“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
“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
“Comedy Central”: Grover Norquist Is Wrong About The Tea Party’s Second Coming
This past Sunday, on NBC’s Meet The Press, Grover Norquist had a warning for the president, Democrats, the nation, and perhaps the world: If America ends up going over the “fiscal cliff” there will be a Tea Party revival that will outweigh that of the 2010 midterm elections. “Tea Party two is going to dwarf Tea Party one if Obama pushes us off the cliff.”
I have a question. Has Mr. Norquist resigned as president of Americans for Tax Reform and turned to comedy? If not, maybe he should quit his day job because I laughed so hard at the idea of “Tea Party two” as a warning to our president, my political party, and our nation. Oooh…”Tea Party two.” Scared President Obama? Democrats? You should be, or so Mr. Norquist thinks. Is the “Tea Party two” like Jaws II, or worse yet, Godfather III?
Look, all joking aside, the Tea Party, which isn’t a party at all, had a handful of political victories in 2010. But as I predicted, those “Tea Party candidates,” who are technically Republicans, acted like the red R on their cape dictated when it came time to voting. There was no “T” next to their name when they ran or were elected and when they got to Washington. The GOP schooled them not only on how to behave, but on how to vote. So the faithful lost their religion so to speak. And America wasn’t fooled by a party which was a movement. America also wasn’t fooled by a group that claimed to be nonpartisan, not conservatives, not angry, or not anti-Obama when it turned out to be just that: extremely partisan, very conservative, angry and definitely against the president. In other words, the original plan for the Tea Party either got off track or they lied. Oh, excuse me, let me use political terms: They misspoke.
Another reason I had to laugh at Mr. Norquists’s warning of the second coming of the Tea Party? Polls show since last spring a continuing decline in support for the Tea Party. And there was an analysis done by the Pew Research Center showing that support for the Republican Party has fallen even further in those places that once supported Tea Party candidates than it has in the country as a whole. In the 60 districts represented in Congress by a member of the House Tea Party Caucus, Republicans were viewed about as negatively as Democrats. And the analysis suggests that the Tea Party may be dragging down the Republican Party. That analysis was proven true by the results of the last election. Other polls have shown a decline in support for the Tea Party and its positions, particularly because of its hard line during the debate over the debt ceiling and deficit reduction.
So when Mr. Norquist warns the president about pushing the country over the fiscal cliff, I think he is really speaking to Republicans who are lining up now to walk away from their original pledge to him and his organization not to increase taxes. I think Mr. Norquist is saying, work with the Democrats and we’ll put so much power and money behind a Tea Party candidate to challenge your seat in Congress that you’ll lose your job. So a warning to the president? Or a threat, an unspoken form of bullying to any of the 95 percent of Republicans who signed his pledge?
Some say Democrats should heed Mr. Norquist’s warning. Some say the Tea Party is no longer relevant, they had their 15 minutes of fame and they were a one hit wonder. (This blogger among those of that opinion).
So when Mr Norquist took center stage on NBC’s Meet The Press and David Gregory asked the question “Are you over?” I think it was Sen. Claire McCaskill, a Democrat of Missouri who was in the same segment on Sunday, who said it best: “I just met him for the first time this morning,” McCaskill said. “Nice to meet him. But, you know, who is he?” Or perhaps my two toddlers, who when they hear me mentioning “Grover,” think I’m talking about a furry guy on Sesame Street.
By: Leslie Marshall, U. S. News and World Report, December 5, 2012
“GOP Fiscal Maneuvers”: Republicans Are More Preoccupied Now With The Optics Of “Not Surrendering”
So there are two pieces of news out today about the Republican response to the president’s so-far-very-successful maneuvers on the big fiscal issues. The first is a formal counter-offer from the House GOP leadership (with, significantly, Eric Cantor’s and Paul Ryan’s names joining that of John Boehner). It specifically calls for $800 billion in new revenues (close to what Boehner put on the table in his repudiated 2011 debt limit deal), but without rate increases. And it bites the bullet somewhat on spending by calling for a 2-year increase in the Medicare eligibiity age and a government-wide adjustment in how cost of living adjustments are calculated.
You could read this as Republicans deciding to get more specific on “entitlement reform” than on taxes (it’s extremely unlikely that you can come up with $800 billion in “loopholes” to close without hitting the middle class), or simply choosing the least inflammatory ways to reduce entitlement spending. Or–and this is my personal take at the moment–it could just be an offer meant to be refused that just gets the GOP out of the immediate problem it had with appearing unwilling to put anything on the table.
Arriving just before the “counter-offer” were a host of less formal reports that Republicans have a fallback strategy of letting an extension of the Bush tax cuts for taxable income under 250k pass without their votes, and then fighting Democrats tooth and nail after the beginning of the new year on the debt limit increase or indeed, anything else Obama wants.
I share Jonathan Chait’s puzzlement over this supposed strategy:
[Y]eah, Republicans would still have things to fight over. Obama is going to want measures to reduce unemployment. Republicans can dangle those. Obama is also going to want to not destroy the credit rating of the U.S. government for no good reason, and Republicans will threaten to do that, though it’s not clear that Obama is going to submit to another blackmailing on this.
