Debt ceiling warnings and postures
Obama walked out of the debt ceiling talks yesterday, as Moody’s and Standard and Poor’s both threatened to downgrade US debt.
What happened at the last debt ceiling meeting
The best account of what happened at yesterday’s White House meeting is from The Daily Mail (London). Tempers were about to flare throughout. Then Representative Eric Cantor (R-VA), the House Republican Whip, suggested a short-term debt ceiling rise to carry through to the upcoming Presidential election.
That was when Obama lost his temper.
Eric, don’t call my bluff! Would Ronald Reagan be sitting here? I’ve reached my limit. This may bring my presidency down, but I will not yield on this. This process is confirming what the American people think is the worst about Washington: that everyone is more interested in posturing, political positioning, and protecting their base, than in resolving real problems.
With those words, Obama walked out. The Mail quotes an unconfirmed report from a Democrat that Obama dressed Cantor down, and then stood up, thus ending the meeting.
The one thing that everyone agrees on, is that they don’t agree. Obama and his Democratic colleagues want to raise taxes. Republicans want to cut spending.
What Moody’s and S&P say
Meanwhile, Moody’s Investors Service put the country’s credit rating under review. That’s the first step toward a downgrade. Moody’s said that they might lower the rating from Aaa to Aa, and might not restore the third “a” as quickly.
Standard and Poor’s gave a harsher warning. They will change the country’s credit rating from AAA to D if one check bounces or doesn’t go out on time. (Watch this video for details.) Everyone interprets that as saying that if the government does not raise the debt ceiling, S&P will score the country as in default.
But S&P has said something else, that most media organs are not reporting. Namely, that they will rate US debt as junk by 2030 if the government does not reform its entitlement programs. Not if Congress does not raise taxes. If Congress does not reform entitlements.
What Congress is saying
Congress is falling out on party lines. Senator Harry W. Reid (D-NV), the Senate Democratic Floor Leader, accused Cantor of behaving like a spoiled child. On the other side, Representative Joe Walsh (R-IL) flat-out accused the President of lying to the American public.
You know d____d well that, if August 2nd comes and goes, there’s plenty of money available to pay our debts and cover all of our Social Security obligations. And you also know that you, and only you, have the discretion to make those payments. What’s next, sir?
Walsh went on to ask whether Obama planned to hold anyone else up for ransom, as he held Social Security payees up for ransom two days ago.
The American people will, of course, have plenty to say next year. Obama’s words might then become prophetic, not hypothetical.
Featured image: a Weimar-era householder wheels a barrow full of worthless scrip to the corner baker to buy a loaf of bread.
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Terry A. Hurlbut has been a student of politics, philosophy, and science for more than 35 years. He is a graduate of Yale College and has served as a physician-level laboratory administrator in a 250-bed community hospital. He also is a serious student of the Bible, is conversant in its two primary original languages, and has followed the creation-science movement closely since 1993.
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If you’re going to recap the positions, don’t misrepresent them by omission.
What Obama is proposing is to not just increase revenues through tax changes, but to cut trillions in spending and even make changes to “third rail” entitlement programs to improve their fiscal viability. This is more than what Boehner was asking for back in the Spring, and would mark a fundamental movement away from out-of-control fiscal policy and start back in the direction this country needs to go. It’s only a start, but it’s a major one that shows a willingness to get real about turning things around
He’s alienating many of his own party base in the process, and through that risk is showing the leadership a President needs to have in doing what’s right for the country over special interests.
In contrast, Cantor isn’t negotiating in good faith, but demanding 100% accommodation with his position or nothing instead. His tactics resemble bullying more than leadership, and walking out on the Biden negotiations to punt the closure of a deal to Boehner and Obama shows that he wasn’t up to the task of getting it done himself. Now he’s not even helping the final process, but acting as an rigid obstacle when others in his party are negotiating constructively.
Joe Walsh is pretending that nothing will happen if we get to August 2nd without a deal, but notice how he’s not addressing the Ratings Agency downgrade warnings? He’s playing the part of demagogue to rally the base, but here’s the reality – in the absence of a deal, the U.S. will pay its debt obligations at the cost of other internal obligations, but the effect on our government operations and the U.S. economy will be comparable to a partial shutdown. Even worse, if our credit rating goes down from AAA, then the financing cost of our debt balance goes up, and every dollar allocated to debt repayment will be worth less than if a deal had been reached. This happened in the late 1970’s, so it’s not speculation.
