Obama and "Obamaism" after the non-negotiating negotiations and budget/debt deal this past week

This is excellent news: Labor puts Dems on notice: Don't touch Medicare and Social Security benefits Washington Post Plum Line by Greg Sargent 10/17/2013.

Robert Reich explains why that timely in What to Expect During the Cease-Fire 10/17/2013:

We know the parameters of the upcoming budget debate because we’ve been there before. The House already has its version — the budget Paul Ryan bequeathed to them. This includes major cuts in Medicare (turning it into a voucher) and Social Security (privatizing much of it), and substantial cuts in domestic programs ranging from education and infrastructure to help for poorer Americans. Republicans also have some bargaining leverage in the sequester, which continues to indiscriminately choke government spending.

The Senate has its own version of a budget, which, by contrast, cuts corporate welfare, reduces defense spending, and raises revenues by closing tax loopholes for the wealthy.

Here, I fear, is where the President is likely to cave.

He’s already put on the table a way to reduce future Social Security payments by altering the way cost-of-living adjustments are made – using the so-called "chained" consumer price index, which assumes that when prices rise people economize by switching to cheaper alternatives. This makes no sense for seniors, who already spend a disproportionate share of their income on prescription drugs, home healthcare, and medical devices – the prices of which have been rising faster than inflation. Besides, Social Security isn’t responsible for our budget deficits. Quite the opposite: For years its surpluses have been used to fund everything else the government does.

The President has also suggested "means-testing" Medicare – that is, providing less of it to higher-income seniors. This might be sensible. The danger is it becomes the start of a slippery slope that eventually turns Medicare into another type of Medicaid, a program perceived to be for the poor and therefore vulnerable to budget cuts. [my emphasis]

President Obama's remarks on Thursday after the debt ceiling crisis had passed for the moment (Remarks by the President on the Reopening of the Government, 10/17/2013) don't give defenders of Social Security, Medicare and Medicaid a lot of comfort.

There are a number of disturbing things about the speech.

There's consistency. He gets harsh with the Republicans here: "But probably nothing has done more damage to America's credibility in the world, our standing with other countries, than the spectacle that we've seen these past several weeks. It's encouraged our enemies. It's emboldened our competitors. And it's depressed our friends who look to us for steady leadership."

But a few sentences later, he's saying: "And when we disagree, we don't have to suggest that the other side doesn't love this country or believe in free enterprise, or all the other rhetoric that seems to get worse every single year."

My fingertips would no doubt burst into flames if I were to say anything that sounded like it was even slightly taking the Republicans' side of this. But it is Obama's chronically inconsistent messaging to the Republicans. I actually doubt that the budget debacle "encouraged our enemies." What, the hardcore Islamist militants in Yemen trying to avoid drone-strike assassination have spent the last two weeks charged up over the US debt ceiling?

But if you're going to slap the Republicans with that kind of thing, you don't then need to turn around and say, oh, it's naughty "to suggest that the other side doesn't love this country." It certainly would be reasonable to conclude that the Tea Party Republicans don't have much love for the people of this country, at least the ones that aren't filthy rich white Christians.

He cites a credit-rating agency as an authority that he thinks we should actually pay attention to:

And you don’t have to take my word for it. The agency that put America's credit rating on watch the other day explicitly cited all of this, saying that our economy "remains more dynamic and resilient" than other advanced economies, and that the only thing putting us at risk is -- and I'm quoting here -- "repeated brinksmanship." That's what the credit rating agency said. That wasn't a political statement; that was an analysis of what's hurting our economy by people whose job it is to analyze these things.

First of all, the credit ratings agencies proved that they had, shall we say, quality and accuracy issues in the run-up to the start of the depression in 2007-8. Their ratings would have real-world effects if they downgraded US government bonds to non-investment grade, because it would force pension funds and others who have requirements for maintaining a certain portion of investment-grade securities. Otherwise, why is the President citing one of those organizations as an authority? It just reinforces the non-chronic Democratic habit of apologizing for being a Democrat, i.e., his statement implies that people should believe a solid bitness organization (in this case one of the clueless credit-rating agencies!) over the Democratic President. Just stop it, please!

He repeats the tiresome, abstract complaint about "Washington": "And, of course, we know that the American people's frustration with what goes on in this town has never been higher. That's not a surprise that the American people are completely fed up with Washington."

It was "this town" that caused the problem. Not, you know, the Republicans who wanted to force the world into a new financial crisis. It was "Washington." How did the President and head of the Democratic Party deal with the opposing party that was fully responsible for the recent crisis? Here are his mentions of the word "Republican" in this statement:

Because Democrats and responsible Republicans came together, the first government shutdown in 17 years is now over.

And I want to thank those Democrats and Republicans for getting together and ultimately getting this job done.

First, in the coming days and weeks, we should sit down and pursue a balanced approach to a responsible budget, a budget that grows our economy faster and shrinks our long-term deficits further.

At the beginning of this year, that’s what both Democrats and Republicans committed to doing.

Again, the Senate has already passed a solid bipartisan bill. It's got support from Democrats and Republicans. It's sitting in the House waiting for passage. If House Republicans have ideas that they think would improve the farm bill, let's see them. Let's negotiate. What are we waiting for? Let's get this done.

I understand we will not suddenly agree on everything now that the cloud of crisis has passed. Democrats and Republicans are far apart on a lot of issues. And I recognize there are folks on the other side who think that my policies are misguided -- that's putting it mildly. That's okay. That's democracy. That’s how it works. We can debate those differences vigorously, passionately, in good faith, through the normal democratic process.

The American people's hopes and dreams are what matters, not ours. Our obligations are to them. Our regard for them compels us all, Democrats and Republicans, to cooperate, and compromise, and act in the best interests of our nation –- one nation, under God, indivisible with liberty and justice for all.

How many times is he going to rehash his famous 2004 no-red-America-no-blue-America speech? Forever, apparently. In the face of the most blatant attempts to politically sabotage the national government since before the civil war, the Democratic President presents the Republican Party as:

• A party that deserves equal credit with the Democrats for ending the crisis (Mark Shields on the PBS Newshour 10/18/2103, Shields and Brooks on who will come out ahead after the shutdown 'cease-fire': "John Boehner, after all of this, standing at the precipice, about to plunge over, to send the country into default, only one-third of his entire caucus supported the resolution and the compromise crafted by the Senate.")
• A party that contains some meaningful faction that deserves the label "responsible"
• A party with which the Democrats share a commitment to concentrate on reducing budget deficits in the middle of a depression, with a weak recovery already seriously endangered by the drastic cuts made just this year
• A normal party that can be expected to work in a "bipartisan" basis, at least on farm legislation
• A party committed to "democracy," to debating differences "in good faith," a party willing to work within "the normal democratic process"

Only one of these even comes close to describing the real existing Republican Party as we've seen it in action this year, the part about an irresponsible joint commitment to focusing on minimizing federal spending during a depression and weak recovery. In other words, the one on which the corporate Democrats have successfully persuaded the People's Party to adopt a Herbert Hoover austerity economics perspective.

We just do not need any more Democratic Presidents that spend so much time trying to minimize the partisan advantages that the Democratic Party stands to gain from the most irresponsible kind of behavior by the Republicans. We really do not need another one.

I don't recall noticing the phrase "Obamaism" before I saw Rick Perlstein using it recently. "Even if Obamaism works on its own terms," he wrote, "it can't stop Republicans from wrecking the country. Instead, it may end up abetting them." (Why Obama Needs to Change to Win Rolling Stone 02/28/2013)

For me, there are two basic elements of "Obamaism" in the sense Rick uses it. One is his habit of framing issues in Republicans terms. In his Oct. 17 statement, he defended a moderately-conservative deficit policy by invoking the hardcore Reaganite attack on earned-benefits programs, "The challenges we have right now are not short-term deficits; it's the long-term obligations that we have around things like Medicare and Social Security."

Second is his obsession with bipartisanship with the Republican Party as a good thing in itself. Bipartisan agreement on policy is only as good as the policy being agreed upon. And by making holy bipartisanship a key goal of his Presidency, he gives the Republicans a club to beat Democratic policy into the ground with. Because if bipartisanship is an end in itself, he by definition has to have Republican cooperation to achieve it.

The two weaknesses of "Obamaism" come together nicely in his drive to cut benefits on Social Security, Medicare and Medicaid, known in the Beltway Village and the business press as "entitlement reform," aka, the Grand Bargain. It's a Republican goal, and to achieve it he has to have substantial Republican support. Teaming with the Republicans will anger something like 99% of the Democratic Party's voting base, which is a good thing in Obama's view of holy bipartisanship. He regularly brags about his own voting base being upset with him over something. That is a virtue in the eyes of this particular Democratic President.

