“Good Cop, Bad Cop”: Conservative Think Tanks’ Responses To Default Is Another Reason To Kill The Debt Ceiling
House Republicans are looking to weaponize the debt ceiling again, while the Obama administration is trying to make removing the threat of default part of any agreement.
Here’s one reason why the debt ceiling needs to go: the conservative intellectual infrastructure cheered on a potential default. I had imagined that there would be a good cop/bad cop dynamic to the right. Very conservative political leaders would be the bad cop, saying that they weren’t afraid to default on the debt, while conservative think tanks would play a version of the good cop, warning of the dire consequences of a default for the economy if their bad cop friend didn’t get his way.
For instance, here’s bad cop Sen. Pat Toomey (R-PA) saying that the markets “would actually accept even a delay in interest payments on the Treasuries,” especially “if it meant that Congress would right this ship, address this fiscal imbalance, and put us on a sustainable path, and that the bond market would rally if it saw we were making real progress towards this.” Missing interest payments is fine; in fact, it is great for the country if it is used to pass the Ryan Plan.
Financial analysts, to put it mildly, disagreed. JP Morgan analysts wrote that “any delay in making a coupon or principal payment by Treasury would almost certainly have large systemic effects with long-term adverse consequences for Treasury finances and the US economy.”
Here’s where the think tanks are fascinating. You could imagine them saying “our partner Toomey is nuts, we can’t control him, and you’d better do what he says or there’s going to be real damage.” But that’s not what they did. It’s best to split the work they did on the debt ceiling in two directions:
1. Technical Default Ain’t No Thang. The first is arguing, like Toomey, that a “technical default” wouldn’t matter, and in fact it could be a great thing if the Ryan Plan passed as a result. How did James Pethokoukis, then of Fortune and now of AEI, deal with a Moody’s report arguing a “short-lived default” would hurt the economy? Pethokoukis: ”I guess I would care more about what Moody’s had to say if a) they hadn’t missed the whole financial crisis, b) didn’t want to see higher taxes as part of any fiscal fix and c) if they made any economic sense.” Default doesn’t matter because Pethokoukis doesn’t want taxes to go up, and there’s no economic sense because of an interview he read in the Wall Street Journal.
Others went even further, arguing that the real defaulters are those who, um, don’t want to default on the debt. Here’s the conservative think tank e21 with a staff editorial arguing that ”policymakers need to stay focused on the real default issue: whether the terms of the debt limit increase this summer will be sufficiently tough to ensure that the nation’s debt-to-GDP ratio is stabilized and eventually sharply reduced.” All these people who want a clean debt ceiling increase are causing the real default issue. As someone who used to do a lot of credit risk modeling, this is my favorite: “Indeed, those demanding the toughest concessions today actually have a strong pro-creditor bias.” S&P disagreed with whoever wrote that editorial and increased the credit risk (downgraded) based on the threat of this technical default.
The Heritage Foundation wrote a white paper saying that you could just “hold the debt limit in place, thereby forcing an immediate reduction in non-interest spending averaging about $125 billion each month,” and that “refusing to raise the debt limit would not, in and of itself, cause the United States to default on its public debt.” Dana Milbank noted that these kinds of shuffling plans would still leave the government short and likely cause a recession. Milbank: ”Without borrowing, we’d have to cut Obama’s budget for 2012 by $1.5 trillion. That means even if we shut down the military and stopped writing Social Security checks, the government would still come up about $200 billion short.” The Cato Institute also jumped in with the technical default crowd here.
But that was the reaction from the number-crunching analysts. What about the bosses?
2. Civilization Hangs in the Balance of the Debt Ceiling Fight. Here’s the president of AEI, Arthur C. Brooks, in July 2011: “The battle over the debt ceiling…is not a political fight between Republicans and Democrats; it is a fight against 50-year trends toward statism…No one deserves our political support today unless he or she is willing to work for as long as it takes to win the moral fight to steer our nation back toward enterprise and self-governance.”
Even better, the president of The Heritage Foundation, also in July 2011, compares Democrats to Japan during World War II and then argues: ”We must win this fight. The debate over raising the debt limit seems complicated, but it is really very simple. Look beyond the myriad details of the awkward compromises, and you see an epic struggle between two opposing camps….Congress should not raise the debt limit without getting spending under control.”
