Editore"s Note
Tilting at Windmills

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April 10, 2011

ON DEBT CEILING, A SIMPLE REQUEST: 'A CLEAN BILL'.... On Fox News this morning, House Majority Leader Eric Cantor (R-Va.) said he's prepared to play a dangerous game with the federal debt limit -- he'll help block an extension without "guaranteed steps" on unspecified cuts to public investments.

It is, in other words, another hostage strategy. Last week, the message was, "Give us what we want or we'll shut down the government." Going forward, the new message is, "Give us what we want or we'll wreak havoc on the global economy and trash the full faith and credit of the United States government."

The details of the ransom note apparently haven't been written yet, but we're getting clues.

The down-to-the-wire partisan struggle over cuts to this year's federal budget has intensified concern in Washington, on Wall Street and among economists about the more consequential clash coming over increasing the government's borrowing limit.

Congressional Republicans are vowing that before they will agree to raise the current $14.25 trillion federal debt ceiling -- a step that will become necessary in as little as five weeks -- President Obama and Senate Democrats will have to agree to far deeper spending cuts for next year and beyond than those contained in the six-month budget deal agreed to late Friday night that cut $38 billion and averted a government shutdown.

Republicans have also signaled that they will again demand fundamental changes in policy on health care, the environment, abortion rights and more, as the price of their support for raising the debt ceiling.

The stakes of the Republicans' hostage strategy are significantly higher than the budget fight, at least insofar as the consequences would be more severe. Had the GOP shut down the government, it would have been awful for the economy; if the GOP blocks an extension of the debt ceiling, the results could prove catastrophic. As the NYT noted, "The repercussions in that event would be as much economic as political, rippling from the bond market into the lives of ordinary citizens through higher interest rates and financial uncertainty of the sort that the economy is only now overcoming." The likelihood of "provoking another credit crisis like that in 2008" is very real.

It's exactly why Federal Reserve Chairman Ben Bernanke recently warned congressional Republicans not to "play around with" this, adding that lawmakers shouldn't view the debt ceiling as a "bargaining chip."

Republicans freely admit they're doing it anyway. Indeed, they've been rather shameless about it.

It seems to me President Obama's message should be pretty straightforward: "To prevent a crisis, I expect a clean bill."

This isn't complicated. Democrats and Republicans have, routinely, raised the debt limit many times. Neither party has ever held it hostage, or made sweeping demands. Economists, government officials, and even financial industry leaders have all told Republicans to reject the political games and do what's right.

What's more, as we discussed yesterday, even Republicans know how this has to turn out. House Speaker John Boehner (R-Ohio) recently said failing to raise the debt limit "would be a financial disaster, not only for us, but for the worldwide economy." Sen. Lindsey Graham (R-S.C.) said failure to raise the debt limit would lead to "financial collapse and calamity throughout the world."

Democrats and Republicans can have a larger debate about entitlements and debt reduction in the fight over the next fiscal year budget. But there's not enough time for that to occur before we hit the debt ceiling.

Just pass a clean bill, prevent a calamity, and get ready for the larger budget fight.

Steve Benen 11:20 AM Permalink | Trackbacks | Comments (40)

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Comments

Dems will start with surrender and move right from there.

Posted by: How it works on April 10, 2011 at 11:25 AM | PERMALINK

TAX increases for the wealthy are what is needed to save the government. BUT Republicans would have us believe cutting the government which means putting people out of work and on to unemployment is good for the economy.  They gave is the lie of Trickle Down economics.  Now they give us the lie of budget cuts.

The goals of the Republicans since 1980 have been to increase the income of the über rich and dismantle the federal government.

Republicans destroyed the economy by lax financial regulation coupled with tax cuts for the wealthy which forced great deficits upon the country. The proportion of income going to the upper 1%  in American income has increased from 10% to 25% since 1980.   Now they want to give that 5% of the populations which owns 85% of the country's wealth even more money .
Reagan started the gutting of the federal rules protecting the workers and the poor so gigantic corporations could exploit those who have to work.  Incomes since then have stagnated and in some cases like those for auto workers have even gone backwards. 