We see that kind of Obamaism at work when he said during the run-up to the debt ceiling deadline, "When you hear government not compromising, we're compromising so much we're willing to open the government at funding levels that reflect Republican wishes, that don't at all reflect our wishes." (Obama: We're Willing To Fund Government With Republican Priorities TPM 10/07/2013) Rick posted a Facebook comment about that story the same day saying, "Even our wins are losses."

And, in fact, that what this past week's deal did. It funds the government at sequester levels, with new sequester cuts still scheduled, funds it only until mid-January when another continuing resolution will be needed, and sets up another debt ceiling fight for mid-February.

Obama endorsed the false equivalence the Beltway Villagers love so much: "There's a lot of noise out there, and the pressure from the extremes affect how a lot of members of Congress see the day-to-day work that’s supposed to be done here." It plainly was not "the extremes" that brought on the debt ceiling crisis, it was the "the extreme" otherwise known as today's Republican Party in Congress.

The following is a statement of a key idea of the neoliberalism that is not a distinctive features of Obamaism, it's the ideology that has corrupted large portions of the Democratic Party, as well as center-left parties in Europe:

And we shouldn't approach this process of creating a budget as an ideological exercise -- just cutting for the sake of cutting. The issue is not growth versus fiscal responsibility -- we need both. We need a budget that deals with the issues that most Americans are focused on: creating more good jobs that pay better wages. [my emphasis]

Now, he's right that we should be reducing the federal budget "for the sake of cutting." But the striking thing is his comment that "creating a budget" should be no "ideological exercise." This is the neoliberal idea, the End of Ideology, the End of History. Issues of government become non-ideological, a matter of technical management - because both "left" and right should agreement with Calvin Coolidge's ideal that the bitness of America is bitness, and that what's good for the Koch Brothers and Goldman Sachs is good for America. Everything else is the whining of malcontents who worry about labor rights, jobs, decent pay, women's rights, etc. Unimportant distractions from the Real Business of making gubment the best servant possible to bitness.

In an interview with Jann S. Wenner in the spring of 2012, Obama expressed this hope for the period after his reelection (Ready for the Fight: Rolling Stone Interview with Barack Obama 04/25/2013):

My hope is that if the American people send a message to them that's consistent with the fact that Congress is polling at 13 percent right now, and they suffer some losses in this next election, that there's going to be some self-reflection going on – that it might break the fever. They might say to themselves, "You know what, we've lost our way here. We need to refocus on trying to get things done for the American people."

Frankly, I know that there are good, decent Republicans on Capitol Hill who, in a different environment, would welcome the capacity to work with me. But right now, in an atmosphere in which folks like Rush Limbaugh and Grover Norquist are defining what it means to be a true conservative, they are lying low. My hope is that after this next election, they'll feel a little more liberated to go out and say, "Let's redirect the Republican Party back to those traditions in which a Dwight Eisenhower can build an interstate highway system."

It doesn't seem to me that the post-election Republican Party reflects any of those hopes. Yet there was the President on Thursday, talking about them in much the same vein. Dwight Eisenhower? Interstate highway system? There was no good reason to expect that in 2012 and even less to expect it now.

Kathleen Hennessey wrote of those groundless 2012 hopes recently (Obama's reelection did little to 'break the fever' in Washington Los Angeles Times 09/30/2013), "Whether the president’s thesis misjudged his opponents or was merely wooing supporters with wishful thinking is an open question." Actually, I don't think it's much of an open question. While he put up more resistance to being jacked around over the debt ceiling this time compared to 2011, it's hard to avoid the conclusion that his hopes for Republican rationality are boundless.

She also wrote:

Now, several months into his second term, with Washington on the cusp of the first government shutdown since 1996, the fever of brinkmanship has spiked. ...

Even as Obama campaigned on the notion, few in Washington agreed with the president’s analysis. The 2012 election never looked like a power-shifting election, and it wasn’t. Republicans lost a handful of seats but easily maintained their majority in the House. The Democratic majority in the Senate grew only slightly. The balance of power remained the same, and for the most part so did the politics.

Charlie Pierce (The Reign of Morons: The Presidenting Esquire Politics Blog 10/17/2013) take on the notion of non-ideological federal budgets:

This is, of course, ridiculous. Everything in politics is an ideological exercise. That's the way it's supposed to be. Paul Ryan's objection to social-welfare programs is entirely ideological; he does not believe that things like Medicare and Social Security are legitimate exercises of the power of government. He wants them eliminated. He wants the ideas behind them defeated, forever. His approach is more tactically nuanced than that of Louie Gohmert -- so is a tackhammer -- but the goals are the same. If one side of these negotiations is utterly ideological, and the other side if ideologically fastidious, on which side would you put your money? [emphasis in original]

Obama's neoliberal ideology paired with his obsessive pursuity of sacred bipartisanship would be bad enough if the Republican Party were actually conservative. Since at the moment and for the foreseeable future they are screaming reactionaries with a strong tendency to bouts of collective insanity, Obama's reverence for bipartisanship bears a disturbing mirror-image relationship to the reality-denial rampant on the Republican side.

Sadly, I don't think Obama's concluding words in his post-debt-ceiling-crisis speech were just a rhetorical flourish. I think he's actually expected the Republican Party in Congress to be able and even willing to rise to them:

And those of us who have the privilege to serve this country have an obligation to do our job as best we can. We come from different parties, but we are Americans first. And that’s why disagreement cannot mean dysfunction. It can't degenerate into hatred. The American people’s hopes and dreams are what matters, not ours. Our obligations are to them. Our regard for them compels us all, Democrats and Republicans, to cooperate, and compromise, and act in the best interests of our nation –- one nation, under God, indivisible with liberty and justice for all.

Social Security, Medicare and Medicaid are good things. Obama and the Republicans want to cut them. Every month and every year that goes by without that happening is a real victory for the great majority of Americans.

Tags: austerity economics, barack obama, debt ceiling, grand bargain, medicaid, medicare, platinum coin, social security

Debt limit dust settling?

The House hasn't passed the agreement as of this writing. So we don't know until the votes are counted. But it seems like the debt ceiling fight will now move on to its next round. (Update: The House passed the deal at 10:21 EDT, as Annie-Rose Strasser reports, along with analysis of the deal in Countdown To Catastrophe: The Latest Updates On The Shutdown And The Debt Ceiling Think Progress, dated 10/15/2013 but still being updated on the 16th.)

The Senate bill that looks to be the immediate solution is a deal, even though Obama claimed not to be negotiating over the debt ceiling. One of the provision is a tightened income verification on recipients of government subsidies for health insurance under the Affordable Care Act (ACA/Obamacare). George Condon, Jr. discusses the politics of this in a piece written before he had access to details on the latest Senate bill, White House: Debt-Ceiling Deal's Obamacare Change Not ‘Ransom’ National Journal 10/16/2013:

The deal, brokered by Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell, includes a section that modifies Obamacare to include new income-verification requirements for those seeking subsidies under the law. Only five weeks ago, the administration threatened to veto a Republican effort to force income verification for those same subsidy recipients.

Because that language has not been made public, it is unknown how close the two versions are. But White House officials insisted Wednesday that they aren't even close. "Two different proposals," said one top official.

Speaking on background, the official said the House bill would have put "at risk" the basic structure of the law's tax credits and subsidies for individuals "by making them contingent on an IG prospectively certifying that the system was sound. This would have caused unnecessary uncertainty" and delayed health care coverage for millions. In contrast, the version agreed to in the Senate would have the Health and Human Services secretary certify to Congress that eligibility is being verified. The official said that the compromise has the Inspector General "perform a retrospective analysis, which is consistent with the traditional role of an IG, and will not impede or affect the provision of benefits to individuals through the ACA."

Press secretary Jay Carney also struck a confident pose when he dismissed the suggestion that the president had paid even a little bit of ransom in moving on the GOP verification effort. That provision, Carney told reporters, "was negotiated by Senate Democrats and Senate Republicans and is a modest adjustment to the existing Affordable Care Act law. We have always said we are willing to make improvements and adjustments to the law. Ransom would be a wholly different thing." Pressed at his briefing, Carney added, "We're fine with it."

He said the president stuck to his guns in refusing to accept any effort by Republicans "to extract unilateral political concessions in return for Congress fulfilling its fundamental responsibilities." [my emphasis]

It remains to be seen how serious a problem that could become. The Republicans in Congress and the courts are already chipping away at the ACA, even though the quixotic defunding attempt failed. They can be expected to continue such efforts.

Peter Grier in Debt limit debacle: Who won and who lost? Christian Science Monitor 10/16/2013 talks about a major feature of the non-ransom deal, the short time it sets up for the next major round of what we just went through:

The Republican Party’s poll numbers have plunged to record lows, but numbers for Democrats have fallen as well. Mr. Obama’s job approval rating has reached a new low in the RealClearPolitics rolling average of major polls: 51.4 percent now have an unfavorable opinion of his actions.