So the the conservative intellectual infrastructure, which consumes hundreds of millions of dollars a year, looked at the possibility of a debt default and determined it was both inconsequential and also the only way to stop statism in our lifetimes. No wonder the time period around the debt ceiling in 2011 was such a disaster for our economy, killing around 250,000 jobs that should have been created. There’s no reason to assume all the same players won’t play an even worse cop this time around.
There’s no good reason for the debt ceiling, and now there are really bad consequences for its existence. Time to end it.
By: Mike Konczal, The National Memo, December 6, 2012
“The Emperors Waterloo Defeat”: Jim DeMint Returns To Obamacare Roots With Move To Heritage Foundation
South Carolina senator Jim DeMint announced Thursday morning that he will be leaving the Senate in January to run conservative think tank The Heritage Foundation.
Although he said in a statement that “I’m leaving the Senate now, but I’m not leaving the fight,” adding that “the conservative movement needs strong leadership in the battle of ideas,” his departure from the Senate could be a significant blow to the right wing. DeMint, who holds extreme far-right positions on virtually all social and fiscal issues, has been the unofficial Senate leader of the Tea Party. As founder of the Senate Conservatives Fund, he has helped nominate far-right candidates in several Senate races, and has not been afraid to break with party leadership in primary battles. While some DeMint-backed candidates (like Marco Rubio and Rand Paul) won their elections and helped swing the Republican caucus to the right, others (like Sharron Angle and Christine O’Donnell) blew winnable elections for the GOP — helping Democrats maintain their majority.
Between his extreme rhetoric and his flat rejection of ideological dissent within his caucus, DeMint is in many ways the perfect embodiment of the modern Republican Party. Despite his laughable claim that he left the Senate “a better place” than he found it — as Buzzfeed’s Andrew Kaczynski points out, the American public disagrees — in truth, his legacy is better summed up by New York senator Chuck Schumer: “Certainly his effect on the political system may have been more beneficial to Democrats than Republicans.”
For DeMint, the move to The Heritage Foundation represents the closing of a full circle with regards to the issue that made him and the Tea Party a household name: Obamacare. Although he famously declared in 2009 that “this health care issue Is D-Day for freedom in America,” and that defeating the law would be Obama’s “Waterloo,” the senator was actually for individual mandates before he was against them. Back in 2007, DeMint praised the mandate in Mitt Romney’s Massachusetts health care law for “making freedom work for everyone.”
His new job will be a return to those roots; after all, the individual mandate was originally developed in 1989 by Heritage Foundation health care expert Stuart Butler.
Of course, just like DeMint, the Foundation now believes that the law “must be repealed.” In fact, if Heritage Action for America’s post-campaign video dramatically declaring war against President Obama is any indication of the Foundation’s priorities, then DeMint’s hyper-partisan brand of politics is a perfect fit for the think tank.
Heritage may be a perfect fit for DeMint, as well. Despite winning huge headlines as a senator, his actual legislative record is close to nonexistent. Additionally, as Kaczynski notes in Buzzfeed, DeMint is currently one of the poorest members of the Senate; his new job represents a significant pay raise, and if he plays his cards right — perhaps following Dick Armey’s example at FreedomWorks — then DeMint’s work in the right-wing private sector could set him up for life.
By: Henry Decker, The National Memo, December 6, 2012
“A Good Time To Take Stock”: Don’t Count Out Angry White Guys Quite Yet
Earlier this week, John Boehner opened his fiscal cliff counteroffer to President Obama by claiming that it had been a “status quo election in which both you and the Republican majority in the House were re-elected.” Democrats and progressives, who have spent the last month crowing about Republican’s self-marginalization as the party of aging white men, obviously beg to differ — both about who holds the leverage in the ongoing tax rate and debt ceiling standoffs and how the election plays into it. Are they being overconfident, or will the Obama coalition we saw turn out a month ago hold?
As the last of the post-election data sifts and behind-the-scenes campaign reveals trickle out and the political class tries to figure out the new normal, it’s a good time to take stock.
