Tag: debt limit

Pas de trois, denouement, house lights up

With fewer than 12 hours to spare (a lifetime, apparently, in the ways of Washington) the president has signed into law the combination debt ceiling increase/spending-and-deficit reduction compromise approved by both houses of Congress.  There, now don’t you feel much better about everything?  I mean, it only took a few months of bluster and pontificating, and a little threat to keep the nation from paying its bills on time, to get our government to pass a simple debt ceiling increase and take a small step in the direction of fiscal responsibility.

The last act of this tired drama was predictable: the loudest of the antagonists made a great flowery show of establishing their innate human goodness while talking past one another directly to those in the wings who were already persuaded of the rightness of their case…they executed the thrust and parry of choreographed stage fights which held no real threat of damage since the outcomes were predetermined…when time wound down minor characters took center stage to deliver the resolution then ceded the spotlight once again to the stars, who declaimed the lessons of the play and bid us all a good night.

Now the treasury has cash to pay the bills, and Congress is faced with continuing negotiations to find ways to cut spending and/or increase revenue (I’m hoping for the “and”) to get the government closer to living within its means.  They got there by compromising, which means no one is happy with the product:

Some in both houses are unhappy that there were no tax increases to spread the pain; some are unhappy there weren’t even more cuts to get closer to a final solution in one fell swoop; Democrats are unhappy that GOP priorities suffered few hits (but pleased that the cuts are not as severe as in earlier proposal by Rep. Paul Ryan); Republicans are unhappy about potential cuts to the Pentagon budget if future negotiations are not successful; and Tea Partiers are unhappy because there are no significant spending cuts right now and promised future cuts are contingent on the approval of future Congresses.

The proponents of restraint in government spending should see this as a great victory for their cause: it’s not everything they wanted all at once, but they got the president and Congressional Democrats to give more than would have been considered realistic just a few months ago.  That many of them do not—that they feel any compromise was an unforgiveable moral failure—is cause for concern, and the proponents of responsible behavior by grown adults in elected positions of responsibility should see this as a nightmarish premonition of things to come, if not in the budget talks later this year than the next time a debt ceiling needs to be increased.

Now, for those who have the stomach for it, we face the prospect of watching a new select committee of members from both houses and both parties work to find ways to reduce the deficit, and watching both houses debate and vote on a balanced budget amendment—all by end of the year!

How will cuts in federal government spending impact an economy still struggling to recover from recession and build new jobs?  Can we do something about overhauling tax code and/or entitlements, the real answers to a healthier federal budget?  I’m much less concerned right now with who won or lost the latest political fight than I am with a more pertinent matter: how does this deal help the country?

Take your seats, please, the curtain’s going up for the Big Finish

Since we last checked in with our heroes: Speaker Boehner, faced with his own proposal going down to defeat in the chamber he (ostensibly) leads, capitulated—he added a balanced budget provision to his plan for lowering government spending, reducing debt and raising the federal debt ceiling, to placate enough members to get the bill passed.  It worked; and as expected, and warned, the Senate rejected the plan; now Majority Leader Reid is trying to persuade Senate Republicans to let his plan come to a vote. [UPDATE 3:03 pm: The House rejected Reid’s plan before the Senate had a chance to vote on it.]

The Wall Street Journal editorial page wants Republicans to accept a plan now, and claim a victory, even if it’s one that doesn’t solve all the nation’s economic problems once and for ever.  (Why didn’t I think of that?)  An economy struggling to recover from recession doesn’t need the government to suddenly stop making some of its payments—and you can take comfort in knowing, there is a plan for who gets paid first in the event the debt ceiling is not raised by the deadline next Tuesday…the bureaucratic imperative prevails.

I still choose to believe that Congress may bring us to the edge of default but reason will prevail and the debt ceiling will be raised to prevent a default…that puts me in the company of an American conservative icon:

Socialists-7-27-11-color-640x469 

Thanks to David Horsey, seattlepi.com and Hearst Newspapers…click the cartoon to read Horsey’s commentary:

If it were not for their powerful recklessness, I would simply get a good laugh out of the alarmists on the right who see socialism in any tilt toward moderation in our politics.

(snip)

To ensure that his country does not follow Greece into a bottomless hole of debt, Tory Prime Minister David Cameron has implemented a budget balancing formula of three-to-one – that is, three parts spending cuts to one part revenue increases. These austerity measures have, not surprisingly, provoked rioting among leftists and students. Nobody in Europe would be silly enough to call this socialism.

Yet, when President Barack Obama proposes the same formula to rein in the debt in the United States, a mental riot goes off in the heads of Rush Limbaugh, Sean Hannity, the House Republican Caucus, the Tea Party and all the others who are somehow convinced Obama wants to turn America into Sweden.