Yes, the Senate compromise leaves the GOP with virtually nothing new to show for the shutdown and default crisis. But is that victory for the Democratic Party? Spending levels remain locked at sequester levels, much lower than Democrats would like. The agreement only keeps the government open until Jan. 15 and raises the debt ceiling until Feb. 7. That means it’s possible we'’ll be back in the same fight next year. [my emphasis]

The "next year" in question is three months from now. That's quite a limited victory, from my viewpoint.

And for all my criticism as well as many others of the craziness of the Congressional Republicans' recent behavior, there was an at least not-unreasonable ground to believe they could have pressured Obama into making major concessions over the debt ceiling.

And political fiscal crises, as much as they seem alike, take place amid subtly different circumstances, so we wouldn't rule tactics in or out. Remember, the GOP thought Democrats would crack this time, as they did in 2011's budget battle. But that experience just made the administration all the more determined to hang tough this time. [my emphasis]

And a sobering portion of this fight, which for the Democrats was a more hardline stand than we're used to seeing them take, was that not only Obama but other Dems like Dick Durbin were eager to offer up "entitlement reform," i.e., cuts in benefits on Social Security, Medicare and Medicaid, as a post-non-negotiation negotiation after the debt ceiling was raised.

Felix Salmon also emphasizes the significance of the timetable (Barack Obama vs zombies Reuters 10/16/2013):

But as a feeling of relief courses through Washington and the markets, let’s not get carried away. Yes, as Jonathan Chait says, it’s very good news that the House Republicans’ plan collapsed. But the can hasn't been kicked very far down the road: we’re going to hit the debt ceiling again in just a few short months. And at that point, one of two things will happen. Either the Republicans, licking their self-inflicted wounds from the current fiasco, will quietly and efficiently pass a bill while getting nothing in return. Or, in the spirit of "if at first you don’t succeed", they will try, try again.

We have every reason to believe that the latter will be the case.

And Salmon reminds us that there is, for Democrats, an unpleasant recent precedent for this situation the non-deal deal creates:

Remember that the sequester was initially put into place as a way to force the hand of any self-interested, logical group of politicians. They had to either come to an agreement — or face an outcome which was specifically designed to be as unpalatable to as many different interest groups as possible. And yet, despite the Sword of Damocles hanging over their heads, the politicians squabbled until it fell. The bigger sword, the debt ceiling, has not fallen yet — but I for one have no particular faith in the ability of Congress to always prevent it from doing so.

It's nice that Congress appears to be ready to back off from the House Republicans' attempt to crash the world financial system. But now the same fight is coming up again right around the corner.

Rick Perlstein on Facebook flagged this article by Bob Kuttner, A Letter From the GOP to Itself: Why We Will Come Out Ahead 10/14/2013 Huffington Post . Perlstein commented, "Kuttner brilliant explicates my principle that Obamaism loses, even or especially when it wins."

In this case, the result of a supposed Democratic win is to keep the sequester levels of austerity spending in place and set up another near-term battle in which the Republicans can threaten the faith and credit of the United States with a refusal to raise the debt limit, which in turn is likely to result in additional austerity. I don't won't to be pessimistic. But I do want to be realistic about what we're seeing.

We need better than "Obamaism" from the Democratic Party.

Tags: debt ceiling, obama administration

What happens when the debt ceiling is reached?

October 17, this coming Thursday, is the date that the Treasury Department has established as the deadline for increasing the debt ceiling, based on cash-flow projections. That's the day that the federal government is estimated to start having too little cash to pay its bills. That does not mean that the government starts defaulting on bond payments at 12:01AM Thursday morning. But it means that the government would have to start postponing payments on bills and cutting back in a significant way on ongoing federal expenditures. At sometime around the last week of October, the government would apparently have to begin defaulting on bonds.

Here are a few articles looking at the likely consequences if a default happens. Two cautions are in order. One is that nobody can predict exactly how a US government default on bonds will affect the world economy. The dollar is still the only reserve currency for the world. And the rock-solid reputation of US bonds is a main pillar of the world financial system.

The other caution is that the President of the United States clearly has options to avoid defaulting even without Congress raising the debt ceiling: invoking the 14th Amendment to continue financing the government; minting a platinum coin of a $1 trillion or other denomination to fund the government; and, creative bond-issuance techniques that would provide government the funding it needs without technically violating the debt limit. I'm assuming that, faced with a catastrophic default, President Obama will use one of them. Part of the uncertainty here is that if he wants to keep maximum pressure on the Fort Sumter Republicans in Congress to do the right thing by Thursday, not announcing in advance that he will do that is a key element of doing that. (Christopher Matthews discusses those three options in Three Not-So-Crazy Ways Out of the Debt Ceiling Crisis Time 10/05/2013)

Obviously, Obama has a responsibility here. This mess is clearly the fault of the Republican Party by any remotely coherent view. But the newfound Constitutional restraint that the White House has been claiming the last several days that Obama has now embraced should not prevent him from using Executive power - that really is pretty straightforward, especially with the platinum coin option - to save the world economy from the collective derangement of the Republican Party in Congress.

This unsigned Bloomberg View article, Congress's Blueprint for Global Catastrophe 10/10/2013, gives an outline of various consequences of an actual default. Including:

Forced spending cuts will kill the economic recovery. Over the course of a year, the Treasury borrows roughly $1 out of every $5 it spends, so hitting the debt ceiling would require it to cut outlays by about a fifth — and by much more in the short term, because flows into and out of the Treasury are lumpy. Such a severe fiscal squeeze would crush a still-tentative recovery at a time when widespread unemployment is threatening to do permanent damage to the country’s productive capacity. [emphasis in original]

This part is predictable, and to a large extent quantifiable. Conservatives have been whining ridiculously about the debt and deficit making the United States into "Greece." But a default like the Republicans are trying to bring down on our heads, really would put the US into the position of Greece. New, severe budget cuts would tank the already-weak recovery, shrinking the economy and reducing government revenues, which would require further cuts which would further weaken the economy - rinse and repeat, over and over and over. That is what happened to Greece in the euro currency trap and the brutal austerity programs forced onto them primarily by German Chancellor Angela Merkel. It's happening still, not only in Greece but also in Cyprus, Ireland, Italy, Spain and Portugal. Again, this part is predictable. How sudden or severe a new financial crisis would be is less so.

John Glover invokes the "H" word, though not in a goofy way, in U.S. Risks Joining 1933 Germany in Pantheon of Deadbeat Defaults Bloomberg Businessweek 10/13/2013. Again, not raising the debt ceiling would be a statement by Congress that they intend to push the US into default. It does not mean that the US goes into default on Day 1 or that the President has no options to prevent it.

Simon Johnson cautions about the uncertainty inherent in a US debt default scenario in The Debt Ceiling and Playing With Fire Economix 01/24/2013: "The main problem is that no one knows what would happen if the federal debt were to hit its legal ceiling."

Brad Plumer looks at the schedule for catastrophe in A very simple timeline for the debt-ceiling crisis Wonkblog 10/08/2013.

The creative bond-issuance techniques I mentioned are also discussed in:

Matthew Boesler, Everyone's Talking About This Sneaky Solution To The Debt Ceiling That Might Be Even Better Than The Platinum Coin Business Insider 10/08/2013

Matt Levine, Mint the Premium Bonds! Bloomberg View 10/02/2013

Felix Salmon looks at the debt prioritization process in Felix Salmon smackdown watch, debt prioritization edition Reuters 10/07/2013.

David Keohane in US default stripshow FT Alphaville 10/08/2013 gets into some of the consideration the Treasury would be wrestling with in a potential default situation to minimize the immediate damage on the world financial system. Cardiff Garcia does the same: Raise your hand if you know how the Treasury’s payment systems work ... Anyone? 10/06/2013

Mike Konczal checks in with how some of the conservative bigwigs have been analyzing the potential consequences of keeping the current debt ceiling: What are Conservative Experts Saying About Breaking Through the Debt Ceiling? Rortybomb 10/07/2013

Then there's the 600-lb. gorilla on these matters, the Shrill One, Paul Krugman. The title of this October 6 blog post gives an idea of the range of possibilities on the effects of a default, Hitting the Ceiling: Disastrous or Utterly Disastrous?, in which he writes:

... Goldman Sachs has a short paper (not online) arguing that the government probably could prioritize payments on Treasury bills, avoiding the breakdown of markets that would come from putting the world’s key safe asset into default. They don’t sound too confident. But even if they’re right, the government would still go into arrears on many other payments, from contractor bills to medical bills. And it would be forced into savage spending cuts, around 4 percent of GDP, that wouldn't just cause hardship (Surprise! No Social Security for you this month!) but amount to a severely contractionary fiscal policy, sending us into recession if it lasted any length of time.