Liberals are thrilled to see a toughened Obama use his strengthened hand against Republican intransigence, which they see as bolstered by an election day mandate. Greg Sargent at the Washington Post put it this way: “The argument is straightforward: This isn’t 2011 anymore. Last time, Republicans had won an election; this time, Obama and Democrats won. Polls show the public increasingly sees Republicans as the intransigent party and the primary obstacle to compromise in Washington.” And Frank Rich was equally dismissive of the Republicans’ bargaining power: “Everyone knows the Republicans are going to fold — the Republicans know they are going to fold — and the only question to be resolved is when and on what terms. They have zero leverage. It’s not only that they lost the election; they continue to decline in national polls, with the latest Pew survey showing that 53 percent of Americans will blame the GOP (and only 27 percent will blame President Obama) if there’s no deal by January.” Even plenty of Republicans are pessimistic: “Now more than ever, Republicans should know better than to pretend polls aren’t telling them something,” wrote John Podhoretz glumly.
But House members aren’t elected by national polls, and thanks to gerrymandering into safe districts that helped Republicans hold the House last month, they still may have more to fear from their right flank in the event of a compromise. And the prior particulars of this current skirmish favor the Democrats: Taxes going up on everyone on January 1 over their desire to keep tax cuts for the rich looks bad just after you lost by running an out-of-touch rich guy for president. As Republican Rep. James Lankford admitted to the Times, “It’s a terrible position because by default, Democrats get what they want.” This is a crisis of Republicans’ making that they’ve boxed themselves into; future battles might not be so deliciously karmic.
Of course, the long-term demographic trends that, combined with a killer turnout game helped re-elect the president — despite Republicans’ innumerate overconfidence — still exist. Just how that created (or confirmed) an “Obama coalition” is elucidated in a just-released report by Ruy Teixeira and John Halpin, who can justly claim to have called those trends long before Republicans had to remember that Latino voters exist.
While many pollsters erroneously believed that the share of the white vote, for example, would remain stable, their 2011 report, “The Path to 270” projected that in 2012, the following math would favor Obama: an increase of 2 percent in the share of voters of color, fewer white working-class voters, and a small uptick in white college graduate voters. “According to the 2012 exit polls, that is exactly what happened,” they write in the new report. “With the re-election of President Barack Obama in 2012, this progressive coalition has clearly emerged, albeit in an early and tenuous stage.”
That last qualifier also matters in figuring out just what that progressive coalition can do and how it can be harnessed, especially with coming state-level and local races and in future legislative battles that may divide those disparate constituencies — or leave them disengaged. For example, much was rightly made of the gender gap, but specificity matters: As Teixeira and Halpin note, President Obama actually lost white college-graduate women after winning them in 2008: “Among women in this demographic, his margin declined from 52 percent to 47 percent in 2008, to 46 percent to 52 percent in 2012.” (Romney also won the white working class, where he gained men compared to McCain, but not enough working class white women were in his ranks to make a difference from 2008.) As John Cassidy pointed out just after the election, white women overall have broken with the overall “gender gap” dynamic: Bush won 55 percent of white women in 2004.
The most reliable Obama voters turned not to be all women, but young women and women of color, in part because young people and people of color in general turned out and voted for the president. (Younger people and people of color are also generally less likely to be married, which partly explains how Obama won single women by 36 points; unmarried women also made up a larger share of voters in the election, 23 percent versus 21 percent in 2008.)
Unfortunately, those are the same demographics who largely stayed home in 2010, when we got many of the looniest members of the Republican caucus. They’re the same ones that brought the debt ceiling debate to the brink, after they held the government hostage over defunding Planned Parenthood. By the way, those positions on women’s health also proved politically toxic last month, at least according to the organization’s own action fund, which just released polling showing that it had managed to make 64 percent of all voters aware that Romney planned to defund it, which 62 percent of them disagreed with. Their research also found that Latinos and African Americans were more likely to side with Obama after hearing his views on “affordable birth control,” abortion, and Planned Parenthood funding. Republicans may have lost their appetites on that kind of fight, except that they still have right-to-life absolutists to appease in their coalition and in their districts.
Soon after the election, Michael Tomasky proposed that some rich liberal donor throw cash at this perennial problem: In off-year elections, “The 20 percent who leave the system are almost entirely Democrats. This has been true all my life. It’s basically because old people always vote, and I guess old white people vote more than other old people, and old white people tend to be Republican. So even when white America isn’t enraged as it was in 2010, midterms often benefit Republicans.” Meanwhile, according to Politico, it’s looking like the vaunted Obama database is going to be kept in the president’s hands mainly to channel support for legislation, despite the desperate entreaties of Democratic candidates up for election in 2013 and 2014, though it might also be used for an entirely new organization that could support candidates. (It’s also up for debate whether that database is already obsolete, anyway.)
