretty close to real chaos in that debt ceiling debate. Had Obama invoked emergency powers to raise the debt limit unilaterally – and I think he had good reasons to do that – we might have had a revolt on our hands.
In his letter on Monday, Schultz invited executives to join him in a “pledge to withhold any further campaign contributions to the President and all members of Congress until a fair, bipartisan deal is reached that sets our nation on stronger long-term fiscal footing.”
Schultz also urged fellow CEOs to invest in projects or new products that will perk up the economy at a time when fear and uncertainty have made businesses unwilling to invest, consumers unwilling to spend and banks unwilling to lend.
Add this to Berkshire Hathaway Chairman Warren Buffett’s letter telling lawmakers to “stop coddling the super rich,” and this week has started off with two very prominent business leaders weighing in on the political scene.
As your humble Decoder wrote yesterday (with knowledge from pantlessprogressive), campaign contributions are a hot-button item surrounding the Congressional supercommittee charged with cutting $1.5 trillion from the nation’s debt over the next decade. According to current campaign finance rules, the 12 members of the supercommittee would not need to disclose donations made to them while on the committee until early in 2012, after the committee’s work has been completed.
Instead, Republican Senator David Vitter (La.) is proposing supercommittee members be forced to disclose contributions every 48 hours, similar to current federal rules governing the final days before an election. (Just don’t expect Starbucks to be pitching in any campaign coin until it’s all said and done.)
Unfortunately for Bachmann, Standard and Poors has now clarified that it’s actually people like her, who oppose raising the debt ceiling and aren’t mindful of the consequences of default, that were a primary reason for the downgrade….
Among the many misconceptions about Barack Obama is that he is cautious. In fact, it is hard to think of a modern president in recent times who has been more willing to take big risks, not because he is reckless, but because he is willing to suffer potential short-term setbacks to achieve a desired long-term result. It is in that context that the much-maligned debt-ceiling compromise must be understood.
This sort of risk-taking goes beyond making policy choices, whose success or failure will always be debated, and can’t be known for years. What I am talking about are presidential decisions that can be demonstrably shown to be right or wrong in a relatively short window, with serious repercussions. That sort of risk-taking by presidents is fairly rare, and yet Obama hasn’t hesitated to take such gambles.
One example early in his administration was his choice to “bail out” the automobile industry. There were many ways in which that could have gone wrong: Chrysler Group LLC and General Motors Co. (GM) could have failed; management changes and bankruptcy filings that the administration insisted upon could have exacerbated problems; good money could have been thrown after bad.
The safe course was the one that President George W. Bush followed: pumping in just enough money to be able to say he had made an effort, and letting the chips fall where they may. But Obama took action by investing substantial funds, demanding important management and strategic changes, requiring bankruptcy filings, and painfully shrinking auto-dealer networks. All were risky steps that could have quickly unraveled.
Two years later, that choice is paying off: Car sales have risen, auto-industry employment is up, taxpayers are getting their money back, and U.S. cars are getting higher consumer ratings than ever.Health-Care Overhaul
A second gamble came in early 2010, after Scott Brown won a Massachusetts Senate seat in an unexpected victory for Republicans, and vastly complicated the path for Obama’s health- care reform bill. With the loss of the 60th Senate vote for the measure, many of the president’s advisers urged him to abandon the push for a comprehensive bill, and pursue a far more limited approach. But Obama wouldn’t bend, and took a gigantic risk: He pressed for a House vote on a bill that was passed by the Senate the previous year and was unpopular with many House Democrats.
Obama could have easily, and visibly, lost. Yet, once again, his gamble paid off, achieving a victory that had escaped his predecessors.Bin Laden Raid
And earlier this year, the president once again rejected the play-it-safe advice of many advisers, and ordered SEAL Team 6 to carry out its heroic raid to kill Osama bin Laden. The safer alternative — a drone strike — would have minimized the fallout if the al-Qaeda leader wasn’t at the target, or if the assault went awry. But the president believed the bin Laden’s death could only be verified with a manned raid; once again, the risky decision was the right choice.