I would be mortified to wear a $5,000 pair of shoes when 25% of Arizona kids live in poverty.   America was more prosperous when taxes on the rich were at their highest and the wealthy paid their fair share.  Tax the rich, I say, and use the money to repair our infrastructure creating good jobs for good wages for good people while protecting those least fortunate.

Posted by: KurtRex1453 on April 10, 2011 at 11:29 AM | PERMALINK

Obama shouldn't even entertain the idea of negotiations on the debt limit.

Posted by: Holmes on April 10, 2011 at 11:30 AM | PERMALINK

I am hearing weird claims that if the debt ceiling is not extended, then the laws conflict and Obama is ceded full control over fiscal matters. He can defund whatever he wants and rescind whatever tax rebates he wants.

Is this true? And if it is, how do Republicans have any bargaining leverage at all?

Posted by: Walker on April 10, 2011 at 11:32 AM | PERMALINK

Obama should tell them to get a debt ceiling raising bill to his desk pronto, with nothing attached, or they can plan on shutting up shop and watchign the world burn. He should then sit back and wait for their money buddies to call each republican individually and order them to lift the debt ceiling. There is no advantage to negotiating at all and none to even to appearing to negotiate. Doing so only takes the pressure off the money men who will assume that they can get a functioning world economy and whatever extortion their republican lackies can extract. If Obama refuses to play it is the republican's own backers who will ahve to do the negotiating for him.

However, I have zero confidence that the Democrats are smart enough to see this so expect capitulation on all fronts until the eleventh hour.

aimai

Posted by: aimai on April 10, 2011 at 11:33 AM | PERMALINK

Boehner can - at his whim - defuse this by getting a sane group of Republicans to join the Dems.

Won't happen!

Posted by: Mark-NC on April 10, 2011 at 11:44 AM | PERMALINK

Unfortunately, as Obama has demonstrated time and again, he leads with concessions, follows up with more concessions, and winds up conceding more than the Republicans initially asked for. As a bargainer, he's got to be one of the worst around. Why would the Republicans ever try anything other than a hostage strategy? It works for them every time, big time.

Arrgggghhhhhh.

Posted by: John on April 10, 2011 at 11:46 AM | PERMALINK

I don't think there is anything to negotiate. Only fools play chicken with the debt ceiling. Even the Koch boys know their fortunes are tied to the full faith and credit of the United States.

Posted by: Ron Byers on April 10, 2011 at 11:50 AM | PERMALINK

I've heard the same thing as Walker. Could we get some legal perspective on this question? Anybody?

Posted by: BrklynLibrul on April 10, 2011 at 11:50 AM | PERMALINK

Obama has a lot more leverage in this situation. If debt ceiling isn't raised, the Treasury Department decides what to fund, not Congress. Obama can win this with one simple threat: raise the debt ceiling or I'll furlough every employee at the Department of Natural Resources and Conservation. That department sells oil and gas leases, and with no employees working, no new leases can be sold and no new drilling operations can begin. As powerful as the Republicans may seem, they are still controlled by the oil and gas industries. And those companies want their leases more than anything else. They are the puppet masters and their puppets in the Republican Party will do their bidding.

Posted by: fostert on April 10, 2011 at 11:57 AM | PERMALINK

The Democrats in my view are in a better bargaining position, for this if no other reason: ask the power brokers at the Chamber of Commerce if they want the debt ceiling not to be raised. Make them squirm, as that bottom line will fall like a ton of bricks.. And where the Chamber goes the Republicans will follow. This is simplistic to a degree but the broad outlines are accurate. Watch and see.

Posted by: Rhfox on April 10, 2011 at 12:00 PM | PERMALINK

Since the vast majority of Americans don't do nuance, or economics, or FACTS, for god's sake!- let's have a script writer and a Hollywood director lay out the situation for us, in simple but dramatic terms, so even the boisterous youngsters in the Tea Party GET IT.

If Obama isn't up to the starring role, then get Martin Sheen. . .

Posted by: DAY on April 10, 2011 at 12:00 PM | PERMALINK

Some interesting comments here already, including fostert's which I like a lot.

the general take-away here is that Obama is the one with the power, not the GOP. And if Obama doesn't use that power, then, if it was in doubt before, it won't be in doubt now: he's just a corporate hack, a "vacuous opportunist" as one former associate of his describes him.