None of this means that Democrats should be folding to a compromise which well could include draconian cuts to programs like Medicaid and Social Security that are crucial to that coalition. In fact, it probably means the opposite: Those voters need to be reminded why it matters for them to come back to the polls and to stand up for the policies that motivated them on November 6, from social insurance to ensuring access to reproductive health to comprehensive immigration reform, even without Obama’s name on the ballot.
By: Irin Carmon, Salon, December 6, 2012
“Just Another Shell Game”: John Boehner’s Medicare Proposal Is Sleight Of Hand, Not Cost Control
Denying Medicare to seniors until they reach age 67 will shift costs to seniors, states, and employers without reducing the actual cost of healthcare by one penny. It’s a shell game, and it should not be an option in the fiscal showdown talks.
While it would reduce Medicare expenditures, those costs won’t vanish. Yes, the federal government would save $5.7 billion in 2014, but that would be offset by an additional $11.4 billion spent by states, employers, and seniors, according to the Kaiser Family Foundation. That’s a cost shift and a cost increase.
The Congressional Budget Office assumes that half of 65- and 66-year-old seniors would continue employer-sponsored coverage at a cost of about $4.5 billion in 2014. That would likely accelerate the long-term decline in corporate benefits for retirees.
States would also pay because low-income uninsured seniors would be eligible for Medicaid. Even if the federal government would pay 100 percent of the cost of the new beneficiaries, states would still be on the hook for an additional $700 million in 2014 alone.
And, of course, seniors lose in the deal. Two thirds of those ages 65 and 66 would each average $2,200 more in out-of-pocket costs ($3.7 billion total) in 2014, even when accounting for subsidies to buy a plan on a health insurance exchange.
There’s another significant but less obvious cost shift through increased premiums in Medicare and in the exchange. Seniors ages 65 and 66 are the healthiest and least expensive Medicare beneficiaries, and they help lower premiums for all enrollees. Moving them to private coverage, where they would be the least healthy and most expensive health plan members, would drive up premiums for everyone else in the exchanges.
Boehner’s proposal seems more sleight of hand than legitimate cost control. It’s about weakening Medicare, not strengthening the program for future generations.
If we really want to think big about Medicare reform, let’s consider lowering the age of eligibility. Letting people as young as 55 buy into Medicare would improve the risk pool for seniors and strengthen Medicare’s bargaining power without raising program costs.
By: Ethan Rome, Executive Director of Health Care for America Now, U. S. News and World Report, December 6, 2012
“It Ain’t Over Till It’s Over”: Pennsylvania GOP To Reconsider Electoral-Vote Scheme
Republican Mike Turzai, Pennsylvania’s House Majority Leader, made quite a name for himself over the summer when he boasted that the state’s voter-ID law, ostensibly about the integrity of the electoral process, “is gonna allow Governor Romney to win the state of Pennsylvania.”
That plan didn’t go well — courts rejected the voter-suppression effort and President Obama won the Keystone State with relative ease. But Turzai isn’t done rolling out election schemes (via my colleague Laura Conaway).
A Pennsylvania lawmaker is proposing making the state the only one to divide its electoral votes based on a presidential candidate’s percentage of public support, a method that would have helped Republican Mitt Romney on Nov. 6.
Senate Majority Leader Dominic Pileggi, a Republican from Chester, wants to replace the winner-take-all system, which gave President Barack Obama the state’s 20 electoral votes, with one that divides them to reflect the proportion of votes cast for each candidate. His method would have awarded 12 votes to Obama and eight to Romney had it been in force this year.
It’s understandable that Pennsylvania Republicans would consider efforts like these, and Pileggi’s proposal reportedly has the support of Gov. Tom Corbett (R). The Democratic presidential candidate has won the state six of the six elections, and it’s easier to rig the system then earn public support.
But as I wrote about a year ago, that doesn’t make efforts like these any less ugly. As Ian Millhiser explained, “Pileggi’s plan is nothing more than a proposal to steal electoral votes that are overwhelmingly likely to be awarded to the Democratic candidate under the current system and give them away to the Republican candidate.”
Last year, this identical effort fizzled when congressional Republicans balked fearing the shift might endanger their seats. The fact that Pileggi is back at it, however, suggests the state GOP takes the plan seriously, and is well worth watching.
By: Steve Benen, The Maddow Blog, December 5, 2012
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