But Republicans will also need Obama to sign a law canceling out the huge defense spending cuts scheduled for next year. If Obama is starting out with a trillion in higher revenue in his pocket (through expiration of the Bush tax cuts on the rich), and the extension of the middle-class tax cuts have largely taken the threat of a recession off the table, then he’ll still be negotiating from a position of strength. He’ll be able to offer Republicans cuts to entitlement programs plus defense spending increases in return for modest revenue increases, which don’t have to involve rate hikes, just to get to his own budget proposal.
Chait’s hunch is that Republicans are more preoccupied now with the optics of “not surrendering” on big fiscal votes than they are with actually imposing their priorities on Obama and the country. In other words, both maneuvers may be aimed at cutting losses without provoking an overt conservative backlash, and keeping–as Grover Norquist has suggested–their “fingerprints off the murder weapon” of any deal that can be described as betraying the sacrosanct “conservative principles.”
If that’s all true, it’s a strange way of exercising what Republicans claim is their co-responsibility for solving the nation’s fiscal problems after a “status quo election.” One might even reach the conclusion they lost.
By: Ed Kilgore, Contributing Writer, Washington Monthly Political Animal, December 3, 2012
“Why Sane Bargaining Looks Strange”: Two Can Play The Crazy Uncle Game
An entirely new political narrative is taking shape before our eyes, yet many in Washington are still stuck in the old one.
President Obama’s victory blew up the framework created by the 2010 elections, which forced him to play defense. Now, he finally has room to move. That’s the only way to understand the ongoing budget talks.
This has several implications. First, why was anyone surprised that Obama’s initial offer to the Republicans was a compendium of what he’d actually prefer? We became so accustomed to Obama’s earlier habit of making preemptive concessions that the very idea he’d negotiate in a perfectly normal way amazed much of Washington. Rule No. 1 is that you shouldn’t start bargaining by giving stuff away when the other side has not even made concrete demands.
Second, Obama made clear that he will not allow the fiscal calendar to set his priorities. Past actions by Congress established this wacky set of deadlines requiring frenzied decision-making. This does not mean the deficit is the nation’s highest priority. It isn’t. Speeding up economic growth is the most important thing now.
Thus did Obama’s opening proposal call for measures to boost the recovery, including an infrastructure bank, a public-private partnership that ought to appeal to Republicans. And he was right to insist upon an extension of unemployment insurance and another year of the payroll tax holiday or some equivalent way to keep middle-class purchasing power up. Raising taxes on the wealthy won’t damage the economy. A sudden drop in the take-home pay of the vast majority of U.S. consumers would.
Third, House Republicans have, so far, been unwilling to assume any risk to get what they claim to want. They seem to hope a deal will be born by way of immaculate conception, with Obama taking ownership of all the hard stuff while they innocently look on.
Obama went that route in 2011 when he feared that Republicans would bring down the nation’s economic house by failing to pass an increase in the debt ceiling. This time, he doesn’t face that risk.
If we go past the so-called “fiscal cliff” deadlines and all the resulting budget cuts and tax increases come into force, the administration can minimize the damage. It can delay the implementation of new tax tables so billions of dollars are not suddenly sucked out of the economy. There is no law requiring that budget cuts be implemented upfront or spread equally across the year. Obama can publicly announce he is delaying any cuts, on the theory that Congress will eventually vitiate some of them. And he can make sure the bond markets know of his plans well in advance.
This is not pretty, and it’s not ideal. But the only way to keep the next four years from becoming another long exercise in gridlock and obstruction is for Obama to hang tough now. And he has every right to.
Republicans claim they are fighting for cuts in entitlement programs, particularly Medicare. Fine. Let them put their cuts on the table. So far, all we have are words. Obama has outlined $400 billion in savings from Medicare. If this isn’t enough, the GOP’s negotiators should tell us how to find more. And having individual Republicans toss out ideas is not the same as a detailed public counter-proposal.
Republicans also say tax reform can raise enough money so we can avoid rate increases on the wealthy. Fine. Let them put forward a comprehensive plan so we can judge it. Their problem is that tax reform can’t produce the revenue that’s needed, but let’s at least see what they have in mind.
Obama is criticized for making life difficult for House Speaker John Boehner (R-Ohio) who has to bring around a rather right-wing caucus. Sorry, but demanding this sort of solicitude doesn’t fly anymore. Boehner rather brilliantly used the “I have to deal with this crazy uncle in the attic” gambit to extract a lot of concessions in 2011. Republicans walked away from the great deal Boehner won for them. The intervening election means they won’t get a similar gift this time. Obama has to win something for his own progressive supporters who rightly feel empowered by November’s results. Two can play the crazy-uncle game.
So a normal negotiation looks strange only because the past two years have been so utterly abnormal, driven by tea party extremism and an irrational hostility to Obama, a fundamentally moderate man who has already shown a willingness to offer more than his share of concessions. Boehner knows this, which is why everyone (especially Wall Street) should calm down.
By: E. J. Dionne, Jr., Opinion Writer, The Washington Post, December 2, 2012
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