I hate to interrupt fulminations about President Obama’s three incredible shrinking scandals with something as prosaic as concern about the GOP’s threatening to sabotage the economy, but a couple of bits of real news emerged yesterday regarding the debt ceiling (yes that, again).
It’s actually a perfect juxtaposition: On the same day that an interview with Standard & Poor’s top U.S. credit rating analyst warned of tinkering with the debt ceiling, House Republicans huddled up to brainstorm about what their price should be for not deliberately tanking the economy.
On the one hand you’ve got an interview National Journal did with Nikola Swann, “Standard & Poor’s top analyst for the U.S. credit rating.” You will recall that Standard & Poor’s downgraded its rating of U.S. debt in 2011 after the last debt ceiling showdown. And you will recall that that showdown was engineered by the GOP as a political hostage-taking situation: Virtually everyone (or virtually everyone who is responsible) acknowledges that raising the debt ceiling is necessary to avoid the U.S. government defaulting on its obligations, which would be financially cataclysmic, but the Republicans threatened to force that exact scenario if they didn’t get spending cuts.
Now the debt-ceiling-fight countdown clock is ticking once again (the Treasury started its “extraordinary measures” to avoid default at noon today), with the moment of crisis expected to hit some time between August and year’s end. Does the prognosis look any better? “We have not seen any strong evidence that the political system as a whole is more effective, more stable, or more predictable than we thought it was in 2011,” Swann told National Journal’s Stacy Kaper. “There does seem to be, especially in recent years, an overall trend in the U.S. to effectively make major policy decisions at the last moment in a crisis setting. We don’t see that as credit-positive.”
That’s delightful understatement. He goes on to say that in order to avoid another credit downgrade, the U.S. should extend the debt ceiling for five years and bring the debt-to-GDP ratio under control with a plan that is actually credible. House Republicans passed a bill (which stands zero chance of becoming law) which would allow the Treasury to prioritize government payments (which would still leave the government in a position of not paying its bills … it would just be not paying for goods and services while making sure that its debt holders are taken care of). “This does not sound like a very comfortable scenario,” he says in another bit of understatement.
The final point in the interview is the most instructive:
S&P rates over 120 sovereign governments, including all of the wealthy developed ones. Of those, there are very few that have anything similar to the U.S. debt ceiling. Of those countries that do have some kind of legislated limit on the amount of debt, that limit is set as part of the budget-setting process. It almost never is divided the way it is in the U.S. We don’t think it is helpful to credit quality.
The very idea of a debt ceiling that doesn’t rise with authorized spending is, in other words, both uniquely American and uniquely stupid. Why? Because it lends itself to the kind of irresponsible hostage taking the Republicans are gearing up to engage in yet again.
And it’s a political terrorism scheme that is increasingly disengaged from reality (to which its connection was tenuous at best anyway). To wit: The last time around the GOP objection to the debt ceiling was grounded in rising deficits; this didn’t make their threats less irresponsible but at least established a plausible-sounding connection between their threat and their demand. But the budget deficit is, as my bloleague Pat Garofalo wrote earlier this week, the incredible shrinking issue. As a percentage of the economy, it is now roughly half of what it was when President Obama took office.
But Republicans know they’ve got a hostage so they’re bound and determined to extract a ransom. Hence the brainstorming session they held yesterday where 39 different members of the House GOP conference arose to offer their idea of what policy they should demand in return for not intentionally tanking the global economy. The ideas, according to various reports, ranged from approval of the Keystone XL pipeline to doing something about partial-birth abortion.
My personal favorite item comes from Jonathan Strong’s account at National Review Online:
The Ryan budget passed by the House assumes repeal of Obamacare. So if House Republicans were to press for enactment of the Ryan budget in exchange for raising the debt ceiling, that would entail repealing Obamacare – which is why there are pangs of doubt within the GOP leadership about whether that strategy is realistic.
