Debt Ceiling Concerns: Much Ado about Nothing?
Should we assume that a deal will eventually be struck and simply stop paying attention to the debt ceiling debate?
Todd Ganos, blogging at Forbes, asks: What Debt Ceiling Crisis?
In recent testimony before the US House of Representatives, Federal Reserve Chairman Bernanke stated that if the national debt ceiling were not raised by the August deadline, the US Government would either have to default on some of its debt or reduce spending by 40 percent . . . which would adversely affect Social Security and other entitlement payments. Anyone who thinks this will actually happen is smoking banana peels.
People, we are being played like a fiddle. The knuckleheads in the House, the Senate, and White House are all beating their chests and posturing politically. They are going to dig in their heels and fight the good fight so they can maintain face within their respective dogmatic camps. But, in the end, there will be a compromise.
I suppose that if I had to put money on an outcome, it would look something like that described in Ganos’ post: some sort of last minute deal that averts an actual crisis.
However, what concerns me is that there seems to be a faction in the Congress that does not believe that a real crisis will take place if the ceiling isn’t raised or they think that creating that crisis would actually be a good thing (either because of perceived political benefits or because they actually have bought into the notion that immediate and massive cuts would be a good thing for the country).
One thing is for certain: interest in a truly pragmatic compromise does seem to be lacking.
Another thing that is for certain: using situations like this to threaten a crisis (one far more serious than a temporary government shutdown) is an irresponsible way to govern. Events like this ought to make us wonder as to what it is about our system that makes reasonable policy-making so difficult.
It will be interesting to see exactly how this plays out in terms of how much was pure political theater and how much was a true willingness to go over the edge to make a partisan point. Of course, figuring that out won’t be easy.
I’m not familiar with Ganos, and I agree that a last-minute deal is the likely result, but if he thinks there’s no threat of an actual default train-wreck, he hasn’t been paying attention to US politics for the last few years. There is a sizeable chucnk of the GOP – which appears to be led in Congress right now by Cantor – that really would pull the trigger of gov’t default. They’re just that stupidly short-sighted, undereducated, and uncompromising.
I’ve been operating under “of course they’ll reach a deal when they must” presumption for a few days now. I’m not so sure now.
Up until the last month I would have said yes, but the negotiations are dragging out a lot longer than I expected. My main concern at this point is the large group of House Republicans that have basically gone on record as being unwilling to vote for the debt ceiling increase under any circumstances. Under normal conditions this wouldn’t be a problem, as a good number of them could normally vote against a debt ceiling increase while still arranging for it to pass. In fact, this has occurred for quite a while, symbolically voting against the debt limit with the unsaid understanding that it must be raised.
The problem now is that the GOP leadership doesn’t want to pass something this many of their members oppose and attaching actual conditions to the vote has been counterproductive. The House GOP still isn’t signing on for any reasonable compromises, and while the Senate and House Democrats might be able to negotiate an agreement with Boehner and McConnell, it’s not clear they speak for the rest of their caucuses anymore.
Like the Forbes blogger, I used to be very confident that the debt ceiling would be raised before the deadline. At this point, I’m a lot less so. But, I also think that those politicians who don’t want the ceiling raised at all should be careful what they wish for, because once the consequences become apparent to voters, it will change the tone of the debate considerably.
I hope they can get it done without dividing our country any further than it is now. The Democrats are the ones who are forced to put up and the Republicans will not give at all. Cantor is the biggest idiot of them all.
I’m beginning to think nothing will happen until the Markets start to deteriorate….then something will happen fast.
Aren’t there enough “sane” House Republicans to get something done with the Democrats delivering most of the votes? Does Cantor control the whole of the Republican Caucus?
Boehner is coming off like a featherweight.
Hey Norm,
I tend to agree (shades of TARP). I am at least glad there is something on the table (in the form of McConnell’s proposal) that is broadly acceptable to everyone who actually wants a deal if there is something less than everything they want in it. If push comes to shove, that could be approved pretty quickly to resolve this.
@Scott F.: I don’t think it’s so much that he controls them; more that he appears to speak for the contingent of single-issue, no-compromise freshmen the Teahadists sent in… Like DavidM says, the leadership may not have enough control to broker a real deal…
I still think they’ll get it done, but it will go right down to the wire. The narrative, at least at first, will probably be “oh, look, the GOP pushed things too far and had to pull back, silly GOP.” Later, after the dust settles, it will be noticed that, once again, they moved the Overton Window and ended up with a deal that, pre-manufactured crisis, would’ve been deemed implausibly good for the GOP.
I cannot help but wonder if Obama and the mainstream Republicans see this as an opportunity to “break” the Tea Party – or rather the hold of Norquest aligned Activists and Talkers.