I think this is important. Lots of people have been focusing on the possibility of a mega-Lehman event, but even if we somehow avoid that, this will be a catastrophe.

He reminds us that we should Blame the Deficit Scolds 10/07/2013. He makes an important point in Deficit Deniers 10/08/2013:

As we close in on the debt limit, with Obama insistent that he will not give in to hostage-taking, there is a growing chorus of voices on the right insisting that the whole debt limit thing is scare tactics from the administration, and that hitting the limit will be no big deal.

And the truth is that there is some real uncertainty about exactly what happens if we hit the ceiling. I think the administration has made a tactical error by putting all the weight of its warnings on the financial consequences; we might have a Lehman-type event, but we might not, and if it turns out not, the administration will have hurt its credibility. What sane people should be emphasizing is that in addition to the risk of financial disruption, there’s the certainty of huge pain from spending cuts and a crippling hit to economic growth. [my emphasis]

And in The Debt Ceiling and the Housing Bust 10/10/2013, he explains the process by which a default scenario would push the United States into a Cyprus/Greece/Ireland/Italy/Portugal/Spain austerity spiral, as income falls short of outlays without the government being able to borrow to close the gap:

This deficit would have to be closed immediately, cold turkey, in the event of a debt-ceiling breach. Probably the default — because it would be a default, even if interest payments are being made — would take the form of a “delayed payment regime“, with the government falling ever further behind on its bills.

So, when did we last see a spending shock this big? As it happens, we’re looking at something just about the size of the post-bubble housing bust, which was also about 4 percent of GDP[.]

You can argue that these spending cuts wouldn't have as much impact as the housing bust, because payment would be delayed, not cancelled, and at least some players would continue to expect eventual payment. On the other hand, as I pointed out in my last post, this time around we would have disconnected the automatic stabilizers — as GDP fell, revenues would fall, forcing another round of spending cuts, and so on.

Again, my point is that we could well be looking at a Great Recession-sized event even if we avoid a purely financial crisis.

If Congress goes with the force-the-US-into-default option and Obama decides to use Executive options to prevent that from happening, the House of Representatives would likely impeach him. But they will probably impeach him regardless, so he might as well save the economy from a self-imposed disaster. Not having another global economic catastrophe works for me.

Tags: angela merkel, austerity economics, debt ceiling, euro, france, françois hollande, greece, obama administration

Negotiating with the Mad Hatter Tea Party

Digby is right in her assessment of the logical negotiating implications of the White House's current position (Trading spaces, kabuki style Hullabaloo 10/12/2013):

Unless the president can extract some kind of ironclad agreement [from the Republicans] to never do this again, which is impossible, the whole thing will end up being a kabuki spectacle that rewards the craziest dancer.

Personally, I don't see how it could ever have worked --- once the dam on the debt ceiling was broken in 2011, I think this was bound to happen. The Republicans will have to lose and lose big, and explicitly because they become so out of the mainstream that even some of their own voters decide they're too nuts to be elected before this fanatical behavior stops. Until that happens, I think Democrats have to start being a little bit more strategic and wield their power more effectively than they have been. These people are nuts and kabuki dances pretending to "win" when you didn't actually win isn't going to cut it.

I have to think, however, that even on a kabuki level, Democrats whispering to reporters that they "recognize" that they're going to have to compromise after they've made such a huge deal out of never giving in probably isn't the best idea. It's hard for me to believe that came from the leadership or the White House because it would be completely ridiculous at this point. [italics in original]

The Republican Party in Congress is acting collectively crazy. They view the 2011 face-off over the debt ceiling as having been successful for them. The Obama White House has lately been saying that they see it more-or-less the same way. This time he needs to stop them cold.

But that only works if he really is willing to use one of the Executive options open to him to stop a default on the federal debt: the 14th Amendment, the platinum coin, or creative bond structuring.

Tags: debt ceiling, obama administration

Sean Wilentz and Jack Balkin on the debt ceiling crisis and the 14th Amendment

Sean Witlentz gives some historical perspective on Obama and the Debt New York Times 10/07/2013, in which he argues that the Republicans' threat to throw the United States government into default amounts to "proposing a blatant violation of the 14th Amendment, which states that 'the validity of the public debt of the United States, authorized by law' is sacrosanct and 'shall not be questioned.'"

Jack Balkin challenges part of his argument in Sean Wilentz on the Debt Ceiling Crisis: Imprudent Advice Balkinization 10/08/2013, arguing that "although Wilentz's history may be sound, his normative prescriptions are not."

Specifically, the question is whether the President could legitimately invoke the 14th Amendment to ignore the debt ceiling. Wilentz says yes, Balkin no.

Wilentz argues that debt-related language in the 14th Amendment aimed "to prevent precisely the abuses that the current House Republicans blithely condone." While "precisely" is a tricky word to use for such comparisons, I'm inclined to agree with him. He describes some of the political and legislative history involved:

Congress passed the 14th Amendment and sent it to the states for ratification in June 1866. Its section on the public debt began as an effort to ensure that the government would not be liable for debts accrued by the defeated Confederacy, but also to ensure that its own debt would be honored.

That was important because conservative Northern Democrats, many of whom had sympathized with the Confederacy, were in a position to obstruct or deny repayment on the full value of the public debt by paying creditors in depreciated paper money, or "greenbacks." This effective repudiation of obligations already accrued — to, among others, hundreds of thousands of Union pensioners and widows, as well as investors — would destroy confidence in the government and endanger the economy.

As the wording of the amendment evolved during the Congressional debate, the principle of the debt’s inviolability became a general proposition, applicable not just to the Civil War debt but to all future accrued debts of the United States. The Republican Senate leader, Benjamin F. Wade of Ohio, declared that by placing the debt "under the guardianship of the Constitution," investors would be spared from being "subject to the varying majorities which may arise in Congress." [my emphasis]

The strongest argument Balkin makes is this one:

... by acknowledging in advance that he will disregard the debt ceiling, Obama gives Republicans no reason to act responsibly in a debt ceiling crisis. They can happily refuse to budge knowing that Obama will bail them out and subject himself to impeachment. Even if Obama planned an emergency action along the lines of what Wilentz suggests, it would be foolhardy for him to announce it in advance. His proper strategy is to insist that the 14th Amendment does not give him the power to raise the debt ceiling without Congressional authorization, which is also the correct legal answer.

There he's considering what Wilentz recommends that Obama do immediately:

Surely the lawyers advising and defending the White House, let alone the president, know as much. Refraining from stating this loudly and clearly, and allowing Congress to slip off the hook, has been a puzzling and self-defeating strategy, leading to the crippling sequester and the politics of chronic debt-ceiling crisis. More important, by failing to clarify the constitutional principles involved, the administration has neglected to do its utmost to defend the Constitution.

I'm inclined to agree with Balkin on the negotiating strategy. My own preference would be for Obama to really refuse to negotiate with the Republicans, even refuse to negotiate about negotiating, and continue to insist that the Reps need to raise the debt ceiling and re-open the government. He could then wait for a couple of weeks as the Reps' poll ratings go through the floor, until a day in which the stock markets go into a serious panic. After the close of the markets that day, he would announce that he's had a trillion-dollar platinum coin minted that he will use to keep paying the bills, explaining, "I had to do this because the Lord of the Flies Republicans were determined to destroy the world economy. Again."

If I actually expected that Obama were willing and able to pull off something like that, I would agree with Balkin. But based on his negotiating record so far, I would actually feel more comfortable if he were to go with an earlier declaration of an Executive debt ceiling solution.

Balkin seems to think that Obama can and should avoid having the Republicans impeach him. But at this point, the Republicans in Congress and the broader "conservative movement" are certainly acting like their in Lord of the Flies mode. So I doubt Obama has much actual influence over whether the Reps impeach him or not. His basic stance on impeachment ought to be more along the lines of, "Bring it on, Cracker Party!" Also an all-but-unimaginable position for Obama the Great Bipartisan to take.

As the countdown to a US debt default gets closer to d-day, the gameboard is shifting more rapidly every day. As of yesterday, here are the views presented by Sleepy Mark Shields and David "Bobo" Brooks on the PBS Newhour Political Wrap section on 10/11/2013, Shields and Brooks on shutdown's 'tectonic' effect for Republicans:

Both are in their default mode of giving their own variations on conventional wisdom. Sleepy Mark rambles about the Erie Canal and land-grant colleges. Bobo gives his own calm-voice spin on how this isn't really so bad for the Republicans. Bobo's "tell" is that when he's really delivering a version of Republican ideology comically divorced from the real world, he assumes a soft, calm, imminently reasonable tone. He keeps that tone through most of this segment.

