Friday, July 08, 2011

Our National Debt

I can’t tell you whether raising the debt ceiling is a good thing or a bad thing. It sounds like a ridiculous thing like printing more paper currency. And maybe that’s the answer, eh? Just print more. The stuff isn’t tied to anything real any more anyway. Not to mention, a pretty obvious solution would be to stop warring on the Middle East.

At any rate, if David Frum understands anything – and I don’t know whether he does or not – here’s his summary judgment at CNN:

The debt ceiling, for you history buffs, is a concept invented as a temporary emergency measure during the First World War, one more confirmation of the ancient rule that there is nothing more permanent than a temporary measure.


At this point, the president confronts two possible outcomes in the coming weeks:

Outcome 1: The president and congressional Republicans reach agreement on a budget package weighted overwhelmingly in favor of the GOP. The president opened negotiations by offering $3 of spending cuts for every $1 of tax increases. His current offer tilts even further to the GOP: $6 of spending cuts to $1 of tax increases.

Better still (from a Republican point of view), the spending cuts come from programs Republicans dislike, like Medicaid, rather than programs they like, like the farm budget. The tax increases meanwhile are designed to be as acceptable as possible to the GOP: no increases in tax rates, but instead trimming some of the less defensible deductions in the tax code.

Outcome 1 represents a very big win for Republicans over the future shape of the federal government, and a correspondingly big defeat for the president.

Outcome 1 also represents the president's best-case scenario.

The worst-case is Outcome 2. Republicans reject the president's concessions as insufficient. They refuse to lift the debt ceiling. Denied the legal authority to borrow further, the federal government exhausts its cash sometime in the next three to four weeks.

At that point, the United States will face some kind of federal bankruptcy: paying some claims, deferring others, plunging the U.S. government into financial crisis and probably plunging the whole world into renewed economic crisis.


My bet would be with number one, if that’s the only two available. And the “agreement” they reach will actually be even MORE favorable to the GOP.

Not since the era of the Vietnam War has a house of Congress used the threat of national bankruptcy to gain its way on a policy point.

But the roughness of the president's opponents does not excuse the president's own mistakes and weakness.


As Marc Ambinder of the National Journal suggested at the time, the president could have included an increase in the debt ceiling in the December deal to extend the Bush tax cuts. The Republicans dearly wanted that extension.

Yeah, he’s been a piss-poor beacon of hope ever since he stepped inside that oval office. But I’m just not convinced it’s “mistakes and weakness,” rather than just weakness. And maybe not even that. Who knows? Maybe if he really wanted change, he’d go for it. The man is simply not a liberal. He’s a very wealthy politician at the top of the world’s food chain. And he likes it there.

Obama never publicly branded the debt ceiling as "if the Republicans force this country into bankruptcy." He issued no public call to constituencies like the financial industry to bring pressure to bear on the issue. He did not warn that he would manage any crisis in ways that Republicans would not like. ("If the Republicans in Congress deny me the authority to pay everybody, then I'm going to have to choose some priorities. I don't think it's likely that Texas-based defense contractors will find themselves at the top of my list.")

Instead, he appealed again and again to Republicans' spirit of responsibility. Good luck with that.


[He] commenced bargaining by offering what he assumed would be an irresistible deal. Wrong again. The Republicans did resist. So Obama offered an even better deal -- which predictably only whetted the GOP appetite for still more.

And here, you have to finally get suspicious. This is definitely not the first time they’ve danced that dance.

Talks have now broken down altogether. The crisis is drawing close. And once again Obama is throwing away his leverage.

Obama's team is publicly discussing what they are calling the "constitutional option," contesting the validity of the debt ceiling altogether.

Go ahead and emphasize that. Not only have they given in to the GOP, they are doing them one better! As I said at the beginning -- outcome #3.

If you read Frum’s article, he explains what you can expect if they go this route – what he calls “pure win-win for the Tea Party.”

Back in January, Speaker John Boehner said the possibility of a government default was "not even on the table."


Obama did not use leverage when he had it -- and so he became a victim of leverage when he lacked it. Then, as Republicans discovered the power of their new tool, the president decided to assume they were bluffing, that they would never actually do anything so reckless.

Their “new tool” turned out to be him.

No comments:

Post a Comment

Comments are moderated. There may be some delay before your comment is published. It all depends on how much time M has in the day. But please comment!