Right now the Republicans are being dominated by the most radical element of their caucus. And, with the exception of the McConnell plan, most moderate Republicans (including Bohner) seems comfortable trying to challenge that — at least not publicly.
But if they are perceived as driving the party (and the country) off a cliff — especially if there is market action… that might give the moderates more breathing room again.
@Rob in CT: “Later, after the dust settles, it will be noticed that, once again, they moved the Overton Window and ended up with a deal that, pre-manufactured crisis, would’ve been deemed implausibly good for the GOP.”
Like when health care reform passed? Or the stimulus? What exactly are these “implausibly good” deals the GOP has been getting? Extending the Bush tax cuts for two years when Obama and most Democrats wanted to extend some of the cuts anyway?
Mike
Some more confirmation via Ezra Klein that the TP/GOP really don’t want to raise the debt ceiling under any conditions, regardless of how unpleasant the default might be.
@Scott F.
For almost every member in Congress their optimal political situation as they read it is the following:
a) A Majority votes “YES” for a relatively clean debt ceiling increase.
b) The individual member in question votes NO and screams against the tyranny of debt for the next fifteen months.
For a Republican from a safe seat (say R+8 or better) a YES vote means they get teabagged in the primary. Even if they win the primary, that is a pain in the ass. And given the % of GOP Reps who voted for TARP and have since left office (around 50%,) voting YES on the debt ceiling is a career breaker.
A Rep in a marginal seat (R+8 or less) might get primaried, although the Establishment of the GOP will try to head that off, but won’t have any door knockers in the general election if they vote YES.
A Dem in a marginal seat (R+anything to D+5 or so) will see a YES vote as guaranteeing a million dollar ad campaign from the Club for Growth, Americans for Prosperity or Crossroads GPS plus whatever official money is spent in that district with the punch line of “Congressman X voted to sell us out to the Chinese or the Saudis”
The D+5 to D+10 Dem Congresscritters are the “gettable” votes if they get credible committments from the GOP to not fund strong challengers against them (not gonna happen)
The only Congresscritters who don’t have to worry about losing their seats due to a Yes vote is a Dem in a safe to super-safe seat (D+10 or more). A clean debt ceiling vote is not a primary challenge inciter, and the seat is Democratic enough to hold the ramparts in the general election. Now if there is a grand bargain that fucks over the lower half of the income distribution, then a YES vote is a primary inciter.
Furthermore, look at the dynamic you propose — Republicans get to be massively irresponsible, force the Dems to take the political heat in order to allow Republicans to be even more irresponsible. Bad incentive structure there
I don’t think he’s paying attention. We have a two party system and one party is now cravenly abasing themselves to people who don’t believe in evolution, think fluorescent lights and census forms are conspiracies to take away freedoms, and continue to cling to notions of trickle down economics decades after they were thoroughly beclowned.
There has been a fundamental repudiation of the very notion of expertise and empirical data by a sizable faction of the right. They have insisted that information they do not like cannot be, and so they have demanded their own TV, own radio, own encyclopedias, own comedy shows, own search engine… all to avoid being confronted with information they’d rather just not know.
For the hard right ignorance isn’t just bliss; it’s a first principle from which all else follows..
The House Republicans remind me of this joke. (Insert ethnic group of your choice.)
Guy comes home and catches his wife in bed with another dude. He races over to the nightstand, pulls out a pistol, and points it at his own head. “Don’t laugh,” he says to the guy in flagrante, “you’re next.”
Whether we’ll have a default depends entirely on which group of oligarchs wins out: those who bet long on sovereign debt, or those who bet short. This country, everything and everyone in it are owned by a club we ain’t in and they will decide America’s fate, not us.
I am sick to death of this whole debate on the debt ceiling and although I am an independent and have voted for Republicans and Democrats alike; I am so angry at the Republicans that I cannot see myself voting for any of them again. This economic mess we have been in since the end of the Bush administration was caused by the greedy rich and our governments inability to corral them because of massive deregulations of banking, Wall Street, etc during the Reagan Administration. “Let the economy take care of itself.” What a dream that was! It would be a great one if every one could be trusted and work for the good of all people. Now they want entitlements decreased. Again the middle class will bear the brunt and have their income reduced. We are already bogged down by gas prices, food prices, losing our homes and yet we know that a hard time could be coming our way. Take heed we are mad and your tenure in Congress will be short lived. Dorie Tiseth
@legion:
Compromise? It’s compromise with the Democrats that got us here. Further compromise will drive us halfway off the cliff they’ve driven us to.
Compromise with what, exactly?
Your perception, James is correct. If the GOP backs down on this the result will be rather like McCain’s result, and for the same reason. And they know it.
And,
There’s this:
Oh… and…
Forgive me, but I fail to see any value whatever in compromise, any longer.