Bobo quote of the day: "It's not, like, a transformational news event." (after 9:50 in the video; they don't seem to have the transcript up as of this writing.)

At least Obama is still holding out for the Republicans to act like minimally responsible elected officials. As Billy House et al report in White House Rejects House Offer; Hope for Fiscal Deal Now Lies in Senate National Journal 10/12/2013:

Many House Republicans were openly angry following Saturday morning's meeting. They accused the White House of not only misleading House Republicans, but of pitting House and Senate Republicans against one another.

Rep. Tom Price, R-Ga., who also said the most recent House Republican offer had fallen through, described it as "a short-term debt limit extension with a budget process, and specific negotiations on reopening the government."

But Obama informed Boehner last night that he wasn't interested.

In the Senate, talks are in the hands of Majority Leader Harry Reid and Minority Leader Mitch McConnell. "At the end of the day, what we all are supporting is the effort that's under way between Senator McConnell and Reid," said Sen. Bob Corker, R-Tenn.

The Fort Sumter Party no doubt feels that it's a victory for them that the President even held his supposedly non-negotiation negotiations with them. But you can understand how he doesn't feel that the Republicans have been entirely reliable negotiating partners:

This is also an interesting snippet of Republican opinion that they provide:

"The challenge that we have here, very simply, is that the Republicans have control of the House, the Democrats have control of the Senate, the White House and the media," said Rep. Trent Franks, R-Ariz. "The equation there is very asymmetric one for House leadership."

"I'm convinced that, given that equation, that we're doing the best we can," Franks said. "And there's a fifth issue—and that [is] we're dealing with a president who unfortunately doesn't hold himself … to the truth or his own word. That's my conviction."

Rep. Raul Labrador, R-Idaho, said, "I haven't been more proud of my leadership than I've been over the last three weeks. I think they're holding strong and they feel that the Senate Republicans are undermining their negotiations."

Said Price: "I'm just astounded that the president can't take yes for an answer. It really is remarkable that he refuses to accept basically what was his offer initially. So we'll see. Hopefully he'll wake up this morning a little smarter and a little more observant of what has actually been proposed."

Meanwhile, others said they were going home to their districts until the House is scheduled to return to session on Monday, subject to a callback from House leaders.

"I have not seen my 2-year-old for two weeks," said freshman Rep. Trey Radel, R-Fla.

The punchlines to that just write themselves!

Tags: debt ceiling, obama administration

Sequester II about to strike?

I don't know if this National Journal article is behind subscription: Scott Bland, Poll: Huge Majority of Americans Have Seen No Impact From Sequester 10/09/2013:

But it shows had badly it hurts the Democrats' nominal goals for Dem leaders to frame their economic arguments in Republican terms, i.e., bragging about drastically reducing The Deficit during a depression and praising St. Reagan all the time:

According to the latest United Technologies/National Journal Congressional Connection Poll, only 23 percent of respondents have "seen any impact of these cuts" in their communities or on them personally, while 74 percent said they had seen no impact from sequestration.

The results highlight a difficult issue for Democrats and the Obama administration in the broad fight over government spending: The budget cuts they decry not only haven't exasperated the public, they've gone largely unnoticed. That means both parties' political attacks over the sequester have less salience.

The poll results also are notable as Washington navigates the federal government shutdown and possible breach of the debt ceiling--two parallel crises carrying the potential of economic harm. While President Obama has stressed Senate Democrats' acquiescence to what he called "Republican spending levels," congressional Republicans are advocating another round of reductions in exchange for a debt-limit increase. Yet, absent reductions in Social Security or Medicare spending, it appears most Americans do not experience--or do not think they are experiencing--the effect of lower government spending.

Of course, "both parties" aren't attacking the sequester. It gives the Republicans what they want: less gubment. This is worth remembering when we hear about a short-term extension of the debt ceiling as a solution to the current crisis.

The 2011 debt ceiling crisis was "solved" by setting up the Fiscal Cliff or the end of 2012. When there was no no Bipartisan Grand Bargain over that, they set up the sequester, which supposedly would be so bad that "both parties" would have to make a deal. Amazingly, the Republicans let the sequester that fits their anti-government goals go into effect. Now getting back to the sequester's level of cuts would be a victory for Obama and the Democrats. Shoot, Obama is bragging about already having accepted a continuing resolution that has spending levels even lower than the sequester levels. Tell me again, why did we have a national election last year?

Here is Tom Tomorrow's account from a 03/13/2013 cartoon:

Joan Walsh gives an account in Cruelty in motion: The latest GOP debt crisis "solution" Salon 10/10/2013:

I would never say "both sides do it," but it must be acknowledged that the incredible privilege of virtually everyone associated with the federal government in Washington, D.C., and yes, in both parties, insulates them from the real suffering elsewhere in the nation. (Many Democrats are capable of empathy nonetheless.) And if you want to understand why "false equivalence" dominates the media narrative, that's a huge factor: the privilege and insularity of the Beltway media. I won’t name names right now but I'm watching writers and pundits I admire on television today applauding the House GOP proposal as a step forward, because a) their jobs depend on being the first to hail signs of "progress" and b) because they’re really not focused on the suffering this ongoing crisis has caused, because it hits no one they know. ...

This all goes back to August of 2011, when the president unwisely opened negotiations over the debt ceiling with the impotent and sneaky Boehner, and Boehner gave nothing, and then said he got "98 percent" of what he sought. We have lived with unconscionable austerity ever since. Obama came out and boasted, as he has many times since, that he’d agreed to a deal to cut discretionary spending to the lowest level since Dwight Eisenhower was president, in the 1950s, which is something no Democrat should ever be proud of. [my emphasis]

Norm Ornstein, who has been regarded as conservative for as long as I've ever heard of him but who now would count as a "moderate" Republican writes in The Atlantic 10/10/2013:

The idea of threatening default in a real way—demanding outlandish concessions with a loaded gun to the country’s head—only emerged in 2011. We escaped default when Mitch McConnell swooped in at the last minute to craft a deal—but the future became clear soon thereafter when a candid McConnell told The Washington Post about the future of the debt ceiling, "What we did learn is this: It's a hostage that's worth ransoming." This year the hostage drama is more frightening. McConnell is AWOL this time. And the fantasy believed by many prominent GOPers about the consequences of default make it easier for them to push to the brink and over into the abyss. It may have come as no surprise when Rep. Ted Yoho, a veterinarian, said that a default would be great because "it would bring stability to the world markets." But when Tom Coburn, who should know better, says that there is no debt ceiling and that if we fail to raise the debt ceiling “we’ll continue to pay our interest, we’ll continue to redeem bonds, and we’ll issue new bonds to replace those,” it tells us that there are way too many lawmakers in a bubble of unreality. In contrast, there’s this from Bloomberg News: "Among the dozens of money managers, economists, bankers, traders, and former government officials interviewed for this story, few view a U.S. default as anything but a financial apocalypse."

Tags: debt ceiling, obama administration

Obama's latest non-negotiation negotiating on the debt ceiling

I should probably open any post on the debt ceiling with: 14th Amendment, platinum coin, yes we can!

Video of President Obama's press conference today (more than an hour long):

"There is no silver bullet," President Obama said in hisPresidential press conference today. "There is no magic wand that allows us to wish away the chaos that could result if, for the first time in our history, we don't pay our bills on time." No silver bullet. But there is the platinum coin option. And the 14th Amendment option.

Except the President, which his newfound Constitutional scruples, is sounding like he's ruling them out:

And I know there's been some discussion, for example, about my powers under the 14th Amendment to go ahead and ignore the debt ceiling law. Setting aside the legal analysis, what matters is -- is that if you start having a situation in which there -- there's legal controversy about the U.S. Treasury's authority to issue debt, the damage will have been done even if that were constitutional, because people wouldn't be sure. It'd be tied up in litigation for a long time. That's going to make people nervous.

So -- so a lot of the strategies that people have talked about -- well, the president can roll out a big coin and -- or, you know, he can -- he can resort to some other constitutional measure -- what people ignore is that ultimately what matters is, what do the people who are buying Treasury bills think? And again, I'll -- I'll just boil it down in very personal terms.

If you're buying a house, and you're not sure whether the seller has title to the house, you're going to be pretty nervous about buying it. And at minimum, you'd want a much cheaper price to buy that house because you wouldn't be sure whether or not you're going to own it at the end. Most of us would just walk away because no matter how much we like the house, we'd say to ourselves the last thing I want is to find out after I've bought it that I don't actually own it.

