“Default Prevention Act, Really?”: House GOP Plays With Matches; Will The Economy Burn?
The Republican-led Congress has just 12 days before the nation’s debt ceiling has to be raised. If lawmakers fail to meet their responsibilities, the country won’t be able to pay its bills, we’ll default on our debts, the full faith and credit of the United States will be in jeopardy, and the economic consequences will be severe.
At this point, congressional Republicans appear to be divided into two groups. The first, which includes the GOP leadership, knows it must raise the debt ceiling, but this faction has no idea how to complete the simple task. The second, which includes far-right members in both chambers, wants to hold the debt ceiling hostage, threatening to crash the economy on purpose unless Democrats meets their demands, but this faction hasn’t bothered to fill out the ransom note.
So far, markets aren’t panicking, because everyone is working from the assumption that Republicans won’t deliberately create a recession for no reason – though anything’s possible.
What’s striking, though, is how little work is getting done. We’re 12 days away from a dangerous deadline – Congress is only in session for 7 of those 12 days – and Congress isn’t even trying to move towards a resolution yet. Instead, the GOP-led House spent time yesterday on something called the “Default Prevention Act.”
With the potential for an unprecedented federal default two weeks away, House Republicans on Wednesday plan to pass legislation not to avert disaster, but rather to manage it, channeling daily tax collections to the nation’s creditors and Social Security recipients if the government’s borrowing limit is not lifted.
Let’s put this in everyday terms. Imagine a gang told you they plan to burn down your town unless their demands are met. You’re skeptical and tell the gang to go away. But the gang members stick around and say, “Before we burn down your town, let’s start making plans to prioritize which parts of the town you might want to rescue before we turn violent.”
That, in a nutshell, is what the “Default Prevention Act” is all about – the gang members passed a bill yesterday to prioritize which bills they’ll allow the United States to pay, and which bills will get burned by their fire.
The problem, of course, is that all of this is completely insane.
What we’re talking about is a plan in which Republicans try to manage the fire from their own arson, “channeling daily tax collections to the nation’s creditors and Social Security recipients” after they refuse, on purpose, to raise the debt ceiling.
And why would GOP lawmakers prioritize the nation’s creditors and Social Security recipients? On the former, because so much of the global economy rests on U.S. Treasury bonds, a deliberate default risks crashing financial systems across the planet. That would be … catastrophically bad.
On the latter, congressional Republicans don’t want to be responsible for cutting off Social Security checks for millions of American seniors, right in time for the holidays.
The “Default Prevention Act” is, by this measure, misnamed. It would prevent the nation from defaulting on some debts, while encouraging the nation to default on others.
Making matters just a little worse, Slate’s Jordan Weissmann explained that the GOP plan appears to be illegal and literally impossible to implement.
[E]ven if the government could borrow to pay bondholders and seniors, crossing the debt limit would still be plenty apocalyptic. Treasury’s computers still might not be capable of prioritizing its obligations, in which case we’d still end up failing to pay some bondholders despite Congress’s intentions.
The mere threat of such an accidental default could cause markets to seize. If the Treasury did successfully keep money flowing to its lenders, meanwhile, the government still wouldn’t be able to cover all of its other costs, and thus would be forced to implement massive, immediate spending cuts to other programs, likely dragging the U.S. and probably the rest of the world into a recession.
He’s referring, of course, to a recession that could easily be avoided by simply raising the debt ceiling – a simple, procedural vote that costs nothing.
Tick, tock.
By: Steve Benen, The Maddow Blog, October 22, 2015
“Obama Has Plenty Of Reasons To Smile”: A Useful Reminder That There Is No Such Thing As The “Twilight” Of A Presidency
Attention has been focused on who becomes our next president, but meanwhile the incumbent is on quite a roll.
Throughout his tour of Alaska, President Obama looked full of his old swagger. He took a photo of Denali — the former Mount McKinley — through a window of Air Force One and shared it via Instagram. He used melting glaciers as a backdrop to talk about climate change, posed with small children and large fish, and became the first sitting president to venture north of the Arctic Circle.