@legion:
Compromise? It’s compromise with the Democrats that got us here. Further compromise will drive us halfway off the cliff they’ve driven us to.
Compromise with what, exactly?
And,
There’s this:
Oh… and…
Forgive me, but I fail to see any value whatever in compromise, any longer.
And you know what? If the debt ceiling is so damned important, Obama could always acualy cut spending….Obamacare, for example.”green jobs”, stop the war on reliable energy and so on. We both know he won’t. Yet, none of the usual suspects dare to call HIM “stupidly short-sighted, undereducated, and uncompromising”. Funny how that works….
Your perception, James is correct. If the GOP backs down on this the result will be rather like McCain’s result, and for the same reason. And they know it.
Eric, do you notice that a very small, and dwindling, number of fringe types show up to defend the GOP position? Can you see from in there?
If there are any moderate Republicans here, they seem to fall into two groups:
– they’ve flipped, and are now GOP critics
– they’ve gone silent, unable to actually defend the GOP
@BitEric
Speaking of cliffs, Kevin Drum ran the numbers on the result of failing to lift the limit:
So, if you happen to live in areas where there is a high danger of wildfires (that would be the entire southeast and southwest), don’t expect the US Forest Service to come to your aid with firefighters and aerial tankers and such. And if you live in areas that are prone to devastating floods, don’t expect FEMA to arrive with any help. Just for starters.
We could contrast Eric’s partisan position with one from the opposite side of the political divide. Marshall Auerback:
That’s funny. I don’t think he is “a Tea Party President through and through” but I do think he’s compromised.
Any attempt to paint him as an uncompromising ideologue is crazy talk from teh crazy party.
Indeed, the progressive base is pissed at Obama and has been for some time. Health care reform (seen as corporatist), extending the tax cuts, continuing (and/or extending) civil liberties abuses, doubling-down on Afghanistan (which, to be fair, he promised to do in the campaign), Libya… there’s a solid list there for a lefty to be angry about. But yeah, he’s a friggin’ commie.
“Compromise? It’s compromise with the Democrats that got us here. Further compromise will drive us halfway off the cliff they’ve driven us to.”
The GOP base speak, folks. This is what we’re dealing with.
@MBunge:
Part of this is just my own pessimism, I’ll admit.
But seriously, a couple of months ago, would anyone have expected any concessions *at all* in exchange for raising the debt limit? It’s ridiculous. And yet here we are. The last deal offered by Obama was 83% cuts, 17% taxes. That sounds like a really, really good deal for the GOP to me (they disagreed). Obviously, we’ll have to wait and see what the final deal is, but right now everything I’ve seen indicates a deal that appears skewed rather heavily toward cuts, and cuts aimed largely at things Democrats support (entitlements, rather than military).
The Bush tax cuts were set up to be temporary and, of course, they became the status quo. Et viola! They stay. The goalposts moved, and the GOP moved ’em.
GOP refusal did not stop healthcare reform, it’s true. They did impact the stimulus, though neither side was particularly happy with that deal. Both of those are points in favor of your argument.
They don’t always win. But they often frame the debate itself.
The problem we have is a structural recipe for disaster. There are 3 related issues; spending, revenue and debt. Mathamatically, any two of these control the third, yet congress attempts to control all 3 individually. We need to pick which one is allowed to be forced by the other 2. It is very straightforward to allow debt levels to be controlled by revenue and spending, which is what the rest of the world does (no debt ceiling). It would be nearly as straightforward to allow revenue to be controlled, by automatically adjusting all income tax rates to respond to debt levels resulting from previous spending and revenue. It is much more difficult and inefficient to have spending controlled by revenue and debt, since spending should be based on long term planning, real world needs (disaster relief) and policy decisions. My preference would be for tax levels to be controlled by policy decisions about spending and debt levels, since that would provide the most direct feedback as to the real cost of those policy decisions. If tax rates were forced to respond to spending decisions, congress (and the public) would be forced to make policy decisions with more realistic cost/benifit considerations. Our current system acts as if the 3 can be independent of each other, so the consequences are not realistically considered when dealing with any of the 3.
@sam:
This is putting very clearly-
Its easy for the rightwing to scream loudly for CUTS CUTS CUTS-
but notice how they never seem to offer up any numbers, its always framed in broad vague terms?
They want to cut 40% of the federal budget- but keep funding Defense, Social Security , Medicare, and debt payments, which adds up to about 3.2 Trillion of the 3.8 Trillion we are expected to spend.
They aren’t serious- they never have been.
“Fiscal conservatives” are like unicorns- they exist only in the imagination.
On July 31st I’ll be worried if there is no deal. Until then I think this is just posturing by both sides.