Well, the same thing is true if I'm buying Treasury bills from the U.S. government, and here I am sitting here -- you know, what if there's a Supreme Court case deciding that these aren't valid, that these aren't, you know, valid legal instruments obligating the U.S. government to pay me? I'm going to be stressed, which means I may not purchase. And if I do purchase them, I'm going to ask for a big premium.

So there are no magic bullets here.

Joan Walsh reminds us of the Obama White House's negotiating approach with the Republicans just a few months ago in GOP cowards face biggest test of their self-inflicted mess Salon 10/08/2013:

Let’s hope the White House doesn't undercut Reid the way it seemed to on the fiscal cliff deal at the end of 2012. You’ll recall: Reid thought he could hold firm on revoking the Bush tax cuts for those who made more than $250,000, and either postponing or lifting the sequester cuts that settled the 2011 debt-ceiling crisis; Biden came in and reached a deal with McConnell that raised the higher tax rate threshold to $450,000 and only extended the ugly sequester cuts two months – and of course, they then kicked in. While there's no certainty Reid could have gotten his deal, it's clear he felt undercut by Biden, who’s been conspicuously missing in the current government shutdown/debt ceiling debate.

Yes, progressives continue to worry about the possibility of the president cutting a deal with GOP extremists, while hoping we’re wrong. We've hoped we were wrong before, but we've been right. (Here are my takes on the 2011 debt ceiling "deal" and the fiscal cliff deal.) The myth that we have GOP "moderates" is strong in the media, but one thing that prevents the emergence of meaningful GOP moderation is the perception that the White House will, in the end, cave to the extremists' demands. That can't happen again.

Joan is actually being a bit generous to the White House here. The Bush tax cuts were set to expire on December 31. Doing nothing would have let them expire. Then the Democrats could have restored the reduced rates for middle-class taxpayer and dared the Republicans to vote against it.

As I've said before, it's not irrational for the Republicans to think they can get more out of Obama by holding fast on the debt ceiling until the bitter end. Because they think they get big concessions out of Obama by doing this. And they do.

On the topic, see also Digby, Let's not kid ourselves. It's all one negotiation. Hullabaloo 10/08/2013 and Charlie Pierce, The President Finally Speaks His Mind Esquire Politics Blog 10/08/2013.

Obama got a little cute, unintentionally in this case, in his Presidential press conference today:

In the same way, members of Congress, and the House Republicans in particular, don't get to demand ransom in exchange for doing their jobs. And two of their very basic jobs are passing a budget and making sure that America's paying its bills. They don't also get to say, you know, unless you give me what the voters rejected in the last election, I'm going to cause a recession.

That's not how it works. No American president would deal with a foreign leader like this. Most of you would not deal with either co- workers or business associates in this fashion. And we shouldn't be dealing this way here in Washington.

Actually, American Presidents including Obama have been known to deal that way with foreign leaders they don't like, and worse.

For better or worse, he laid it on pretty thick about the danger of a financial disaster, not neglected to invoke St. Reagan:

If Congress refuses to raise what's called the debt ceiling, America would not be able to meet all of our financial obligations for the first time in 225 years. ...

Now the last time that the tea party Republicans flirted with the idea of default, two years ago, markets plunged, business and consumer confidence plunged, America's credit rating was downgraded for the first time, and a decision to actually go through with it, to actually permit default, according to many CEOs and economists, would be -- and I'm quoting here -- "insane, catastrophic, chaos" -- these are some of the more polite words.

Warren Buffett likened default to a nuclear bomb, a weapon too horrible to use. It would disrupt markets, it would undermine the world's confidence in America as the bedrock of the global economy, and it might permanently increase our borrowing costs which, of course, ironically would mean that it would be more expensive for us to service what debt we do have and it would add to our deficits and our debt, not decrease them.

There's nothing fiscally responsible about that. Preventing this should be simple. As I said, raising the debt ceiling is a lousy name, which is why members of Congress in both parties don't like to vote on it, because it makes you vulnerable in political campaigns. But it does not increase our debt. It does not grow our deficit, it does not allow for a single dime of increased spending. All it does is allow the Treasury Department to pay for what Congress has already spent.

But as I said, it's always a tough vote. People don't like doing it, although it has been done 45 times since Ronald Reagan took office. Nobody in the past has ever seriously threatened to breach the debt ceiling until the last two years. And this is the creditworthiness of the United States that we're talking about. This is our word, this is our good name.

This is real. In a government shutdown, millions of Americans face inconvenience or outright hardship. In an economic shutdown, every American could see their 401(k)s and home values fall, borrowing cost for mortgages and student loans rise, and there would be a significant risk of a very deep recession at a time when we're still climbing our way out of the worst recession in our lifetimes. [my emphasis]

And he bragged about one of his proudest accomplishments, that during a depression, "Our deficits are falling at the fastest pace in 60 years."

And, just to show what a swell guy he is, he generously offered to cut benefits on Social Security, Medicare and Medicaid again, his treasured Grand Bargain, aka, "entitlement" reform:

And by the way, if anybody doubts my sincerity about that, I've put forward proposals in my budget to reform entitlement programs for the long haul and reform our tax code in a way that would close loopholes for the wealthiest and lower rates for corporations and help us invest in new jobs and reduce our deficits. And some of these were originally Republican proposals, because I don't believe any party has a monopoly on good ideas. So I've shown myself willing to go more than halfway in these conversations, and if reasonable Republicans want to talk about these things again, I'm ready to head up to the Hill and try. I'll even spring for dinner again.

Awesome. Cut Social Security! Cut Medicare! Cut Medicaid! Lower corporate taxes! This is our a Democratic President is offering to defend us against Republican austerity mania. Did I mention that Obama is a Democrat?

He added another homey metaphor equating family budgets with the national economy, showing he hates moochers and losers, too:

And so when I read people saying, now, this wouldn't be a big deal; we should test it out; let's take default out for a spin and see how it rides -- and I -- I -- I say, imagine, in your private life, if you decided that I'm not going to pay my mortgage for a month or two. First of all, you're not saying money by not paying your mortgage. You're just a deadbeat. And you can anticipate that will hurt your credit, which means that in addition to the debt collectors calling, you're going to have trouble borrowing in the future.

And if you are able to borrow in the future, you're going to have to borrow at a higher rate.

Well, what's true for individuals is also true for nations, even the most powerful nation on earth. And if we are -- are creating an atmosphere in which people are not sure whether or not we pay our bills on time, then that will have a severe long-term impact on our economy and on America's standard of living. [my emphasis]

From Joe Stiglitz, Five Years in Limbo Project Syndicate 10/08/2013:

Other problems have gone unaddressed – and some have worsened. America’s mortgage market remains on life-support: the government now underwrites more than 90% of all mortgages, and President Barack Obama’s administration has not even proposed a new system that would ensure responsible lending at competitive terms. The financial system has become even more concentrated, exacerbating the problem of banks that are not only too big, too interconnected, and too correlated to fail, but that are also too big to manage and be held accountable. Despite scandal after scandal, from money laundering and market manipulation to racial discrimination in lending and illegal foreclosures, no senior official has been held accountable; when financial penalties have been imposed, they have been far smaller than they should be, lest systemically important institutions be jeopardized.

Maybe that's why Obama's Administration has done so little to address problems of millions of individual homeowners hurt by the mortgage disaster and the depression: he literally thinks that if you miss a mortgage payment, "You're just a deadbeat." That sounds like a real Freudian slip. As well as another of his "Is this guy really a Democrat?" moments.

Tags: debt ceiling, obama administration

Obama negotiates not negotiating over the debt ceiling

Rick Perlstein linked this article with a short comment, "Even our wins are losses": Igor Bobic at TPM is reporting on Obama's current negotiating over not negotiating, Obama: We're Willing To Fund Government With Republican Priorities TPM 10/07/2013:

Despite Republicans' insistance that he's not willing to come to the table and negotiate re-opening the federal government, President Barack Obama on Monday noted that his party is already willing to accept a short-term measure to fund the government that includes funding the GOP previously considered a policy victory, provided it doesn't touch Obamacare.

"The bill that is being presented to end the government shutdown reflects Republican priorities," Obama said, addressing federal employees at FEMA in Washington. "It's the Republican budget. The funding levels of this short-term funding bill, called the CR, is far lower than what Democrats think it should be.

"Nevertheless Democrats are prepared to put the majority of votes on it to fund the government," he added. "When you hear government not compromising, we're compromising so much we're willing to open the government at funding levels that reflect Republican wishes, that don't at all reflect our wishes."

The full text is here, Remarks by the President at FEMA Headquarters 10/07/2013.

He uses some defiant rhetoric before he gets to the part quoted above. But even the defiant parts have obvious weasel-words included:

What I've said is that I cannot do that under the threat that if Republicans don’t get 100 percent of their way, they’re going to either shut down the government or they are going to default on America’s debt so that America for the first time in history does not pay its bills. That is not something I will do. We’re not going to establish that pattern.