Just once, just once, I'd like to see the democrats simply crush the GOP into submission. And they could. Easily. So easily...they probably won't do it.

What a weird fucking country we live in. Of the Rich, by the Rich, for the Rich. Where cruel children rule, and the adults look on in bemusement or terror at how one set of children (voters) put another set of children (the GOP) in charge. Actually, it's worse than that, since many children I've known would not behave in so irresponsible a way. \

How long will we allow ourselves to be fucked by that "big red-white-and-blue dick" George Carlin characterized so accurately?

Posted by: LL on April 10, 2011 at 12:04 PM | PERMALINK

I hope all those blue dog morons who wouldn't vote for the FY 2011 budget and the debt ceiling, back when there was a Democratic majority to do so, because they thought it would make their re-election difficult, and then lost their elections last November anyway, are proud of how they served their country, watching the true crazies crawl out of the woodwork and do their best to destroy the country.

These people are out of their fucking minds, and the rest of us are forced to deal with them for the next 21 months. I hope the country can survive.

Posted by: TCinLA on April 10, 2011 at 12:09 PM | PERMALINK

Yes, while we all make this Obama's responsibility, I'd like to pause to say the onus here is on Boehner. It's time for him to put down the Scotch and for once, earn his "Speaker" title. He needs to whip some Tea Party ass in his caucus and tell them to cut the bullshit.

Posted by: June on April 10, 2011 at 12:10 PM | PERMALINK

Sure, the President should "demand" a clean bill. Have we ever seen him "demand" anything? Anything?

No, he just rolls over and asks for another.

Posted by: janinsanfran on April 10, 2011 at 12:12 PM | PERMALINK

LL, who is the former associate that called Obama a "vacuous opportunist"?

Posted by: Holmes on April 10, 2011 at 12:20 PM | PERMALINK

It *should* be so simple as "We can all agree that failing to raise the ceiling would be very VERY bad, so let's raise it and move on." But it seems a lunar-sized meteor could be heading toward earth and the Rethuglicans would quibble over clean air before agreeing to do something about it. There is something uniquely sick about these people.

But the rich have as much to lose if the meteor hits, so hopefully an underlying common sense even within the oligarchs will speak up in time. This shouldn't turn into another bad movie where the disaster might be averted with only a second to spare.

Posted by: jTh on April 10, 2011 at 12:33 PM | PERMALINK

As counter-intuitive as it seems, Republicans are in a much weaker position this time BECAUSE the consequences are so much more dire than before. Shutting down the government would have been bad, but if they openly talk about letting us default if their demands aren't met, it already puts them in a horrible position. Assuming Team Obama realizes this, and they probably do, they'll be far less likely to budge on anything.

Thus said, this assumes House Republicans are rational enough to understand how untenable their position is and act accordingly. I haven't the highest faith that this will happen. I'm not sure why you people think Republicans will start behaving rationally if only we stand up to them, but they've given no indication that this will happen.

Negotiations are never the same when you're dealing with crazy people. Remember that.

Posted by: Doctor Biobrain on April 10, 2011 at 12:37 PM | PERMALINK

LL, never mind, I found it. Walter Reed, Jr., who is anything but a former associate, said it. In fact, Reed has said he never supported Obama, even when he ran for the State Senate.

That doesn't necessarily diminish nor increase the veracity of Reed's claim, nor change the fact that Obama has repeatedly been rolled since becoming President, but I thought that should be clarified.

Posted by: Holmes on April 10, 2011 at 12:40 PM | PERMALINK

Florida senator Marco Rubio wants a big ransom for raising the debt limit. I assume he'll filibuster a "clean bill."

Posted by: David Martin on April 10, 2011 at 12:46 PM | PERMALINK

Hello, people? We are not on the gold standard.

The entire premise of the GOP's threat is that this is some "common sense" way of reigning in government: "Ha! These politicians think they can keep borrowing money and spending it? Well we won't let them borrow any more money!"

This apparently makes sense to moron teabaggers who don't understand how the monetary system works. The Treasury Department does not need taxes to pay for anything. It simply creates money out of thin air. Indeed, we could abolish all taxes if we wanted to and simply print all of the money that we need.