He seemed to smile throughout the trip, and why not? The nuclear agreement that Secretary of State John F. Kerry negotiated with Iran is now safe from congressional meddling. U.S. economic growth for the second quarter was a healthy 3.7 percent. Unemployment has fallen to 5.1 percent, according to figures released Friday. Saudi King Salman — portrayed by Obama’s critics as peeved with the president — dropped by the White House on Friday for a chat, reportedly renting an entire luxury hotel for his entourage. And this month, Chinese President Xi Jinping is scheduled to arrive for what promises to be the most important state visit of the year.
Obama gives the impression of having rediscovered the joy of being president. Maybe he really needed that Martha’s Vineyard vacation. Or maybe he is beginning to see some of his long-term policies finally bearing fruit — and his legacy being cemented.
Watching him now is a useful reminder that there is no such thing as the “twilight” of a presidency. Until the day his successor takes office, Obama will be the leading actor on the biggest and most important stage in the world.
It is useful to recall that George W. Bush practically had one foot out the door when the financial system threatened to collapse in 2008. It was Bush and his advisers who put together a massive $700 billion bank bailout and managed to sell it to Congress. Bush signed the rescue bill into law on Oct. 3 — barely a month before his successor would be chosen.
The banks were saved, but nothing could stop the economy from falling into its worst slump since the Great Depression. I believe historians will conclude that one of Obama’s greatest accomplishments was bringing the economy back to real growth and something close to full employment — more slowly than Americans may have wished, perhaps, but steadily.
The Iran deal, in my view, is another remarkable achievement. Beyond the fact that it definitively keeps Tehran from building a nuclear weapon for at least 15 years, the agreement offers Iran’s leaders a path toward renewed membership in the community of nations. The mullahs may decide to remain defiant and isolated, but at least they now have a choice.
Obama’s White House has often been clumsy at inside-the-Beltway politics, but the handling of the Iran deal has been adroit. The drip-drip-drip of announcements from Democratic senators who favor the agreement has created a sense of momentum and inevitability. Now Obama knows that if Congress passes a measure rejecting the deal, he can veto it without fear of being overridden. The question, in fact, is whether a resolution of disapproval can even make it through the Senate. If Obama convinces 41 senators to filibuster the measure, it dies.
All is not sweetness and light, of course. The Syrian civil war is a humanitarian disaster of enormous and tragic proportions, as evidenced by the heartbreaking refugee crisis in Europe. I don’t believe there is anything the United States could have done to prevent the war, but all nations bear a responsibility to help ease the suffering. The fact that some nations refuse to do their share does not absolve us from doing ours.
Domestically, the good economic numbers ignore the fact that middle-class incomes remain stagnant. Even without healthy wage growth, an economic recovery feels better than a slump — but only in relative terms. One doesn’t hear people breaking into “Happy Days Are Here Again.”
All in all, though, it looks like a good time to be President Obama. The Affordable Care Act, as he had hoped, is by now so well-established that no Republican successor could easily eliminate it. Industries are already making plans to accommodate new restrictions on carbon emissions. Oh, and despite what you hear from all the Republican candidates, the border with Mexico is more secure than ever before.
Obama’s legacy will have a few blemishes. But he has good reason to smile.
By: Eugene Robinson, Opinion Writer, The Washington Post, September 7, 2015
“G.O.P. Candidates And Obama’s Failure To Fail”: Republicans Had Nothing To Say About Any Of The Supposed Obama Disaster Areas
What did the men who would be president talk about during last week’s prime-time Republican debate? Well, there were 19 references to God, while the economy rated only 10 mentions. Republicans in Congress have voted dozens of times to repeal all or part of Obamacare, but the candidates only named President Obama’s signature policy nine times over the course of two hours. And energy, another erstwhile G.O.P. favorite, came up only four times.
Strange, isn’t it? The shared premise of everyone on the Republican side is that the Obama years have been a time of policy disaster on every front. Yet the candidates on that stage had almost nothing to say about any of the supposed disaster areas.
And there was a good reason they seemed so tongue-tied: Out there in the real world, none of the disasters their party predicted have actually come to pass. President Obama just keeps failing to fail. And that’s a big problem for the G.O.P. — even bigger than Donald Trump.
Start with health reform. Talk to right-wingers, and they will inevitably assert that it has been a disaster. But ask exactly what form this disaster has taken, and at best you get unverified anecdotes about rate hikes and declining quality.
Meanwhile, actual numbers show that the Affordable Care Act has sharply reduced the number of uninsured Americans — especially in blue states that have been willing to expand Medicaid — while costing substantially less than expected. The newly insured are, by and large, pleased with their coverage, and the law has clearly improved access to care.