We’re not going to negotiate under the threat of further harm to our economy and middle-class families. We’re not going to negotiate under the threat of a prolonged shutdown until Republicans get 100 percent of what they want. We’re not going to negotiate under the threat of economic catastrophe that economists and CEOs increasingly warn would result if Congress chose to default on America’s obligations. [my emphasis]

But will he give 99% to be the so-called grown-up in the room? Crazy as the Republicans are acting, it's not completely irrational on their part to think Obama will cave and make huge concessions over the debt ceiling. How else are they going to read what he said in that FEMA speech?

Joan Walsh has a recap today of the original fight over the ACA (Obamacare), which has this reminder: "it was the administration’s determination to compromise, and to let the centrist Baucus drive the process, that led Democrats to head into the disastrous August 2009 recess without an actual bill they could tout, let alone defend – and that vacuum was filled by Tea Party hatred at town halls that Rep. Todd Akin (remember him?) appreciatively labeled 'town hells' for Democrats." (GOP’s latest shutdown delusion: They missed the Obamacare negotiations! Salon 10/07/2013)

Charlie Pierce was writing just this morning (The Great Sucker Play Esquire Politics Blog 10/07/2013):

The president has demonstrated that he can be brought to a deal if someone properly engages his impulse to be a conciliator. They're never going to be able to do that by asking him to chloroform the Affordable Care Act. But if they start talking about the deficit, they can get him to listen. If he starts to think about bipartisanship and about problem-solving, and about the rosy dream he painted in his famous 2004 speech at the Democratic convention, a speech that now sounds as though it were delivered by a five-year old, then he can convince himself to do anything. At which point, I will believe that, in doing what he did when he did it, Ted Cruz is the smartest man alive. And I do not, under any circumstances, want to believe that.

This does not sound like a President ready to shove a trillion-dollar platinum coin down the Republicans' throats over hitting the debt limit next week.

There's some pretty hair-raising predictions out there about the consequences of hitting the debt ceiling and defaulting on US debt, e.g., A U.S. Default Seen as Catastrophe Dwarfing Lehman's Fall by Yalman Onaran Bloomberg News 10/07/2013.

Tags: debt ceiling, obama administration

Spinning necessity at the White House as the debt ceiling limit gets close

Garance Franke-Ruta reports on the liberal-friendly White House spin on his unaccustomed combativeness on the budget continuing resolution (CR) and the debt ceiling in Why Obama Doesn't Care If He's Winning or Losing the PR Battle The Atlantic 10/042013:

And for all the accusations of gloating hurled at the White House today, I heard something very different from senior administration officials Thursday: an awareness that Obama doesn't have to get elected again, and that that has freed him to take politically risky positions in the service of dragging the American political system out of chaotic and destabilizing patterns. As senior administration officials portrayed it, Obama has been working throughout the course of this year to rightsize the presidency. He sought Congress's approval for a military strike in Syria, even though the national-security establishment thought he should have just acted. For the president, it was about creating a precedent for war-making powers. (What followed, I should note, didn't exactly go smoothly.)

Negotiations on the debt limit, however, would weaken the office of the presidency, weaken democracy, and virtually guarantee a default in 2014 or the next time the debt limit needs to be increased, according to White House thinking. By sanctioning the threat of default to get things through the political process that wouldn't get through on their merits, Obama would be helping to create a new procedural tactic in American democracy that could nullify the outcome of elections by giving fresh powers to minority factions. [my emphasis]

She gives the "senior administration officials" the customary anonymity.

But I'm struck by what a cheeky spin it is. Obama's is the Presidency that treats leaks to the media about national security matters as espionage.

The Presidency that practices targeted assassinations.

That attacks countries with which the US is not at war with rockets fired by drones.

That has been taken the most drastic position on Executive secrecy of any President ever.

That went to an ill-considered war in Libya without Congressional authorization.

That has practiced massive domestic surveillance with little regard for law or the Constitution.

And now we're supposed to believe that President Obama has transmogrified into a scrupulous Constitutional scholar who wants to establish precedents for a limited view of Executive power? Please.

E.J. Dionne offered up a version of this silly spin on the PBS Newshour of 10/04/2013, also giving the spinners the customary anonymity:

But the thing that really strikes me, I was in the White House this week and talked to a number of top aides to President Obama, and I have never seen the administration be so resolute in saying, we cannot make any concessions on the issue of the shutdown or on the debt ceiling. We are happy to negotiate after those are settled.

Obama is famous for liking to negotiate. Some of us are actually somewhat critical of him for being too eager to negotiate, but this time, they're saying there is a principle here. It's a constitutional monstrosity to use these threats to try to get something done, in this case repealing the Affordable Care Act, when the president won't sign it and they don't have a majority in the Senate. [my emphasis]

For the immediate future, i.e., this month, I hope this isn't a prelude to Obama declaring he won't invoke the 14th Amendment or mint a platinum coin to make a Republican refusal to raise the debt ceiling meaningless, because, hey, Obama is committed to limited Executive powers!

If he pulls that, it will be because he wants to use the debt ceiling like he did in 2011 to ram through his Grand Bargain to cut benefits on Social Security, Medicare and Medicaid.

But I hope the Obama White House has finally realized that the Republicans will jack them around in a major way if they agree to negotiate further over the continuing resolution or the debt ceiling.

President Principled Constitutionalist had better be ready with an effective alternative to Congress raising the debt ceiling if the Republicans balk, particularly given the hair-raising version the Treasury is putting out about what a default would mean.

Annie Lowrey of The New York Times elaborated some of the consequences in Defaulting on U.S bond obligations could cause 'mother of all financial crises' PBS Newshour 10/03/2013:

And so the issue is, it would be really bad if Treasury didn't manage to meet some of its payments to states or Social Security recipients, but they could basically say, you know what? We're going to be forced to pay you later. And that would be awful, but it probably wouldn't be catastrophic.

The issue with the bonds is that if Treasury didn't pay its bondholders back or didn't pay the coupon payments that it's required to make on some of those bonds, they would be declared in default and it would basically throw a lot of sand into the gears of the entire financial system, and you would have had a financial crisis, and not just a small financial crisis, but like the mother of all financial crises, because treasuries are so important to the functioning of financial markets.

But in that same report, we get this:

JUDY WOODRUFF: And just quickly, the White House made a point today of saying the president on his own wouldn't raise the debt ceiling. They don't believe he has the authority to do that. I gather there's not much dispute about that.

ANNIE LOWREY: No.

Some folks have said that the 14th Amendment grants him the authority to go ahead and just pay the bills, even though the debt limit hasn't been raised, let Treasury start issuing new debt. The administration has just outright rejected that approach. Other administrations in the future might not, but the Obama administration is not going to do that.

If that's what Obama's newfound Constitutional restraint is about, we could be in a heap o' trouble!

Tags: debt ceiling, obama administration

The shutdown, the Williamsburg Accord and the President's strategy

So, the Reds have shut down the national government. (Sorry, I couldn't resist. I still think it's hilarious that conventional usage now calls the Republicans the "red" party.)

I haven't posted about the shutdown since it began early Wednesday morning. It's anyone's guess at this point how long it may go on. The analysis that sees this event as this Republican House's version of the Clinton impeachment, a kind of Constitutional coup, makes a lot of sense to me.

It seems that not only the mainstream press but much of Left Blogostan missed the significance of a Republican convocation back in January. Jonathan Chait writes in The House GOP’s Legislative Strike Daily Intelligencer 09/30/2013:

In January, demoralized House Republicans retreated to Williamsburg, Virginia, to plot out their legislative strategy for President Obama’s second term. Conservatives were angry that their leaders had been unable to stop the expiration of the Bush tax cuts on high incomes, and sought assurances from their leaders that no further compromises would be forthcoming. The agreement that followed, which Republicans called "The Williamsburg Accord," received obsessive coverage in the conservative media but scant attention in the mainstream press. (The phrase "Williamsburg Accord" has appeared once in the Washington Post and not at all in the New York Times.)

But the decision House Republicans made in January has set the party on the course it has followed since. If you want to grasp why Republicans are careening toward a potential federal government shutdown, and possibly toward provoking a sovereign debt crisis after that, you need to understand that this is the inevitable product of a conscious party strategy. Just as Republicans responded to their 2008 defeat by moving farther right, they responded to the 2012 defeat by moving right yet again. Since they had begun from a position of total opposition to the entire Obama agenda, the newer rightward lurch took the form of trying to wrest concessions from Obama by provoking a series of crises. [my emphasis]

I certainly don't want to detract from the blame that the Republican Party deserves in the shutdown. It wasn't "the politicians in Washington" who did this week's needless and destructive government shutdown. It was the Republican Party Members of the House of Representatives who shut it down.