So GOP leadership thinks demanding that the president sign onto the radical Ryan budget is unrealistic because it would necessarily involve repealing Obamacare? As if the Ryan budget’s dramatic cuts to discretionary spending and gutting of Medicare and Medicaid would be evenly remotely acceptable were Obamacare not involved? The whole scenario yesterday has the air of fantasy – like my wife and I arguing over what we’ll do when we win the Powerball tomorrow night (she looks oddly askance at my plan to commute via jet pack).
By: Robert Schlesinger, U. S. News and World Report, May 17, 2013
“Unbelievably Dangerous And Blisteringly Stupid”: Republicans Plan To Use The Debt Limit, Yes, As “Leverage”
Americans have seen quite a few congressionally imposed crisis in recent months, from the so-called “fiscal cliff,” to the sequestration cuts that are already hurting the country as planned, to threats of government shutdowns. But there’s still one more storm on the horizon, which happens to be the easiest one to deal with and the one that has the potential to do the most damage.
I’m referring to the next debt-ceiling increase — or for those who watch The Rachel Maddow Show closely, Congressional Storm Gertrude.
Sen. Rob Portman (R-Ohio) sat down with Politico this week and said, “Let’s use the debt limit, yes, as leverage.” As a practical matter, what he meant was, congressional Republicans should threaten to hurt Americans on purpose unless President Obama agrees to slash public investments. Because the White House won’t want such a catastrophe, Republicans will have “leverage” that Portman wants to see his party “use.”
The Ohio Republican isn’t the only one thinking this way.
House leaders are planning to bring a debt ceiling “prioritization” bill to the House floor before the end of April, bringing the divisive issue to the forefront ahead of the government hitting the ceiling sometime this summer.
The legislation tries to mitigate the damage of the government reaching the debt limit in the event that negotiations to raise it fail. But Democrats have panned the idea, meaning it is unlikely to be taken up by Senate Majority Leader Harry Reid, D-Nev.
The bill, introduced by Republican Rep. Tom McClintock of California, says the government must pay the interest and principal of its debts with incoming tax revenue before any other obligations.
“It removes default as an option,” said Rep. Steve Scalise of Louisiana, chairman of the conservative Republican Study Committee.
Well, not exactly. “Default” is a tricky thing, a fact House Republicans may not fully appreciate.
In effect, here’s what this proposal is all about: Republicans are preparing to hold the debt ceiling hostage — again — and are preparing for what happens if Democrats fail to pay the ransom and GOP lawmakers are forced to shoot the hostage.
At that point, because Congress will have blocked the United States’ ability to borrow the funds necessary to meet our legal obligations, these House Republicans are looking to prioritize who’ll get paid first after the debt ceiling is breached. Under the right-wing vision, the nation will start by focusing on our debt payments, paying them in full, and then using whatever money is left over to pay for literally everything else.
And while that might prevent part of a potential default, it would leave open the possibility of another — the United States has passed laws obligating the government to pay for plenty of other things, and we’d almost certainly have to default on those obligations unless the debt ceiling is raised as it always has been.
The fact that House Republicans find this confusing is not at all reassuring.
But even if we put that aside, the fact that this proposal exists at all is a little insane, since it intends to prepare for congressional Republicans to undermine the full faith and credit of the United States, on purpose, in just a few months, for the first time in American history. In other words, while lawmakers should be working on a plan to avert an easily avoidable crisis, House Republicans have decided to spend time working on a plan on what the government should do when the easily avoidable crisis hits.
This is unbelievably dangerous, and so blisteringly stupid that it’s almost hard to believe a group of American elected officials would be willing to think this way. And yet, here we are.
What remains unclear, however, is how much of the bluster and chest-thumping is sincere. Congressional Republicans have been caught bluffing on this issue before, and House Speaker John Boehner (R-Ohio) conceded just last month, “I’m not going to risk the full faith and credit of the federal government.”
If that’s true, the House GOP’s antics are full of sound and fury signifying nothing. If Boehner wasn’t telling the truth, Americans have cause for alarm, since it’s their economy and world standing Republicans are threatening to deliberately destroy.