Now, there are sound policy reasons for levying taxes and trying to run balanced budgets rather than printing money. Printing money is inflationary because you are constantly driving down the value of the U.S. dollar. On a massive scale, the inflation would be astronomical.

However, once the debt limit is exceeded, the Treasury just prints more money (i.e. hits some buttons on a keyboard). While, yes, this would have really bad effects on the bond markets and the global economy (as the rest of the world scrambled to unload dollars that were becoming less and less valuable by the day).

What is critical to understand is, while an inflation-driven global economic crisis triggered by printing money would hurt everybody it would hit banks and owners of wealth the worst.

There is ZERO chance that the highest 1% of wealth holders in the U.S. wants to see their fortunes (which are stored in various bonds and debt-based derivatives) dwindle while inflation starts skyrocketing.

Your average un- or underemployed 25 year old with $150k in student loans outstanding doesn't give a shit if inflation hits 10%. It is the bank that is terrified at rising interest rates.

Posted by: square1 on April 10, 2011 at 1:06 PM | PERMALINK

Neither Wall street nor the 1% of wealth holders are going to let the Teabaggers in Congress scream and stomp their feet until they get their way on this one.

Perhaps Obama does have legal monetary leverage on his side on this one as well. If so, I hope it is because as a poker player, he is keeping his cards close to his vest and a straight face.

But I am weary of hearing that he is playing some kind of rope-a-dope or eleven dimension chess only to see him give away the store. I expect him to do so again, even though it doesn't take a genius to see that the Teabaggers have powerful enemies on this issue, and all Obama has to do is ally himself to them to end this childishness.

But, he'll let the right frame the narrative with all kinds of angst and hand-wringing, ending with unnecessary concessions.

Posted by: jcricket on April 10, 2011 at 1:36 PM | PERMALINK

I have started a PETITION to accomplish just that! please go and sign the petition if you too want a clean bill and want to tell the DEMs NOT to negotiate to get the GOP to do their damn job.


http://www.change.org/petitions/tell-the-democrats-not-to-negotiate-with-the-gop-on-the-debt-ceiling

Posted by: Brian Murphy on April 10, 2011 at 1:40 PM | PERMALINK

yes, a clean bill is a great fantasy, but I think by now we know Obama does not want to DEFEAT the Republicans in these policy fights, he wants to be seen as a compromiser...ugh. But also, it's worth noting something about all the rhetoric that Steve always quotes from Republicans realizing the disastrous consequences of failing to raise the debt limit: this rhetoric is intended to bolster their point to Dems--"give us what we want or the country gets it". It is not conciliatory, or rational, and it does not sit outside the negotiation strategy, it is PART of the negotiation strategy. Using Lindsay Graham's rhetoric to suggest that Republicans understand how insane it would be not to raise the ceiling is falling right into their trap.

Posted by: bruce k on April 10, 2011 at 2:06 PM | PERMALINK

Democrats should demand a clean bill on the debt limit. It's not an optional or negotiable piece of legislation. It's the direct consequence of the budget the GOP just passed. The GOP doesn't get to negotiate about whether it'll pay for the groceries it just brought to the counter. You can negotiate about what you're going to buy, but not whether to pay for what you buy.

If the GOP wants to tank the world economy playing silly games, let it be on their heads. They don't really have a leg to stand on, and they know it.

Posted by: Jon on April 10, 2011 at 3:05 PM | PERMALINK

"Sure, the President should "demand" a clean bill. Have we ever seen him "demand" anything? Anything?

No, he just rolls over and asks for another"

Bullshit. Just more ignorant, lazy, cheap shots from the internets who don't know how the government works.

Posted by: Cha on April 10, 2011 at 3:10 PM | PERMALINK

Obama looks less like a grand chess champion and more and more like Charlie Brown falling down OVER and OVER when T(aliban)-party Lucy smilingly pulls away the football.

Isn't there a way to talk it up so that Independents want a clean bill? They seem to be his real concern.

Posted by: PEA on April 10, 2011 at 3:39 PM | PERMALINK

Good framing Jon.

Posted by: tanstaafl on April 10, 2011 at 3:57 PM | PERMALINK

The Repubs whine and whine about an "atmosphere of uncertainty" that hurts business and suppresses jobs.