Here's a stock both-sides-are-to-blame version from former General Electric CEO Jack Welch: Schmooze or Lose: How the Lost Art of Negotiation Led to a Shutdown Huffington Post 10/02/2013. At this point, such a position is simply a partisan Republican one. The main Republican position of course, is that it's the President's fault. By any rational standard, that's plainly ridiculous.

However, Democrats and the country more generally should expect a strategy from the twice-elected Democratic President that takes full account of the Republicans' behavior. And Obama has been sadly deficient in that regard.

He said on Wednesday, "I have bent over backwards to work with the Republican Party, and have purposely kept my rhetoric down." Gee, maybe it's time for a different approach! (Sam Stein, Obama To Wall Street: You Should Be Scared Huffington Post 10/02/2013)

Obama came into office at a time of acute economic crisis. And he passed enough of a stimulus to stop the slide and allow the economy to eventually limp out of a recession. But the economy is still performing far below capacity, unemployment is high and poverty has risen.

But from the very first, even while pursuing a stimulus package, Obama framed his goals in terms of giving priority to reducing the federal deficit. Even worse, he set his longer-term economic goals as a Grand Bargain, which originally envisioned: adoption of the Bob Dole/Heritage Foundation/Mitt Romney health care plan now known as Obamacare; raising taxes on the wealthiest; and cutting benefits on Social Security, Medicare and Medicaid. He adopted a basically conservative understanding of economics in which austerity is good and virtuous even during a depression.

He didn't take it to the catastrophic extremes that German Chancellor Angela Merkel did in her management of the eurozone economy. But he relentlessly framed economic problems in terms of the virtues of austerity economics and budget-cutting. An essentially conservative framing that benefits the goals of Republicans far more than it does the goals of the Democratic base, which are generally reflected in the nominal goals of the Democratic Party.

By 2011, his Grand Bargain had come down to cutting benefits on Social Security, Medicare and Medicaid with nominal tax increases for the One Percent. That year, he tried to use the negotiations over the debt ceiling as leverage to get a consensus of Republicans and some Democrats big enough to cut benefits on Social Security, Medicare and Medicaid. It also showed the Republicans that he was willing to negotiate over the debt ceiling and forego obvious options like invoking the 14th Amendment or minting a platinum coin to make the debt ceiling confrontation meaningless.

The failure of that negotiation led to the "fiscal cliff" arrangement of late 2012. Even though re-elected by a healthy margin, he went back to pursuing the Grand Bargain even before his Second Inauguration. When the Republicans, still negotiating in bad faith, wouldn't make any kind of deal with him, the Bush tax cuts on the wealthy were set to expire at the end of 2012. At the last minute, he insisted on an agreement to restore a substantial amount of the tax cuts for the One Percent. If what he wanted was higher taxes on the wealthy, as he claimed, he could have gotten a lot more of it by just doing nothing and letting the Bush tax cuts expire.

It was after that the Republicans agreed on their Williamsburg Accord approach. They would surely have attempted something similar anyway. But his immediate postelection behavior surely served to increase their confidence that he could be rolled.

Robert Reich in Why Obama and the Democrats Shouldn't Negotiate with Extortionists 09/29/2013 recalls those previous negotiations:

Obama and the Democrats must not give in. They shouldn’t even negotiate with extortionists. ...

The President began negotiations with the Republican bullies in 2011 when they first threatened to default on the nation’s debt if they didn't get the spending cuts they wanted. He negotiated again at the end of 2012 when they threatened to go over the fiscal cliff and take the rest of the nation with them if they didn't get the budget they wanted. Now they want to repeal a law they detest. If we give in again, what’s next? A coup d'etat?

Obama is right when he claims, "I have bent over backwards to work with the Republican Party, and have purposely kept my rhetoric down."

But that's not adequate for dealing with an insurgent party intent on wrecking his Presidency. Austerity economics and credulous assumptions about the good faith of the other side aren't the likely to win this fight on any terms that Democrats can consider good.

And it's important to note that the Sequester and now the shutdown achieve the Republicans' goal of reducing government and imposing even more austerity policies than Obama wants. And, as of now, the Republicans are getting what they want.

Tags: austerity economics, barack obama, debt ceiling, grand bargain, medicaid, medicare, platinum coin, social security

The undead Grand Bargain and the platinum coin option on debt-ceiling negotiations

As a new fight over the debt ceiling approaches, it's worth remembering that President Obama has a straightforward legal power to avoid the whole farce, the ability to mint a platinum coin of any value and use it to finance debt payment obligations. The power is called platinum coin seigniorage (PCS).

So if there is a negotiation in which Obama and the Democrats make concessions to Republicans, it's because Obama has chosen not use the power he has to avoid it. In other words, he wants the confrontation for some purpose, like putting through his Grand Bargain to cut benefits on Social Security, Medicare and Medicaid.

Paul Krugman has discussed the platinum coin option in Be Ready To Mint That Coin 01/07/13:

There's a legal loophole allowing the Treasury to mint platinum coins in any denomination the secretary chooses. Yes, it was intended to allow commemorative collector’s items — but that's not what the letter of the law says. And by minting a $1 trillion coin, then depositing it at the Fed, the Treasury could acquire enough cash to sidestep the debt ceiling — while doing no economic harm at all.

So why not?

Yes, it's that straightforward.

Also on the platinum coin option:

Beowulf, FDL Coin Seigniorage and the Irrelevance of the Debt Limit 01/03/2011

Joe Firestone (letsgetitdone), Coin Seigniorage: A Legal Alternative and Maybe the President's Duty Corrente 07/17/2011

Joe Firestone, End the Austerity War Against the People: Mint the Platinum Coin! Corrente 08/05/2011

Joe Firestone, Beyond Debt/Deficit Politics: The $60 Trillion Plan for Ending Federal Borrowing and Paying Off the National Debt Corrente 08/01/2012

Joe Firestone, A Counter Narrative to Peterson's New Economic Perspectives 10/30/2012

Paul Krugman, Rage Against the Coin 01/08/2013

Paul Krugman, Barbarous Relics 01/09/2013

Mike Sandler, Beyond Debt Ceiling, Trillion Dollar Coin Offers New Economic Paradigm Huffington Post 01/10/2013

Joe Weisenthal, COINTASTROPHE: White House Rules Out The Trillion Dollar Coin Option To Break The Debt Ceiling Business Insider 01/12/2013

Mike Konczal, The Game Theory of the Post-Platinum Coin Debt Ceiling Rortybomb 01/14/2013; this should be read in combination with Gene Lyons, Obama Has The GOP Right Where He Wants Them National Memo 01/16/2013.

Ezra Klein, Treasury: We won’t mint a platinum coin to sidestep the debt ceiling Wonkblog 02/12/2013

And as Firestone reminds us in Declaring the Grand Bargain Dead Is Premature FDL 08/31/2013, what Obama would be offering up in such a standoff would be cuts in benefits to Social Security, Medicare and Medicaid. This is his Grand Bargain, at this point a painful misnomer. It would only be "grand" for investment banker and insurers who collected fees and bonuses while delivering substitute products for the cut programs that provide inferior service, even for those who can afford it, compared to the current arrangement.

And it this point the only real "bargain" seems to be that both Democrats and Republicans would agree to support cuts to benefits on Social Security, Medicare and Medicaid. What those would would lose from the cuts would get in the "bargain" is pretty darn vague at this point.

Lori Montgomery reports in White House, Republican senators give up on budget talks Washington Post 08/29/2013, Obama has been offering up the Grand Bargain in negotiations with Republicans even this past week:

Through multiple meetings with White House Chief of Staff Denis McDonough, Deputy Chief of Staff Rob Nabors and Budget Director Sylvia Mathews Burwell, the group discussed a range of options, including a “grand bargain” that would involve a complete restructuring of Medicare, according to people familiar with the meetings, who spoke on the condition of anonymity to describe the private talks.

The group also discussed a smaller deal that would replace much of the remaining sequester savings — about $500 billion over the next eight years — with narrower reforms to Medicare, Social Security and other ­mandatory-spending programs, such as farm subsidies.

But the talks never really gelled, in part because Republicans would not consider raising taxes on the wealthy or corporations as part of the smaller deal, arguing that congressional Republicans as a whole would never agree to replace sequester cuts with higher taxes. Nor did they offer a specific strategy for raising taxes as part of the larger deal.

In the current vocabulary of our political elites, certainly including Obama loyalists, "reform" for Social Security, Medicare and Medicaid means "cutting benefits."

Tags: austerity economics, barack obama, debt ceiling, grand bargain, medicaid, medicare, platinum coin, social security