By: Steve Benen, The Maddow Blog, April 12, 2013
Whose “idea” was the sequester, and why should it matter? My Twitter feed these last couple of weeks has been overflowing with people going beyond the usual “communist” and “idiot” name-calling that I get every day and throwing the occasional “liar” in there because I “withhold” the information that the sequester was the Obama administration’s idea. Very well, consider that nugget hereby unwithheld. Let’s grant that this is true. But it’s true only because the Republicans were holding a gun to the administration’s head—and besides, the Republicans immediately voted for it. In any case the important thing now is that outside of Fox News land, it’s an unimportant fact whose “idea” it was. The Republicans are partial owners of this idea, and as the party that now wants the cuts to kick in, they deserve to—and will—bear more responsibility for the negative impacts.
A trip back through the full context of this saga tells the story. The idea of having these deep budget cuts called “sequestration” goes back to the summer of 2011 and the debt-ceiling negotiations. You’ll recall readily enough that it was first time in history that an opposition party had attempted to attach any conditions to increasing the debt limit. You’ll also recall that the Republicans made this intention quite clear from the beginning of 2011; indeed, from campaign time the year before. Remember Obama’s quotes from late 2010 in which he said he felt sure the Republicans would behave more reasonably once the responsibility to govern was partly theirs?
Instead, they almost crashed the economy. And they were also clearly the side pushing for drastic spending cuts. Let’s go back quickly over a partial 2011 timeline. In April, Obama spokesman Jay Carney said it was the president’s position that raising the debt limit “shouldn’t be held hostage to any other action.” On May 11, Austan Goolsbee, then Obama’s chief economic adviser, said that tying a debt-limit increase to spending cuts was “quite insane.”
On May 16, the United States went into technical default, but the Treasury Department was able to string things along a few more weeks. Tim Geithner made it clear that the real problem would hit August 1. A key moment, as Scott Lilly of the Center for American Progress wrote in The Huffington Post, came on May 31. That’s when the GOP-run House voted on Obama’s request for a “clean” debt-limit increase. It failed, and all 236 Republicans voted no.
All this time, and right on up to August 1, Republicans were screaming for deep budget cuts, and the administration was saying no. But the Republicans had the leverage because it actually seemed plausible they were crazy enough to push the country into default. And so at that point, at least according to Bob Woodward in his new book, Jack Lew, then the budget director and now Obama’s nominee for Treasury secretary, originally came up with the notion of sequestered cuts. Or maybe it was Gene Sperling. The White House’s idea was based on language from the 1985 Gramm-Rudman-Hollings deficit-reduction act. It was also the White House’s notion that if the “trigger” was hit, what would kick in would be not only automatic budget cuts but also automatic revenue increases (an idea Republicans refused to go along with).
So fine, the White House proposed it. It did so only after months of Republicans publicly demanding huge spending cuts and refusing to consider any revenues and acting as if they were prepared to send the nation into default over spending. In other words, this was the administration’s idea in much the way that it’s a parent’s “idea” to pay ransom to a person who has taken his child hostage. There was a gun to the White House’s head, which was the possibility of the country going into default.
And then, when it was all put into legislation, it was the Republicans who passed the Budget Control Act of 2011 in the House, with 218 of them voting yes. So even if administration officials proposed it, it would have remained just a proposal if those 218 Republicans hadn’t supported it (no House Democrats backed it). Most Republicans agreed at the time that the sequestration trigger was a good thing—that it would force everyone to get together and agree to a path forward and a long-term budget deal.
Let’s say that I’m having a dispute with a neighbor I don’t really like or trust about some invasive weeds infesting both of our properties. We consider a range of options and then finally he proposes a solution that isn’t very appetizing to either of us—it’s expensive, might kill a lot of grass, say, or a couple trees. It’s not exactly desirable to either of us, but I endorse his suggestion and share the costs of implementation of his plan. If it ends up killing grass or trees, am I really then on firm moral ground in pointing my finger and saying, “Hey, it was your idea, bub”?
