“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
“Greed Has Not Been So Good”: The Private Sector Does Not Produce Public Virtue
Ever since he first proposed it in the same year Thomas Jefferson declared all men to be created equal, people have been delighted and beguiled by the hidden workings of Adam Smith’s famous “invisible hand.”
For a millennia or more, humans who marveled at the orderly movements of the heavens sought to invent some system to explain and predict the comings and goings of the planets. And so, it was entirely inevitable that in the fullness of time people would seek to impose the cosmic reliability of celestial mechanics onto more terrestrial phenomenon as well, like economics.
“Let the market decide!” That has been the battle cry of free market aficionados from the day Adam Smith first suggested that private avarice might transubstantiate into public virtue right through to the unspoken suppositions buried deep within Congressman Paul Ryan’s god-awful budget that tax cuts pay for themselves and the whole point of national fiscal policy is to lift from the minds of America’s job-producing investor class the dark clouds of “uncertainty.”
But what if the laissez faire conception of the free market doesn’t hold up any better than did the Ptolemaic vision of an earth-centered solar system that very nearly got Galileo burned at the stake for contradicting?
What if private vice doesn’t produce public virtue at all, as Adam Smith surmised, but rather invites a heedless and reckless pursuit of private profit that leads inexorably to public catastrophe? That was the conclusion which the Chicago-school conservative Richard Posner reluctantly reached after sifting through the rubble following the collapse of capitalism in 2008.
In his 2009 diagnosis of the most recent financial crisis, The Failure of Capitalism, Posner concluded that the fundamental problem with free market capitalism is that behavior which is perfectly rational when pursued by individuals, and individual firms, is disastrous when that behavior is aggregated across the entire society.
The micro-economic laws of supply and demand that tell an economic participant how to use the price mechanism to maximize profits, in other words, are worse than worthless as a macro-economic guide for the national policymaker whose aim is, not profits, but the productivity and prosperity of the economy as a whole.
It makes perfect sense for the consumer to buy when the market is strong and save when it is weak, “but by doing this they make the downturn worse,” says Posner, since from the standpoint of the overall society “we want people to save when times are good and spend when times are bad.”
Likewise, it can be rational to ride one of the serial economic bubbles that have become all too commonplace since high finance replaced making things as America’s signature industry — even if you know it is a bubble — since the individual investor can never know when that bubble will burst. And until it does, says Posner, there are lots of profits to lose if one climbs off the bubble too soon.
As a former Citigroup CEO put it: “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing you got to get up and dance. And we’re still dancing.”
Because risk and return are positively correlated, Posner says a firm that plays it safe is, paradoxically, “courting failure because investors will turn elsewhere.”
Likewise, while a “cascade” of bank failures could bring the economy to a halt, Posner says “no individual bank has an incentive to take measures to avoid such a consequence.”
That is why, he says, it may be risky to follow the herd, but it is not irrational.
Since the 2008 collapse, the media has been on high alert (unlike the government) for the scoundrels and knaves who brought our economy to grief. But in apportioning blame, Posner says “there is no need to bring cognitive quirks, emotional forces, or character flaws into the causal analysis.”
The “rational maximization” of businessmen and consumers all legally pursuing their self-interest, together and intelligently, within a framework of property and contract rights, was all it took to “set the stage for economic catastrophe.”
It’s this “rational indifference” to the consequences of one’s own business and consumption behavior — an indifference baked into the very nature of the “free” market itself — that explains why government has a duty to do more than merely prevent fraud, theft and other infringements of property and contract rights, even though this “is the only duty that libertarians believe government has,” as Posner says.
Government also has an obligation to regulate financial behavior, says Posner, for without such regulation “the rational behavior of law abiding financiers and consumers can precipitate economic disaster.”
Given the structural deficiencies of the free market and the perverse, self-destructive incentives it creates, it was probably smart for conservatives to shift the focus of their cheerleading away from capitalism’s economic performance and towards laissez faire’s imagined moral underpinnings instead — freedom, liberty, individualism and all of that. That’s because, as an economic incentive that promises broad-based prosperity, greed, it turns out, has not been so good.
By: Ted Frier, Open Salon Blog, Salon, March 21, 2013
“The Stinch Of Formaldehyde”: GOP “Autopsy” Is Dead On Arrival
The Republican National Committee released its long-awaited post-2012 “autopsy” Monday, in the form of a 99-page report titled the “Growth and Opportunity Project.” Although the report pushes for some drastic changes in the way that the Republican Party conducts itself during elections, it ultimately fails to confront the primary problem: Its policies just aren’t popular with voters.
With the exception of a qualified push for immigration reform, the Growth and Opportunity Project centers around the idea that the Republican Party’s platform is sound, while the messaging is at fault. That comes as no surprise — it was RNC chairman Reince Priebus, after all, who recently declared “I don’t think our platform is the issue” — but this plan is startlingly divorced from the Republicans’ present reality. On nearly every issue facing Congress — from raising the minimum wage, to cutting federal programs, to strengthening gun safety laws, to fighting against climate change — most voters side with Democrats over Republicans.