Consumed by their fear of phantom socialists, these folks see politics in stark, black-and-white terms. If you are not with ’em, you’re agin’ ’em  and even the most staunch conservative risks charges of treason if he shows a willingness to bargain with the other side.

(snip)

Like ultra-conservatives of past decades, today’s reactionaries have scared themselves silly by demonizing their opponents: every liberal hates America, every Democrat is a socialist, every moderate is a dupe, every compromise is a pact with the devil. What is new is that this mindset now dominates the majority caucus in the United States House of Representatives. And because of that, there very well could be no deal to raise the debt ceiling, unless the president and the Senate choose to grant the militants everything they want.

(snip)

…to confuse the centrist economic policies of Barack Obama with socialism is as absurd as calling a conservative like Tom Coburn a RINO – Republican In Name Only. As clean cut, moral and upstanding as my fellow citizens on the right may be, I have to say they have become unhinged from economic and political reality and, in their delusion, they are about to take us all over a cliff.

In a Newsweek interview, Tom Coburn, a guy I disagree with about most things, summed it up frightening well:

“We’ve never been in this territory before. I mean, if we handle this wrong, we’re near the end of our republic as we know it.”

A tour de farce plays on!

Step by step, inch by inch, the passionless play proceeds: the House speaker proposes a new combination budget-cutting and debt ceiling-raising plan, then stands back when independent analysis shows it won’t generate the savings he promised, before the Congressional Budget Office gives good grades to the Senate majority leader’s plan (which saves little more than the speaker’s proposal).  Democrats are offering more than anyone would have expected, while some Republicans are revolting against their leadership for even thinking about going along with them, for not demanding more and more.  Who will be standing when the music stops next?

While I still expect that sanity will prevail and an agreement will be reached to prevent a crisis, nobody in Washington is doing anything about anything else and we look like a bunch of doofuses to the rest of the world as our nation moves closer to default.  So what, you ask—what the hell happens to you and me if they don’t raise the debt ceiling?

Q: Won’t refusing to raise the debt limit cut the deficit?

A. No.

Q: Do you mean that Congress can pass a budget that requires borrowing, and then argue later about whether to approve that borrowing?

A. That’s right.

Q. So, what happens to government spending if the debt limit is not raised? Will the United States default?

A. The United States will not have enough money to pay all of its bills… The possibilities range from “prioritizing” some payments and paying them first to paying bills in the order in which they were received.

The Bipartisan Policy Center analysis notes that if the government were to choose to pay the interest on its debt, Social Security benefits, Medicaid and Medicare payments, defense contractors and unemployment benefits, it could not have enough left to pay for the salaries of federal workers and members of the military, Pell grants for college, highway construction or tax refunds, among other things.

It doesn’t stop there: a default means some combination of government bondholders don’t get paid, government contractors and vendors don’t get paid, government employees don’t get paid, government benefits recipients don’t get paid, and people who don’t get paid have less money to spend so the economy slows down; government creditors demand higher interest rates on future loans and that leads to higher interest rates for we consumers on credit cards and mortgages; cities and states don’t get federal program payments and their own cash flow problems become worse.  Just the threat of default is starting to make the markets nervous.

Our country’s government spends way more than it takes in, and that needs to be corrected.  But as hard as it seems right now to make the choices that will lead to a stronger economy in the long term—and this isn’t going to be all fixed in your first six months in Washington, Mr. and Mrs. first-term Congressmember—it will only be harder if all the problems caused by a default are dumped on top of the ones we already face.  And even if there’s no default, the political playacting that both parties are consumed with right now may make financial markets skittish enough about the future that the credit rating of our country’s debt might be lowered anyway, leading to higher interest rates, etc., etc.

I’ve said this before: first, Congress needs to live up to its responsibility to prevent this totally preventable problem of potential default, then it and the administration can turn full focus on the screwed up federal budget mess that threatens our long-term financial health and security.  By the way, there’s a special tactical unit now on its way to the Capitol to help with that.

Places, please, for the big finish!

The Washington kabuki

It’s playing out just as any predictable, poorly-written melodrama might, these “negotiations” to raise the federal debt ceiling and avert a national economic emergency, particularly when the play is performed by such transparent and ham-handed actors.