I guess maybe conservatives think that way, but of course I don’t. I assented to the plan. I share responsibility for the consequences. Where my little analogy collapses is that in my hypothetical, my neighbor and I are more or less equally affected by the negative outcome. The Republicans’ ace card is that they know, or they hope they know, they are not equally affected. Austere cuts will harm the economy, and the blame will fall on the president.
Normally yes. But the majority of the people are onto them. And it sure isn’t going to be looking very responsible to people, as the March 1 sequestration deadline approaches, for Republicans to be going before the cameras and saying that the cuts are unfortunate but necessary medicine, or whatever formulation they come up with. They’ve wanted these spending reductions for two years. It hardly matters much who invented the mechanism for the cuts. What matters, as the Republicans will find out, is that the people don’t want them.
By: Michael Tomasky, The Daily Beast, February 19, 2013
A prolonged confrontation over the nation’s debt ceiling — unlike the “fiscal cliff,” which provoked many scary headlines – could truly be grave for both America and the world. While press coverage often mentions the possibility of lowered credit ratings for the US Treasury (again), that might only be the mildest consequence if Republicans in Congress actually refuse to authorize borrowing and avoid default.
Last time the nation prepared to face such an impasse, during the spring and summer of 2011, the chairman of the Treasury Borrowing Advisory Committee – a JPMorgan Chase official named Matthew Zames – laid out a disturbing scenario in a letter to Treasury Secretary Tim Geithner, in which he foresaw a rolling catastrophe that could inflict hundreds of billions in additional borrowing costs; spark a run on money funds, leading to a renewed financial crisis; severely disrupt financial markets and borrowing, killing fragile economic growth; and push the economy back into recession due to higher interest rates and tightened credit.
In short, the economy would contract sharply and the U.S. – along with the rest of the world – might well be plunged back into negative growth. If that was true in July 2011, it is equally true today, and there is no reason to dismiss that warning.
But the Republican leadership on Capitol Hill insists that they are willing to take these mind-boggling risks, solely for the purpose of enforcing an extreme austerity regime that has already done permanent damage in much of Europe. Between the “Boehner rule” demanded by House Speaker John Boehner, which requires a dollar in new spending cuts for every dollar increase in the debt ceiling, and the House Republican budget authored by Rep. Paul Ryan, congressional Republicans evidently want not only to gut Medicare, Social Security, and Medicaid, but to “eliminate more and more of the basic functions of government over time,” according to the Center on Budget and Policy Priorities. No education aid, no food safety inspections, no environmental protection, no infrastructure repairs, no cancer research…
From immediate economic jeopardy to long-term national decline, these prospects are obviously appalling – yet many Republican elected officials sound positively pleased about the debt ceiling crisis they have created. Senator Tom Coburn, Republican of Oklahoma, told a right-wing radio host recently that a government default would actually be a “wonderful experiment.” He assured listeners, quite falsely, that their Medicare and Social Security checks would continue to arrive every month, no matter what, and that only “stupid” spending would be cut.
If Coburn – or any Republican senator – is so eager to test the debt ceiling, perhaps he should volunteer to bump up against it first. As the Tulsa World reported in 2011, federal spending in Oklahoma amounts to three times as much as the entire state budget, with Social Security alone accounting for almost a billion dollars a month there, and Medicaid and other medical assistance amounting to another $500 million-plus. Coburn’s ultra-conservative, deep-red home state is highly dependent on federal employment and assistance, ranking 12th in retirement and disability payments and 11th in per capita federal payroll, despite its small size.
So by all means, let’s find out, as Coburn suggested, whether we can live “on the money that’s coming into the Treasury” without borrowing to finance those monthly pension checks and all those stupid federal jobs — and let’s start in Oklahoma, tomorrow. Then let’s roll out the same experiment in every state whose senators and representatives are refusing to pay the bills they have already racked up over the years – especially states, like most of those below the Mason-Dixon line, where federal spending is far higher than the tax revenues remitted to Washington.
Surely that would silence all the loud talk about this “wonderful” experiment in fiscal brinksmanship.
By: Joe Conason, The National Memo, January 16, 2013