Further complicating the RNC’s mission is the fact that the GOP has shown absolutely no signs of being ready to change the conduct that led to the party’s overwhelming losses in November.
For example, the Priebus plan notes that “if we are going to grow as a party, our policies and actions must take into account that the middle class has struggled mightily and that far too many of our citizens live in poverty,” adding “The perception that the GOP does not care about people is doing great harm to the party and its candidates on the federal level, especially in presidential years. It is a major deficiency that must be addressed.”
Improving outreach to the poor seems like a great idea in theory. In practice, House Republicans are preparing to vote this week on Paul Ryan’s extremist “vision document,” which explicitly promises to slash funding for programs that help the needy in order to finance a massive tax break for the wealthy.
The report’s suggestion that Republicans “learn once again how to appeal to more people, including those who share some but not all of our conservative principles” seems like a no-brainer. But in reality, those people are called RINOs, and are almost automatically disqualified from national races. Priebus’ report can’t change that reality. Even while the autopsy suggests that “The Republican Party needs to stop talking to itself,” most of the GOP’s brightest stars spent the weekend at the insular Conservative Political Action Conference — to which popular governors Chris Christie of New Jersey and Bob McDonnell of Virginia were not invited, for the unforgivable crime of compromising with some of their states’ many Democrats.
In theory, the report’s suggestion that “if we want ethnic minority voters to support Republicans, we have to engage them, and show our sincerity,” makes perfect sense. In practice, the GOP seems to be going out of its way to antagonize minority voters; even as the autopsy suggests showing sincerity, the party continues to push for voter-suppression laws that nakedly attempt to keep minorities away from the polls. While the autopsy suggests that the GOP “must be inclusive and welcoming” to Hispanic-Americans, Senate Republicans are simultaneously gearing up for a racially-charged filibuster of Thomas Perez, the only Hispanic nominee for President Obama’s cabinet.
The report pushes the party to “establish a presence in African-American communities and at black organizations such as the NAACP,” but it seems to forget that Mitt Romney tried that in July. He ended up getting booed repeatedly for promising to repeal health care reform, and patronizingly claiming to be the best candidate for the black community.
“It all goes back to what our moms used to tell us: It’s not just what we say; it’s how we say it,” Priebus said of his report Monday morning. He is forgetting a more important factor: what they do. The Republicans’ problem isn’t that voters aren’t getting the message about the party’s policies; it’s that too many voters read the GOP loud and clear.
By: Henry Decker, The National Memo, March 19, 2013
“Changnesia”: The Man With The Worst Memory In American Politics
No wonder he looks surprised so often.
There’s something that’s been bugging me for a while about House Budget Committee Chairman Paul Ryan (R-Wis.), but I haven’t been able to put my finger on it. Until now, that is.
The congressman talked to Bloomberg TV this morning, and reporter Peter Cook raised the prospect of some kind of compromise with Democrats, in light of Sen. Patty Murray’s (D-Wash.) Senate Democratic budget. Take a look at Ryan’s response:
“Well, I would say to the Patty Murray school of thought to the President Obama school of thought, they’ve got their tax increases. They got $1.6 trillion in tax increases that are just now starting to hit the economy. But we have yet to get the spending cuts.”
Now, right off the bat, it’s important to note that Democrats didn’t get $1.6 trillion in tax increases. Earlier this year, they got about $600 billion in new revenue — Ryan is only off by $1,000,000,000,000 — which Republicans on the House Budget Committee found so offensive, they included the money in their own budget plan. Maybe Ryan forgot about this?
But even if we put that aside, there’s the matter of Ryan’s assertion that Republicans haven’t already successfully received spending cuts. The problem, of course, is that Ryan seems to have forgotten 2011, when Democrats accepted nearly $1.5 trillion in spending cuts, with no accompanying revenue, as part of the GOP’s debt-ceiling hostage strategy.
At the time, Ryan boasted about all the spending cuts he and his party had won by threatening to hurt Americans on purpose. Less than two years later, the far-right Wisconsinite appears to have forgotten about the policy altogether. How is that possible?
It’s not just today, either. Ryan keeps reinforcing suspicions that his memory is alarmingly bad.
Ryan doesn’t remember that he used to refer to his own plan to end Medicare as “vouchers.”
Ryan doesn’t remember taking credit for the sequestration policy he later condemned.
Ryan doesn’t remember learning about Democratic alternatives to the sequester.
Ryan doesn’t remember what happened with the 2011 “super committee.”
Ryan doesn’t remember Bill Clinton’s tax increases.
Ryan doesn’t remember the times he condemned social-insurance programs as “taker” programs.
Ryan doesn’t remember all of the times he appealed to the Obama administration for stimulus funds for his congressional district.
Ryan doesn’t remember his marathon times.
Ryan doesn’t remember how much he was inspired by Ayn Rand.
Ryan doesn’t remember his own speeches.
Everyone can be forgetful once in a while, but the Republican Budget Committee chairman seems to forget rather important details and developments so often, it’s rather unsettling.