Cantor, McConnell and many others were in Congress during the Bush years, and were complicit in the transformation of a surplus into a deficit approaching $10 trillion in just eight years. They can pretend not to own the problem but most of it took place on their watch. They can posture and pretend that Obama is at fault if no deal is reached, but the American people are starting to catch on at this late game.
Obama’s offering a long-term plan that makes more substantial changes than Boehner was originally seeking, and is willing to cut $4 in spending for every $1 dollar of revenue.
Real leaders in the past who have reached historic compromises often said that these weren’t the deals they wanted, but they were the best deals that could be reached for everyone’s interests. Even the Founding Fathers chose to allow the original Constitution to contain flawed ideas like the 3/5 rule for slavery in the interest of forming a workable government that could improve things later.
The Bush tax cuts will expire in full if Obama is in office and chooses to do nothing. Real leadership would be recognizing that this is the best time to work out a compromise on that which Obama will sign off on now, in order to close the debt deal. Real leadership is accepting more spending cuts than were expected from the Democrats, while allowing selected rollbacks of the Bush Tax cuts now instead of 100% of them by default later.
Real leadership is acknowledging that the sky will not fall if a deal is not reached by Aug 2nd, but that refusing to compromise now to appease certain interests will impose higher debt rates on every American that won’t be rolled back anytime soon. Real leadership is going to the American people with the facts and numbers, and showing that compromise on revenues now is really better for our national financial interest than having the markets punish us for years with higher rates due to uncertainty that was avoidable.
You may want to cast Walsh and Cantor as the responsible leaders in this matter, Terry, but they’re not the ones taking the real risks and putting the people first. It’s time for the petulant children to stop posturing, and for the adults to do what’s needed.
[…] Debt ceiling warnings and postures […]
If you listen to all of the information you should notice that we have more than enough money coming in to pay the true obligations. We are wasting money on things that are not allowed by the Constitution. It is not the Federal Government’s job to pay for local streets improvements. Take a look at the article
link to cnav.news
about some of the wasteful spending. Or at
link to cagw.org
The problem is people have been feeding at the public teat for so long they think they can feed off it forever without any consequences. Look at what happened in the old USSR and is happening places like Greece.
The adage about Socialism that “Socialism works only until you run out of other people’s money” is true. But it miss the fact that the basic tenet of socialism is fundamentally flawed. It presumes people will subsume their own self interest for other people forever.
Progressive/Marxists like Mr Obama do not want the economy to recover. They want to impose more Socialism and control over people’s lives. Look at the provisions of “H.R. 3590” or the health care legislation. It imposes Government control over every aspect of individual medical care – to the point of removing the discretion of Doctors on how to treat their patients.
That attitude is in denial of what will happen economically if the ceiling is not raised. Debt rates will go up on the uncertainty and lack of a real plan, and it will take even more present-value cash flow to pay the same balances.
$4 trillion in cuts that include changes to entitlement programs is a better offer than the GOP was initially looking for, and most economic experts agree that revenue increases are needed as well, not just spending cuts.
Were you this concerned about irresponsible spending and growing deficits when the GOP ran up deficits at over a trillion a year during the Bush years? You’ve waited until late in the 11th hour to decide things need to change, and at this point cuts alone won’t be enough.
During the last Presidential election, CSpan2 Book TV aired a program where the author discussed the results of his or her research, which suggested that something like 5-10% of Democrats , and 5-10% of Republicans, essentially debated and defined the ideological constructs of each party. The point was that the vast, vast, vast majority of the citizens of this country have their lives dictated by the most active and vocal members of society, who also happen to be more privileged .
I strongly suspect that the same thing is occurring with the debt ceiling debate. The debate is not really about the debt ceiling per se, but rather a very deep, long-standing debate about the role and size of government. It’s never been resolved, and never will be resolved in our representative democracy. However, in the mean time, the regular folks in our society run the risk of being irreparably damaged. The elites (the upper and upper middle socio-economic classes) on each side of the fence have theirs, their corporate contributions, decent jobs and income, and will fare just fine economically. It’s the ordinary citizens (lower middle socio-economic class) who will most likely get screwed, no matter which side ultimately prevails in the short term.
Well, we better resolve it. The folks will now have to un-learn much of what they “learned” that isn’t true. Like the idea that you can have industry without industrialists, and it’s just a matter of seizing the machines.