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Ezra Klein adds some meat to my point about the way Democrats can work their way out of the box they’ve assembled for themselves.
Basically, Republicans have convinced themselves that they will have additional leverage if they look completely past the fiscal slope and the tax rate situation and move directly to taking the debt limit hostage. They believe that they can, as they did in 2011, force major concessions on spending, and this time social insurance cuts, if they simply refuse to increase the government’s borrowing capacity, threatening a default. This has led House Republicans to argue for delay on any deal until that debt limit comes into play, sometime in late February/early March.
The White House has, on the other hand, been adamant that they will not hold any negotiations on the debt limit, both publicly and privately. Their only offer on the debt limit is an offer to essentially nullify it permanently.
The Obama administration is utterly steadfast on this point: They will not suffer a repeat of 2011, when they conducted negotiations over whether the United States should default. If Republicans go over the cliff and try to open up talks for raising the debt ceiling, the White House will not hold a meeting, they will not return a phone call, they will not look at the e-mails. They will move to an entirely public strategy, rallying voters and the business community against the GOP’s repeated brinksmanship. Recall Obama’s speech to the Business Roundtable last week:
“I want to send a very clear message to people here: We are not going to play that game next year. If Congress in any way suggests that they’re going to tie negotiations to debt ceiling votes and take us to the brink of default once again as part of a budget negotiation — which, by the way, we had never done in our history until we did it last year — I will not play that game. Because we’ve got to break that habit before it starts.”
They’re almost religious about this: They believe they owe it to future generations to break the back of the idea that minority parties can and should play Russian roulette with the economy.
And that’s welcome. But of course, that habit already started in 2011, when the White House welcomed the debt limit deadline as a means to put together a grand bargain. They opened this Pandora’s box, and now Republicans have learned from it by weaponizing the debt limit. It obviously would be a different situation now if that had never been done, if the White House just refused to negotiate.
It makes my brain hurt to game out the scenarios in that event. Maybe Republicans would have taken the country into default. Maybe they would have given up. Maybe the economy would have suffered worse than it did (and it did suffer). Maybe it would have bounced back faster by virtue of not setting the table for future hostage-taking. Maybe Mitt Romney would have capitalized on the chaos with an electoral victory. Maybe not.
The point is that this all started for one reason: the White House desired a deal, and they used what was at their disposal – the debt limit – to try and force a deal. And now Republicans are coming back for more. I’m glad that the Administration has apparently figured out the consequences of all this; I wish they did sooner.
It sets things up for a major showdown next year, with the fiscal slope honestly more of an afterthought. Maybe some deal will incorporate the debt limit, but I doubt Republicans will willingly give up that leverage forever without enormous concessions Democrats will reject. I don’t see a sweet spot in between there. More likely is some kind of partial government shutdown, where the executive branch closes everything they can’t pay for out of current funds, and blames Republicans for the results.
So when you hear Harry Reid say that it will be difficult to make a deal by Christmas, and John Boehner say that the President is slow-walking the situation, understand that the real conversation here is about the debt limit, the legacy of its weaponization, and how to disarm this thing in the aftermath.
Photo by Phil Roeder under Creative Commons license.
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Small technical quibble: “Maybe the Republicans would have” … TAKEN … “the country into default”.
Yes, Obama needs to repair the serious damage he and the Democrats not only allowed … but happily encouraged.
My brain is hurting also, from thinking about a number of things Obama needn’t have done, DDay, yet INSISTED upon doing … you are aware of many of those things, so we do not have to iterate them here …
One wishes that Obama had sense enough to read your posts on a daily basis.
As I, too soon, shall miss doing …
Thank you, as ever, for the news you bring us and the deft analysis you make use of while putting that news into useable context and cogent perspective.
DW
I hope dday is right about this. Ezra just said on TRMS that there isn’t a deal and it”s unlikely there will be one. Jared Bernstein said that the debt ceiling is one of the big problems. They seem to think that Obama is going to stand firm on the debt limit.
Ever since 1996, the Secretary of Treasury has had legal authority under 31USC5112(k) to issue fiat money to pay the nation’s appropriate expenses. Last time, Geithner dug in his heels and refused to pay with anything other than borrowed money. His intransigence cost us $18.9 billion.
:suppressing giggles:
“Stand firm” for what? Not paying the nation’s bills? Defaulting, when he could pay with non-borrowed money?
Exactly!
Taking America hostage, to protect existing business models is nothing new in America. This is what America is experiencing. The aligned interests which President Washington feared would come to pass, are here.
When corporations and the political careers of partisans become aligned, the nation and the governed suffer. Now consider money “speech,” and for all intents and purposes humans become subordinate to the LLC, while the LLC, rapes and pillages and utilizes law to dismiss accountability.
Great to see AIG is finally squaring up after the the bailing out this insurance giant, precluding a total economic collapse, because “Wall Street Giants,” bet the short after gaming the system, selling bad debt while driving energy to $147.50 per barrel. No fraud here…
So as America wastes $427,0000,0000,000 this year, driving off cliffs, we get to listen to more of the same old bullshit coming from the mouths of same old dysfunctional Judases to the Republic? Here Americans are being thrown over the cliff to protect monopolies in energy which gut Americans like the once bountiful codfish.