If I am a business owner, what the fuck am I supposed to think of Cantor's statements-- They ensure I will not be hiring more employees any time soon. They want the economy to crash so they can blame it on Obama.

God damn them all to hell.

Posted by: Goerge on April 10, 2011 at 4:45 PM | PERMALINK

"I'm not sure why you people think Republicans will start behaving rationally if only we stand up to them, but they've given no indication that this will happen.: - Dr. Biobrain

Wow, since you put it that way, I guess we should just give them everything they want, since clearly they are too crazy to act rationally and agree to anything we want.

But maybe, if we take a strong stance and go to the people, there are enough people in their voting districts who give them serious shit. Of course, they have to be able to tell the difference between the two sides. Hard to do when our side is praising program and spending cuts.

Posted by: bdop4 on April 10, 2011 at 5:05 PM | PERMALINK

I fully expect that to get the debt ceiling raised the Democrats will have to repeal ACA. And I fully expect that they will. Bye, bye Obamacare.

Posted by: Rock on April 10, 2011 at 5:13 PM | PERMALINK

It's gotta be the End Days, I fully agree with square1! Cantor's either blowing smoke, preening for the cameras or brow-nosing the Teabaggers (he can't even get THAT right!). Defaulting on Treasury bonds WILL cause a massive collapse in ALL bond markets. If the problem isn't immediately handled; ie, the debt is funded, then the collapse will spread. As I doubt the Koch Bros. want to be mere millionaires, Boehner will HAVE to pass a "clean" bill. Whether he survives as Speaker isn't my concern.

bdop4 @ 5:05 PM, Unless and until those "voters" start demanding increased taxes, the conversation will continue to be about which programs to cut and by how much. The absolute most the President, or ANY Democrat, could say would have to be phrased along the lines of "If we want something to remain in the Budget, we'll have to find some way to pay for it." Anything else would be simply giving the WH and Senate to the Republican/Teabaggers in 2012.
I don't think you're THAT disappointed in Mr. Obama...

Posted by: Doug on April 10, 2011 at 5:50 PM | PERMALINK

Equally as important as raising the debt ceiling is who votes for it. The Republican majority has to produce the votes for it, has to be forced to acknowledge and own the debt - it can't be predominantly Dems.

I'm asking my Dem Congressman to announce early that he'll vote with the majority of Republicans on this, however that majority votes.

That said, there is at this point no chance whatsoever that the debt limit won't be raised. The financial markets are clearly saying the matter is under control, and no negotiation is required.

Posted by: ElegantFowl on April 10, 2011 at 7:05 PM | PERMALINK

2 words:

Signing. Statement.

Posted by: melior on April 10, 2011 at 7:11 PM | PERMALINK

Next year's budget, the debt ceiling and the Bush tax cuts must be a package. I thought that the President made a serious error extending the cuts for the year, but worse without a budget deal for the year.

Posted by: George on April 10, 2011 at 7:38 PM | PERMALINK

"Thus said, this assumes House Republicans are rational enough to understand how untenable their position is and act accordingly."


I don't think they are. Rand Paul thinks nothing bad would come of it and it would be a wonderful way to balance the budget. We are going to pay a terrible price for the dumbfuckery that was November 2.

Posted by: LRM on April 10, 2011 at 9:35 PM | PERMALINK

If we have irrational idiots running amok in the government, I think it's best to get it all out in the open right up front rather than die the death of a thousand cuts (so to speak). Let them go to the mat on it, they can't win this one in any way unless we just give it to them. They are threatening to smash eggs into their own faces. By all means, let them.

Posted by: Jon on April 10, 2011 at 11:15 PM | PERMALINK

The Republicans demand to be compensated in return for acting like mature public servants. That is the sickness of the Republican Party today; they have the mentality of the Mob.

Posted by: bob h on April 11, 2011 at 5:38 AM | PERMALINK

I think it's time to start suggesting that by failing to raise the debt ceiling the GOP would be giving Obama the power to decide what government payments were going to immediately stop, like, say, oil royalties, corporate tax credits, military contractor payments, etc.

heard the law was ambigious and Obama decides!

Posted by: jlt on April 11, 2011 at 6:12 PM | PERMALINK
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