So now we come to the recent debt-ceiling deal, in which the president took a gigantic political risk: publicly pressing for a “Grand Bargain” to tackle long-term budgetary challenges that would reverse years of unwillingness in Washington to consider revenue as part of the fiscal solution.
This time, he came up short. We’ll never know how close we came to a “Grand Bargain,” but Obama didn’t get the revenue increases that he wanted.
Yet instead of folding his hand, he decided to double down in the fiscal card game, an appropriate way to understand the debt-ceiling compromise.
Ultimately, the only way that Republicans will accept what they consider unacceptable — revenue increases — is if the alternative is even less acceptable: horrific defense and Medicare cuts.
If the White House can drive that message home in the next three months, continue to advance its political case against the extreme anti-revenue elements of the Republican Party, highlight the consequences of the S&P downgrade, and raise the cost of failure by the super-committee and the Congress so high that it can’t be borne, the president may get his way.
Obama’s willingness to mark his time and double down may be vindicated, and the critics who are betting against him now may be proven wrong once again.
|—||House Majority Leader Eric Cantor • Speaking at a GOP retreat in January. In other words, what happened last week was the plan all along. The Washington Post has a great piece on the origins of the debt showdown. And that’s just the tip of the iceberg. (via shortformblog)|
That only took 7 months — and it’s an historical first! When bad things happen to our country, expect the Teaparty to be there cheering their handiwork.
More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011. — S&P Downgrades U.S. Debt Rating — WSJ Press Release
“When you look at this final agreement that we came to with the white House, I got 98 percent of what I wanted. I’m pretty happy.” — Speaker of the House John Boehner, August 1, 2011, CBS News interview
The end of the stimulus itself is contractionary. And with housing prices continuing to fall, GDP growth faltering, and unemployment remaining stubbornly high (one of six Americans who would like a full-time job still cannot get one), more stimulus, not austerity, is needed—for the sake of balancing the budget as well. The single most important driver of deficit growth is weak tax revenues, owing to poor economic performance; the single best remedy would be to put America back to work. The recent debt deal is a move in the wrong direction.
“I think some of our members may have thought the default issue was a hostage you might take a chance at shooting. Most of us didn’t think that. What we did learn is this — it’s a hostage that’s worth ransoming.” - Senate Minority Leader Mitch McConnell. August 3, 2011.
Read that. Read it again. And don’t fucking forget it.
After [the debt-ceiling fight] was all over, Obama seemed to speak for revolted Americans — the kind of people who always want a new Washington — when he described the government as “dysfunctional.”
But at the Capitol, behind the four doors and the three receptionists and the police guard,…
This weekend’s “debt deal” in Congress, which raised the debt ceiling and agreed to some cuts in the future, contains a change in how the international affairs budget is calculated within the federal budget. In Section 102 of the bill, Function 150 budgets are reclassified as “security.” This means foreign assistance and development programs — USAID, the Millennium Challenge Corporation (MCC) and lots of State Department programs — are now in the same budget category as the Departments of Defense, Homeland Security and the National Nuclear Safety Administration.
It might seem like a minor thing, but this actually provides a sneaky way for the Congress to cut money from “national security” without actually touching sacred DOD programs. By cutting assistance agencies like USAID — a GOP goal for the last 18 months — Congress can cut from development assistance programs and say it is reducing national security spending. This change in language is damaging in that it furthers the militarization of civilian aid programs.
very disturbing indeed.
An Extremely Unfair Agreement (A Message from Senator Bernie Sanders)
Over Bernie’s strong opposition, Congress approved and President Obama signed a deficit-reduction deal that slashes programs for working families without asking the wealthiest Americans and the most profitable corporations to pay a nickel more. “This country needs deficit reduction, but we need to do it in a way that is fair and which will result in economic growth and job creation. This proposal does neither,” the senator said. In a Senate speech and a flurry of television interviews, Bernie called the deal “extremely unfair,” “immoral” and “grotesque.”