As expected, yesterday the Senate refused to go along with the House bill to cut government spending and pass a balanced budget amendment to the Constitution (which even National Review’s Rich Lowry is against); it was thought this might provide the cover for enough Republicans to be able to say that they had done their best to comply with Tea Party demands but now had to vote for a debt ceiling hike to avert a crisis, but we haven’t seen that start so far.  Then, Speaker Boehner dramatically announced he was “abandoning” his negotiations with President Obama and laid all the blame on him for not giving in to the no-tax-hike meme…before he announced he would continue negotiating.  Obama says Boehner’s rejected a plan with less tax increases than what the Gang of Six proposed earlier in the week, and he’s called for more negotiations this weekend, while Senate leaders are trying to revive the scheme to let the president raise the debt ceiling without members of Congress having to cast an approving and politically-dicey vote.

Politically dicey?  Yes, for the many Republicans in the House more worried about getting a Tea Party-ish challenger in next year’s primary election than they are about the United States defaulting on its debts.  How’s that for statesmanship?

(Check out the letter Boehner sent to House Republicans on Friday, and expect to see/hear the verbiage again in campaign ads.)

So they talk this weekend, and come out of the talks to stand in front of the microphones and say predictable things.  I feel pretty confident they will come up with some way to beat the deadline and raise the debt ceiling to prevent default, even if they don’t tie it to spending cuts or increased revenue (which isn’t necessary—these are separate albeit related issues).  But I wish they would take advantage of the opportunity now to take some action on spending and revenue, because that’s going to have to be addressed and sooner would be better than later.  David Brooks thinks so, too, arguing that “Standing still is not an option.”

Doing nothing could lead to default and the end of American economic supremacy. The compromise put together by Harry Reid, the Senate majority leader, and Mitch McConnell, the Republican minority leader, that’s been floating around is a ploy to evade responsibility. Punting with some small package would spook the markets and reflect dishonor on yourself.

(snip)

You do it because you know the political climate will be worse for a deal in 2013. If you’re a Republican, you know Obama might win re-election, and even if the G.O.P. swept everything, you know your party wouldn’t have the guts to cut entitlements unilaterally (that’s why the cut, cap and balance bill didn’t mention the specific programs that would face the ax). If you’re a Democrat, you know Obama might lose, and, even if he doesn’t, the Senate will likely tilt rightward.

Mostly you do it because you want to live in a country than can govern itself.

(snip)

…this is the next step in the journey toward economic health.

T-minus three weeks and counting…

There’s just the faintest whiff of default in the air in Washington, D.C., so the frequency of budget meetings is on the rise.  Late last week President Obama and Speaker Boehner sounded confident they could make a deal  that would reduceBoehner government spending by $4 trillion over ten years, but Boehner has backed off from what The New York Times characterizes as “a transformative proposal, with the potential to improve the ugly deficit picture by shrinking the size of government, overhauling the tax code and instituting consensus changes to shore up Medicare and even Social Security. It was a once-in-a-decade opening.” 

Why?  According to the Times’ analysis Boehner faced the realities of preserving his own power as speaker versus trying to get his own party to accept compromise on taxes; he also may be passing on a rare chance to get Democrats to compromise on major entitlements.

Kathleen Parker is another conservative voice making the case that Congressional Republicans may be pushing their advantage too far, turning their noses up at serious concessions from Democrats while making no progress on solving the immediate issue of the debt limit:

Few honest brokers think that we can prevent a financial catastrophe without both cuts and revenue increases, but there are surely ways to get there from here without necessarily punishing the poor or the wealthy.

(snip)

Meanwhile, not raising the debt ceiling is fraught with peril. Even prolonging raising the ceiling is potentially hazardous before a default happens, as investors take preventive actions that could distort the money markets.

Republicans have made enormous advances toward government reforms that were viewed as unachievable a year ago. Voting no may have become the aphrodisiac of small-government conservatives, but it is not necessarily an act of bravery or wisdom.

Sometimes it’s just stubborn.

If Parker’s suggestion of possible pig-headedness by Republicans is too harsh, Obamaconsider the perspective offered today by David Gergen: with Obama’s indication today that he won’t accept any short-term agreement, all of the players have now painted themselves into their separate corners, and we all will pay the price if they don’t find their ways out:

Republican and Democratic leaders on Capitol Hill, fortunately, agree that it is essential to avoid a default on the debt. They are right. But to get there, each side is going to have to give a little.  It is impossible to imagine either side doing what it would take to reach a $4 trillion deal; the GOP won’t ever agree to tax increases of as much as $800 billion to $1 trillion, nor will Democrats agree to major entitlement cuts. They especially won’t do it in the rush of last-minute negotiations over the next few days.

But in the name of fiscal sanity, they may be willing to agree to a much more modest set of compromises—something that prevents default, allows dust to settle, gives them a chance to build up support back home and keeps negotiating over a longer period of time.

Props to the GOP for getting Democrats to agree to so much of what Republicans want; please don’t get carried away and push for “too much” and not get the debt ceiling resolution that’s needed right away.

Tick…tick…tick…