Washington as this nation first General and President would not tolerate, today, the antics of America’s privileged elites nor the “enthroned corporations,” which manipulate the “rule of law.” for gain. Washington, as in America’s revolution against a King and his corrupt corporate cohorts in crime would probably consider the present GOP fascist, neo-con ilk as traitors to the republic? Anything but patriotic especially when Patriotism is utilized to play people, protecting their businesses and profit. Looks like corporate aristocrats have fucked it all up, on purpose.
Obama let this thing go into 2011 (the Dems never passed a budget in 2010 for some reason. If they did, there would have been no debt ceiling debate at all) because he wanted his debt deal more than anything, and he was confident that he could get a GOP Congress to go along with it. Obama was disappointed that the GOP did not take the Senate as well that year, but figured Reid would just do whatever he told him. Obama had such contempt for Reid that he wasn’t even included in the negotiations. It was all Boehner and Obama.
Obama figured he could use the debt ceiling as HIS reason for cutting Social Security and Medicare and getting his “grand bargain”. But the GOP and political reality had other ideas.
Can you tell me, will checks stop to flow, will SS recipients and general welfare and UI recipients fail to get their checks on time if this cliff that isn’t is allowed to cave?
Cuz, I wonder about these millions who will suffer, if checks don’t flow due to a Congressional Cliff.
What will happen to fed dependent programs and businesses if the checks stop flowin?
Will any checks stop flowin, in this faux grand bargain failure of fiscal cliff assininity?
Thanks in advance, and we are SO gonna miss you, dammit.
“More likely is some kind of partial government shutdown, where the executive branch closes everything they can’t pay for out of current funds.”
I don’t have access to/can’t run the numbers myself, but it was reported at the time of tha last debt ceiling hostage crisis, that the numbers are such that this just wouldn’t work. Not only is borrowing at the present burn rate too big a fraction of the source of current funds, something like 40-50%, but there’s a lot of daily to weekly variability of revenue coming in vs obligations coming due.
You couldn’t get by just closing national parks, or even putting the FBI on leave. Some cost-cutting measures, such as reducing the armed forces, couldn’t be done because there wouldn’t be money to put them on airplanes back to the US to muster them out of the service. There would even be some days when we couldn’t pay creditors per se on time, and if we tried to fob them off with promises to pay next Tuesday, there really wouldn’t be enough money to pay the Tuesday creditors off. At that point, the cost of rolling over debt goes through the roof, and we’re really done.
What you’re talking about could only be done if the administration decides not to observe the ceiling literally and completely, if it grants itself the privilege of however selective an enforcement is necessary to avoid major damage from the default. But if it does that, why observe the ceiling at all? You either buy it as legally binding on Treasury actions, or you don’t. You can’t be only a little pregnant, and you can’t have Treasury breach the ceiling only a little, once you grant that it’s legally binding on Treasury.
31USC5112(k) gives the Secretary of Treasury authority to issue an arbitrary amount of fiat money, from which the nations appropriated expenses can be paid. There is no legal requirement to cover deficits with borrowed money. That practice is simply a holdover from the days of the gold standard.
Well, I don’t buy the idea that the debt ceiling can keep Treasury from meeting all of the legal obligations of the US, but I don’t see that stance as deriving from platinum coin seignorage.
As I see it, twisting the law that allowed the face value of platinum coinage to be credited to Treasury, when it was clearly not the intent of that law to allow the US to finance any significant portion of its expenses off such seignorage, is about as valid as twisting the ceiling law, which was clearly not intended to let just one chamber of the legislature repudiate debt that it had itself already agreed to make a legal obligation. Which is to say that neither is valid. Laws aren’t gotcha devices, that can and should be twisted this way or that to suit the momentary convenience of this party or that.
In response to gtomkins @ 12
And it was clearly not the intent of the First Amendment to allow the viewing of pornography on iPhones. But it has worked out that way.
Well, fortunately for us, neither the platinum coin law nor the ceiling law has yet been twisted by any court. So far all we’ve had is some Rethugs assert the ceiling law as a legally viable means of taking the full faith and credit of the US hostage and holding it for ransom. That and our side unwilling to see their bluff and make them prove that highly dubious point in court. But so far there has been no actual demonstration that the ceiling law can do that, allow the House alone to repudiate debt that the whole legislative authority — including the House itself! — has assumed.
Compared to that idea, that the ceiling law was meant to create a self-destruct button for the US government, the idea that the Founders meant the 1st to protect porn seems positively level-headed. We tend to look no further back than the Victorian era in judging these matters, and assume that because the Victorians were more prudish than we are, then people earlier than the Victorians must have been even more prudish still about sex. I’m not arguing that the Founders were or would today be big porn boosters, just that there is no reason to believe that they would be at all as shocked by it as the Victorians were, or some people still are today. The Founders naturally had a much less reverential attitude towards their work and themselves than we tend to have today, and no, I really don’t think that many of them would much object to the protections of the 1st being extended even to porn. Not because they loved porn the more, but because they hated the unnecessary exercise of government power the more. That really is what the Bill of Rights is about, keeping the government from doing things it doesn’t have to do, not keeping individuals from doing things that may be reprehensible, but shouldn’t be subject to government control.