Needless to say, right-wing think tanks are still cranking out “studies” purporting to show that health reform is a failure. But it’s a losing game, and judging from last week’s debate Republican politicians know it.
But what about side effects? Obamacare was supposed to be a job-killer — in fact, when Marco Rubio was asked how he would boost the economy, pretty much all he had to suggest was repealing health and financial reforms. But in the year and a half since Obamacare went fully into effect, the U.S. economy has added an average of 237,000 private-sector jobs per month. That’s pretty good. In fact, it’s better than anything we’ve seen since the 1990s.
Which brings us to the economy.
There was remarkably little economic discussion at the debate, although Jeb Bush is still boasting about his record in Florida — that is, his experience in presiding over a gigantic housing bubble, and providentially leaving office before the bubble burst. Why didn’t the other candidates say more? Probably because at this point the Obama economy doesn’t look too bad. Put it this way: if you compare unemployment rates over the course of the Obama administration with unemployment rates under Reagan, Mr. Obama ends up looking better – unemployment was higher when he took office, and it’s now lower than it was at this point under Reagan.
O.K., there are many reasons to qualify that assessment, notably the fact that measured unemployment is low in part because of a decline in the percentage of Americans in the labor force. Still, the Obama economy has utterly failed to deliver the disasters — hyperinflation! a plunging dollar! fiscal crisis! — that just about everyone on the right predicted. And this has evidently left the Republican presidential field with nothing much to say.
One last point: traditionally, Republicans love to talk about how liberals with their environmentalism and war on coal are standing in the way of America’s energy future. But there was only a bit of that last week — perhaps because domestic oil production has soared and oil imports have plunged since Mr. Obama took office.
What’s the common theme linking all the disasters that Republicans predicted, but which failed to materialize? If I had to summarize the G.O.P.’s attitude on domestic policy, it would be that no good deed goes unpunished. Try to help the unfortunate, support the economy in hard times, or limit pollution, and you will face the wrath of the invisible hand. The only way to thrive, the right insists, is to be nice to the rich and cruel to the poor, while letting corporations do as they please.
According to this worldview, a leader like President Obama who raises taxes on the 1 percent while subsidizing health care for lower-income families, who provides stimulus in a recession, who regulates banks and expands environmental protection, will surely preside over disaster in every direction.
But he hasn’t. I’m not saying that America is in great shape, because it isn’t. Economic recovery has come too slowly, and is still incomplete; Obamacare isn’t the system anyone would have designed from scratch; and we’re nowhere close to doing enough on climate change. But we’re doing far better than any of those guys in Cleveland will ever admit.
By: Paul Krugman, Op-Ed Columnist, The Washington Post, August 10, 2015
“China’s Naked Emperors”: Listen Up Jeb, China’s Rulers Have No Idea What They’re Doing
Politicians who preside over economic booms often develop delusions of competence. You can see this domestically: Jeb Bush imagines that he knows the secrets of economic growth because he happened to be governor when Florida was experiencing a giant housing bubble, and he had the good luck to leave office just before it burst. We’ve seen it in many countries: I still remember the omniscience and omnipotence ascribed to Japanese bureaucrats in the 1980s, before the long stagnation set in.
This is the context in which you need to understand the strange goings-on in China’s stock market. In and of itself, the price of Chinese equities shouldn’t matter all that much. But the authorities have chosen to put their credibility on the line by trying to control that market — and are in the process of demonstrating that, China’s remarkable success over the past 25 years notwithstanding, the nation’s rulers have no idea what they’re doing.
Start with the fundamentals. China is at the end of an era — the era of superfast growth, made possible in large part by a vast migration of underemployed peasants from the countryside to coastal cities. This reserve of surplus labor is now dwindling, which means that growth must slow.
But China’s economic structure is built around the presumption of very rapid growth. Enterprises, many of them state-owned, hoard their earnings rather than return them to the public, which has stunted family incomes; at the same time, individual savings are high, in part because the social safety net is weak, so families accumulate cash just in case. As a result, Chinese spending is lopsided, with very high rates of investment but a very low share of consumer demand in gross domestic product.
