“Uniquely American And Uniquely Stupid”: The Makings Of The Next Debt Ceiling Debacle
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
“Gotta Nuke Something”: House Republicans Eyeing New Hostage Opportunity
The House Republicans are contemplating a new budget-hostage strategy, the Washington Post reports in a story that is both highly useful and inadvertently Onion-esque. The hallmark of Onion news reporting is conveying insanity as if it were sane in a completely deadpan way. The news contained within the story is that the House GOP is thinking of tying the next increase in the debt ceiling to tax reform. Under this proposed strategy, the Post reports, “The debt limit might be raised for only a few months, with the promise of another increase when tax reform legislation passes the Senate.”
If you didn’t fall out of your chair when reading that apparently anodyne sentence, let me explain why you should have. In 2011, House Republicans undertook a novel and radically new dangerous political tactic of using the debt limit as a political bargaining chip. Before, the opposition party had treated the debt limit increase as a necessary step, though one they would posture over and use to flay the administration. (Senator Barack Obama followed this pattern.) The Republicans instead decided to actually threaten not to raise the debt ceiling unless Obama granted them policy concessions. This was extraordinarily risky. By mixing together a vote that was needed to prevent economic calamity with inherently contentious debates over the size of government, it turned routine budget disputes into a financial Cuban Missile Crisis.
The official party rationale for this extraordinary tactic was that, risky though it may be to fail to lift the debt ceiling, failing to reduce the debt was even riskier. An extreme imminent crisis justified extreme tactics. The risk of becoming Greece outweighed the risk of a debt-limit snafu (though it was not, of course, high enough to justify even a partial repeal of the Bush tax cuts).
President Obama has taken these arguments at face value, offering to meet the opposition halfway, or more than halfway, in order to strike a deal. He has publicly offered significant cuts to spending on retirement programs. But some Republicans don’t want that deal, the Post reports, because “The proposals, included in the president’s budget request, outraged seniors, and some Republicans fear that embracing them would be political suicide.”
Oh! So you threaten to melt down the world economy unless Obama agrees to cut spending on retirement programs, and then he offers to do that, and then you decide it’s too unpopular?
The decision that they no longer care about the thing they were prepared to unleash worldwide economic havoc to achieve has not caused them to abandon the debt ceiling as a hostage. (It’s the party’s Nelson Muntz–ian approach to resolving policy disagreements: “Gotta nuke something.”) If obtaining retirement cuts went from so urgent it was worth threatening to nuke the world economy over to “meh,” the next step is to figure out the next thing to nuke the world economy over. That thing, the Post reports, is tax reform.
But what is the GOP position on tax reform? It’s that tax reform must cut tax rates and not raise any revenue at all. So House Republicans are prepared to refuse to raise the debt ceiling unless Democrats agree to let them cut tax rates without increasing revenue. Their extraordinary threat, first presented as a way to force a reduction in the deficit, is now being wielded to prevent a reduction in the deficit.
By: Jonathan Chait, Daily Intelligencer, New York Magazine, April 29, 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
“Crisis To Crisis Management”: Congress’s Continual Game of Political Chicken
The proposal from the House of Representatives to push off the debt ceiling crisis for three months came with an ironic rhetorical frame: If the Senate will, in that time frame, pass a budget, we can start facing our long-term fiscal challenges instead of managing crisis to crisis. Oh, and if they don’t pass a budget all lawmakers will stop drawing salaries.
The basic idea that crisis to crisis management is the worst form of governance for our country is right on the money: Short-term continuing resolutions and other stop-gap measures ensure inefficiency because government agencies are hamstrung by their inability to plan beyond a few months. And absolutely the Senate should present a budget that lays out a vision for how to put our country on a path towards a healthy fiscal future. But, the politics over the debt ceiling in the last three years have been a leading contributor to the culture of avoiding hard decisions in favor of incendiary rhetoric we see in Congress today.
The debt ceiling debate in the summer of 2011 spawned the so-called “super committee” and so-called “fiscal cliff.” So, in the past two years we’ve seen the creation and failure of the super committee, an underwhelming fiscal cliff deal that paired special interest tax breaks with an increase to the rates for higher income individuals, and a short delay of the looming threat of sequestration, the across the board spending cuts that were supposed to motivate the super committee—and Congress—to come together to act. In the next two months we have another opportunity to avoid the sequester and the expiration of the current continuing resolution, the bill that funded government for six months at fiscal year 2012 levels in lieu of passing actual appropriations bills. And of course a debt ceiling vote is on the horizon.
All of these crises are manufactured. Those willing to put off raising the debt ceiling to make a political point are willing to hurt our economy and our standing in the world to make that same point.
At the root of these manufactured crises are a winner-take-all approach to the disagreements between and even within the political parties. At each crisis, Democrats and Republicans demand a total victory and a grand bargain only to end up placating one another with crumbs of a bad deal and promise to revisit the issues at the next manufactured crisis. Our nation cannot afford this continual game of political chicken. We cannot afford the impact of defaulting on our debts. Policymakers need to work together and come up with reforms to spending, taxes, and entitlements. No more political theater, no more back room discussions on grand bargains. It’s time for the hard work of legislating solutions to the nation’s fiscal challenges.
“Let’s Compromise, Do It My Way!”: The Republican Fever Has Not Yet Broken
I am grateful for some of the signs emanating from the Right yesterday indicating a willingness to accept the 2012 election results, and/or to stop treating the president of the United States as though he’s some sort of alien usurper of power. But let’s don’t get carried away in suggesting “the fever”–as the president referred to Republican radicalism and obstructionism during the campaign–has indeed broken.
Consider the headlines about Eric Cantor’s effusive expressions of good will and bipartisanship yesterday: “Cantor: Time for Washington to ‘Set Aside” Differences” is how CBS put it. Sounds good. But what, exactly, was Cantor talking about?
House Republicans announced last week their decision to hold a vote to raise the debt ceiling, potentially averting a contentious debate many expected to go down to the wire this February. Cantor said today House Republicans are committed to working on passing a federal budget “so we can begin to see how we’re going to pay off this debt; how we’re going to spend other people’s money, the taxpayers’ money; and begin an earnest discussion about the real issues facing this country.”
“I think times demand as much,” he said. “It’s time that Washington get with it, and that is why I believe, hopefully, the Senate can see clear to doing a budget, putting a spending plan out there for the world to see… So we can begin to unite around the things that bring us together, set aside the differences, and get some results.”
Do you see any change of position here, other than the already-decided House GOP decision to not to stake everything on a debt limit hostage-taking exercise at the end of February? Best way I know to translate what Cantor is saying is: “Let’s see how much agreement we can get on the elements of our agenda,” which are entirely about domestic spending, not defense spending or revenues, and involve direct benefit cuts, not ways to rein in health care costs.
Yes, it’s a good thing that for whatever reason congressional Republicans have decided not to blow up the U.S. economy if they don’t get their way in fiscal negotiations. But for the moment, their way or the highway still seem to be the only options they comprehend.
By; Ed Kilgore, Contributing Writer, Washington Monthly Political Animal, January 22, 2013
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