The alternative, of course, is that Ryan’s memory is fine and he shamelessly lies when it suits his purposes, but why be uncharitable? Let’s instead just assume that the poor congressman suffers from a terrible memory.
Maybe it’s some weird political version of Changnesia?
By: Steve Benen, The Maddow Blog, March 19, 2013
“Pernicious GOP Nonsense”: Spending Isn’t The Problem, Austerity Is
Don’t buy the budget hype. Sure it’s fun to ding Paul Ryan for his unrepentant (Election? What election?) budget plan and his Obamacare contortions. (He wants to repeal it, except for its Medicare savings and tax increases, which he was against, then for, then against, and now for again). But here’s the thing about budget resolutions: They’re not laws. They’re not binding. They are, for all intents and purposes glorified, congressionally sanctioned, party platforms.
The great budget debate, in other words, is a philosophical one. And while such arguments are important we shouldn’t let them distract from the real-world policy fights ongoing about how money is actually spent or not spent.
If you’ve paid any attention, for example, you know the GOP’s mantra, that the nation’s problem is spending, which is “out of control.” This is the basis for their entire policy agenda. It’s also pernicious, economically destructive nonsense.
Consider some data points:
Federal spending grew by 0.6 percent from 2009 to 2012, according to Bloomberg. That’s the slowest rate since the Eisenhower years. That’s a novel definition of “out of control.”
Austerity has been the single biggest drag on job growth, according to the Wall Street Journal. The paper notes that federal, state, and local governments have cut nearly 750,000 jobs since June 2009. “No other sector comes close to those job losses over the same period,” the Journal reported last week. “Construction is in second worst place, but its 225,000 cuts are less than a third of the government reductions.” The same article figured that without the public-sector job losses, the unemployment rate would be 7.1 percent instead of 7.7 percent. Remember that the next time Republicans react to improving job numbers with statements of yes, but it should be better.
And what good is all this austerity? “Here’s a pretty important fact that virtually everyone in Washington seems oblivious to: The federal deficit has never fallen as fast as it’s falling now without a coincident recession,” Investor’s Business Daily reported last month. Assuming sequestration stays in place, the deficit is expected to shrink by 3.4 percent of the economy between fiscal year 2011 and 2013, and the only other times the budget deficit shrank that quickly—the start of Franklin Roosevelt’s second term, the post-World War II demobilization, 1960-61, and 1969-70—recessions quickly followed.
This isn’t an error; it’s a deliberate policy of austerity monomania, consequences be damned. Remember what John Boehner said weeks after he became speaker: “In the last two years, under President Obama, the federal government has added 200,000 new federal jobs,” Boehner said. “If some of those jobs are lost, so be it.” If anything is out of control, it’s the push for spending cuts, which, let’s not forget, is ongoing. The Congressional Budget Office has estimated that sequestration—the arbitrary, across-the-board spending cuts which started going into effect two weeks ago—will cost the economy another 750,000 jobs this year if left untouched.
The first couple of weeks of sequestration have produced a strange kind of euphoria on the right as lawmakers and activists alike preen over the cuts (“This was a necessary win for Republicans,” one anonymous GOP aide told National Review Online) while most of the inside-the-beltway attention has focused on whether President Obama oversold the effects of the cuts and criticism over White House tours having been canceled. Republicans run the risk, however, of becoming the proverbial frog in boiling water. At some point the real-world effects of the cuts, slowly building though they may be, will punch through their ideological bubble.
A week into sequestration, the Huffington Post surveyed how local television news reports have covered the cuts. Local stations “did tend to dig more deeply into the ramifications of the cuts, looking at how people around the country … will be affected in their daily lives,” the website reported. Those ramifications included Bell Helicopter in Fort Worth, Texas, trying to induce retirements in order to avoid having to fire people, while nearly two dozen county employees around Salt Lake City have been fired. It’s not hard to find other grim sequestration stories: Air Force civilian employee furloughs will cost Ohio $111.1 million in lost wages, according to the Dayton Daily News; Customs and Border Protection will start furloughing 60,000 employees in April; the Army, Marine Corps, and Coast Guard have suspended tuition assistance programs; control towers in more than 200 general aviation airports nationally are expected to be closed; dairy exports could fall by $500 million, according to Agriculture Secretary Tom Vilsack.
The list goes on—I know because Democrats have sent out regular roundups of such local news stories to demonstrate that the sequester has teeth. That’s also why Obama’s Organizing for Action grassroots group is collecting citizens’ sequestration stories.
And voters are taking notice, despite what much of Washington seems to think. A Washington Post-ABC News poll released Wednesday found 53 percent of Americans disapprove of sequestration while an amazing 72 percent disapprove of Republicans in Congress. And by a margin of 47-33, Americans hold that same congressional GOP responsible for the much-maligned spending cuts.
The question now is how long will it take for these feelings to gain discernible political traction. Specifically, will Republicans feel (dangerously) emboldened in August when the next debt ceiling showdown is expected, or will reality have chastened them?
By: Robert Schlesinger, U. S. News and World Report, March 15, 2013
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