This structure was workable as long as torrid economic growth offered sufficient investment opportunities. But now investment is running into rapidly decreasing returns. The result is a nasty transition problem: What happens if investment drops off but consumption doesn’t rise fast enough to fill the gap?
What China needs are reforms that spread the purchasing power — and it has, to be fair, been making efforts in that direction. But by all accounts these efforts have fallen short. For example, it has introduced what is supposed to be a national health care system, but in practice many workers fall through the cracks.
Meanwhile, China’s leaders appear to be terrified — probably for political reasons — by the prospect of even a brief recession. So they’ve been pumping up demand by, in effect, force-feeding the system with credit, including fostering a stock market boom. Such measures can work for a while, and all might have been well if the big reforms were moving fast enough. But they aren’t, and the result is a bubble that wants to burst.
China’s response has been an all-out effort to prop up stock prices. Large shareholders have been blocked from selling; state-run institutions have been told to buy shares; many companies with falling prices have been allowed to suspend trading. These are things you might do for a couple of days to contain an obviously unjustified panic, but they’re being applied on a sustained basis to a market that is still far above its level not long ago.
What do Chinese authorities think they’re doing?
In part, they may be worried about financial fallout. It seems that a number of players in China borrowed large sums with stocks as security, so that the market’s plunge could lead to defaults. This is especially troubling because China has a huge “shadow banking” sector that is essentially unregulated and could easily experience a wave of bank runs. But it also looks as if the Chinese government, having encouraged citizens to buy stocks, now feels that it must defend stock prices to preserve its reputation. And what it’s ending up doing, of course, is shredding that reputation at record speed.
Indeed, every time you think the authorities have done everything possible to destroy their credibility, they top themselves. Lately state-run media have been assigning blame for the stock plunge to, you guessed it, a foreign conspiracy against China, which is even less plausible than you may think: China has long maintained controls that effectively shut foreigners out of its stock market, and it’s hard to sell off assets you were never allowed to own in the first place.
So what have we just learned? China’s incredible growth wasn’t a mirage, and its economy remains a productive powerhouse. The problems of transition to lower growth are obviously major, but we’ve known that for a while. The big news here isn’t about the Chinese economy; it’s about China’s leaders. Forget everything you’ve heard about their brilliance and foresightedness. Judging by their current flailing, they have no clue what they’re doing.
By: Paul Krugman, Op-Ed Columnist, The New York Times, July 31, 2015
“Significantly Ambivalent On Key Issues”: The White Working Class As “Yes, But” And “No, But” Voters
I think we are beginning to understand this year more than in the past that non-college white voters–a.k.a. the “white working class” are currently bifurcated into those who intensely dislike government but aren’t sold on conservative economic panaceas and those who are very angry about the “rigged” economy but aren’t sure they trust government to do anything about it. The former are heavily represented in the current support base of Donald Trump, while the latter should be targets for Democrats. That proposition about the latter was, of course, the main message in Stan Greenberg’s essay on the white working class in the current issue of the Washington Monthly, which also served as the basis for the roundtable discussion WaMo sponsored in conjunction with The Democratic Strategist.
In his WaPo column yesterday, E.J. Dionne grasped the importance of this realization in writing about “yes, but” voters who may have partisan voting habits but are significantly ambivalent on key issues. After discussing some polling from WaPo and Pew, Dionne noted:
[A] third study, a joint product of the Democratic Strategist Web site and Washington Monthly magazine, points to the work Democrats need to do with white working-class voters.
One key finding, from pollster Stan Greenberg: Such voters are “open to an expansive Democratic economic agenda” but “are only ready to listen when they think that Democrats understand their deeply held belief that politics has been corrupted and government has failed.” This calls for not only “populist measures to reduce the control of big money and corruption” but also, as Mark Schmitt of the New America Foundation argued, “high-profile efforts to show that government can be innovative, accessible and responsive.”
This ambivalent feeling about government is the most important “yes, but” impulse in the American electorate, and the party that masters this blend of hope and skepticism will win the 2016 election.
Yessir. The broader lesson is that the stereotype of swing voters as Broderesque, Fournierite “centrists” looking for bipartisan compromises that don’t upset elites misses the real swing voters, who may not be as numerous on the surface as is years past, but who could move political mountains in response to the right combination of messages that take seriously their concerns.
By: Ed Kilgore, Contributing Writer, Political Animal Blog, The Washington Monthly, July 27, 2015
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