“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
“Sequester Of Fools”: We Should Be Spending More, Not Less, Until We’re Close To Full Employment
They’re baaack! Just about two years ago, Erskine Bowles and Alan Simpson, the co-chairmen of the late unlamented debt commission, warned us to expect a terrible fiscal crisis within, um, two years unless we adopted their plan. The crisis hasn’t materialized, but they’re nonetheless back with a new version. And, in case you’re interested, after last year’s election — in which American voters made it clear that they want to preserve the social safety net while raising taxes on the rich — the famous fomenters of fiscal fear have moved to the right, calling for even less revenue and even more spending cuts.
But you aren’t interested, are you? Almost nobody is. Messrs. Bowles and Simpson had their moment — the annus horribilis of 2011, when Washington was in thrall to deficit scolds insisting that, in the face of record-high long-term unemployment and record-low borrowing costs, we forget about jobs and concentrate exclusively on a “grand bargain” that would supposedly (not actually) settle budget disputes for ever after.
That moment has now passed; even Mr. Bowles concedes that the search for a grand bargain is on “life support.” Let’s convene a death panel! But the legacy of that year of living foolishly lives on, in the form of the “sequester,” one of the worst policy ideas in our nation’s history.
Here’s how it happened: Republicans engaged in unprecedented hostage-taking, threatening to push America into default by refusing to raise the debt ceiling unless President Obama agreed to a grand bargain on their terms. Mr. Obama, alas, didn’t stand firm; instead, he tried to buy time. And, somehow, both sides decided that the way to buy time was to create a fiscal doomsday machine that would inflict gratuitous damage on the nation through spending cuts unless a grand bargain was reached. Sure enough, there is no bargain, and the doomsday machine will go off at the end of next week.
There’s a silly debate under way about who bears responsibility for the sequester, which almost everyone now agrees was a really bad idea. The truth is that Republicans and Democrats alike signed on to this idea. But that’s water under the bridge. The question we should be asking is who has a better plan for dealing with the aftermath of that shared mistake.
The right policy would be to forget about the whole thing. America doesn’t face a deficit crisis, nor will it face such a crisis anytime soon. Meanwhile, we have a weak economy that is recovering far too slowly from the recession that began in 2007. And, as Janet Yellen, the vice chairwoman of the Federal Reserve, recently emphasized, one main reason for the sluggish recovery is that government spending has been far weaker in this business cycle than in the past. We should be spending more, not less, until we’re close to full employment; the sequester is exactly what the doctor didn’t order.
Unfortunately, neither party is proposing that we just call the whole thing off. But the proposal from Senate Democrats at least moves in the right direction, replacing the most destructive spending cuts — those that fall on the most vulnerable members of our society — with tax increases on the wealthy, and delaying austerity in a way that would protect the economy.
House Republicans, on the other hand, want to take everything that’s bad about the sequester and make it worse: canceling cuts in the defense budget, which actually does contain a lot of waste and fraud, and replacing them with severe cuts in aid to America’s neediest. This would hit the nation with a double whammy, reducing growth while increasing injustice.
As always, many pundits want to portray the deadlock over the sequester as a situation in which both sides are at fault, and in which both should give ground. But there’s really no symmetry here. A middle-of-the-road solution would presumably involve a mix of spending cuts and tax increases; well, that’s what Democrats are proposing, while Republicans are adamant that it should be cuts only. And given that the proposed Republican cuts would be even worse than those set to happen under the sequester, it’s hard to see why Democrats should negotiate at all, as opposed to just letting the sequester happen.
So here we go. The good news is that compared with our last two self-inflicted crises, the sequester is relatively small potatoes. A failure to raise the debt ceiling would have threatened chaos in world financial markets; failure to reach a deal on the so-called fiscal cliff would have led to so much sudden austerity that we might well have plunged back into recession. The sequester, by contrast, will probably cost “only” around 700,000 jobs.
But the looming mess remains a monument to the power of truly bad ideas — ideas that the entire Washington establishment was somehow convinced represented deep wisdom.
By: Paul Krugman, Op-Ed Columnist, The New York Times, February 21, 2013
“More Republican Denial”: This Time, The People Are On To The GOP
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 Wonderful Experiment”: Before Default, Let Republicans Bump Up Hard Against The Debt Ceiling
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
“Time Is Running Out”: The GOP Needs To Figure Out Its Position On Entitlement Programs
The White House’s weekend ultimatum that Congress either lift the debt ceiling cleanly or take responsibility for default puts Republicans in a bind over their goal of reforming entitlement programs.
In ruling out all executive options, such as minting a high-value platinum coin, the White House put the onus on congressional Republicans to agree to raise the nation’s borrowing limit — without spending cuts or strings attached — or permit the first ever credit default.
President Obama has steadfastly rebuffed their calls to cut social spending in exchange for raising the debt ceiling, and Democratic leaders support his position.
“There are only two options to deal with the debt limit: Congress can pay its bills or it can fail to act and put the nation into default,” said Obama’s spokesman Jay Carney.
“The President and the American people won’t tolerate Congressional Republicans holding the American economy hostage again simply so they can force disastrous cuts to Medicare and other programs the middle class depend on while protecting the wealthy.”
That leaves Republicans in a difficult position vis-à-vis their promise not to raise the debt ceiling without improving the long-run solvency of programs like Social Security and Medicare.
If they propose safety net cuts that Democrats oppose, they risk political blowback. If they back off, conservatives will accuse them of surrender on a top priority.
The situation has left Republicans flummoxed. Senate Minority Leader Mitch McConnell (R-KY) lashed out at Democratic leaders after they sent a letter Friday calling on President Obama to raise the debt ceiling unilaterally if Republicans block congressional action.
“The Democrat leadership hiding under their desks and hoping the President will find a way around the law on the nation’s maxed-out credit card is not only the height of irresponsibility, but also a guarantee that our national debt crisis will only get worse,” McConnell said in a statement. He swiped Democrats for refusing to offer “any plan to break the spending habit that’s causing the problem.”
Republican leaders understand the risks of pushing near-term entitlement cuts without Democratic buy-in. During the fiscal cliff battle, they abstractly demanded scaling back entitlements but avoided putting specifics on paper. House Speaker John Boehner’s (R-OH) failed fallback plan didn’t touch entitlements.
As he did then, McConnell is again calling on Obama to put forth a debt ceiling plan with spending cuts, in effect suggesting that the president be the one to call for scaling back the safety net.
The other option, backing down on entitlements, is also problematic after Republicans demoralized their anti-tax base by swallowing some $620 billion in tax increases to resolve the fiscal cliff. In accepting the deal, GOP leaders assured conservatives that the debt ceiling was where they would make their stand on retirement programs.
Achieving meaningful savings requires making unpopular cuts beyond what’s been considered recently. Policies under discussion in prior negotiations included reducing future Social Security benefits via Chained CPI and gradually raising the Medicare eligibility age to 67. Both amount to benefit cuts that the public opposes. And the savings they’ll produce would only address a fraction of the programs’ long-term solvency problems.
That’s the GOP’s dilemma in a nutshell: fulfilling their promise to their base requires pushing for something highly unpopular. And this time, not only are Democrats diligently refusing to provide them political cover, but forcing the issue would also require Republicans to court severe economic consequence as their price of political victory.
By: Sahil Kapur, Contributor, Business Insider, January 15, 2013
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