Over the cliff?

I haven’t been paying close attention to the Fiscal Cliff negotiations. I’ve been more or less assuming that since the shape of a final deal seems fairly obvious, the two sides would decide to reach that deal before rather than after damaging the economy and the country’s international standing with another demonstration of our inability to govern ourselves.

That might be true. But this weekend I became aware of another interpretation, held by some people who are both smart and well-connected.

On this alternative theory, Republicans are so terrified of Grover Norquist that they simply will not vote for rate increases, while the White House has done the arithmetic and knows that no plan without rate increases can be made to add up, even if the housing industry, the charitable sector, and the state and local government would hold still for it.

But the day after we go over the cliff and rates rise all by themselves, it becomes much easier for Republicans to vote for what would then be a pure tax cut. And the reaction from the markets and the corporate sector to the cliff-diving exercise will concentrate their minds. Of course, the CEOs could apply some mind-concentrator right now, but their hatred of Obama is so intense that they’d rather not if they don’t have to, and they don’t think they have to because they can’t imagine that the Republicans on the Hill are so stupid, stubborn, and cowardly that they need to be told.

So we could be in for a bumpy ride. I just hope that the White House follows through on Dick Durbin’s insistence that one element of the deal must be the abolition of the debt ceiling, which Boehner promises to use as an extortionate threat every time it comes up.

Meantime, none of the obvious measures to either raise revenue reduce spending while improving efficiency – alcohol taxes, congestion taxes, GHG taxes, financial-transactions taxes, negotiated drug prices in Medicare Part D, a public option in Obamacare – is under any sort of discussion.

Comments

  1. dave schutz says

    One of my favorite books – ever – is Tuchman’s March of Folly. She talks about the Peloponnesian War, the actions of the British Colonial Office in the 1750s and 60s, the Vatican just before the Reformation, and the US military in the Vietnam war. Her common theme is, folks who are trying to rise in an institution, and taking care to check the boxes and do the actions which will get them well thought of by the people in power in that institution – and who do things which prove to be hugely damaging to that institution because they render it vulnerable to outside attack. They couldn’t even conceive that the institution could be under threat. And, Bang! Martin Luther, and Sam Adams, and the Spartan military, and over the cliff it goes.

    In my view, both the Reeps and the Dems have folks who are seeking preferment in their organizations, and who aren’t paying attention to the real threats outside the walls.

    • Anderson says

      Haven’t read that Tuchman in a while, but wasn’t it the Sicilian Expedition, more than the Spartan military, that really did for Athens? Honest question.

      • Dave Schutz says

        Well, Syracuse broke the Athenian blockade with aid from Sparta. So Sicily was kind of a catspaw war – sort of like Viet Nam, which was the analogy Tuchman was trying to make.

        Once I started thinking this way (insiders looking for preferment) I saw lots of examples: General Motors and its heedlessness about Japanese cars, Rust Belt unions thinking the right-to-work South could never touch them, etc.

      • agorabum says

        Yes; it was Sicily. It represented a classic overreach; there was no real need to go to Sicily, some factions had been spoiling for a fight for awhile, and a local ally appealed to Athens. So Athens found itself tied up in a war against the most powerful state in sicily, based on misguided ideas of glory and plunder. And it kept getting chances to realize the war was a bad idea and go home, but kept blowing those chances.
        Thucydides observed that contemporary Greeks were shocked not that Athens eventually fell after the defeat, but rather that it fought on for as long as it did, so devastating were the losses suffered.

  2. navarro says

    it’s more of a staircase or a ramp than a cliff. i say obama and the democrats should take a walk on the wild side.

  3. Seth says

    “Both sides privately acknowledge that they are playing familiar roles in a largely choreographed drama …” (Politico article in first link)

    Yep. It’s called DC kabuki and it’s been playing every night for decades. Anytime you’re in DC, you really must treat yourself to a visit to the Senate gallery some afternoon when the party leaders do their soliloquies for the C-Span cameras. McConnell speaks to the empty chamber, reciting various traditional cliches from the Republican style manual, then Reid takes his turn. Very stagey, about as convincing as pro wrestling. Just providing some B-roll for the news networks while the real business of Congress goes on elsewhere.

  4. Altoid says

    No deal until at least mid-January sometime, if then, imho. The theater is more important than anything, as dave and Seth have said. Besides, the teaper wing holds Boehner’s vital parts in a jar as it did last year because of the vote count, and that won’t change with the new Congress. It isn’t about getting an overall majority for him since his operating rule has been that he won’t introduce anything his caucus doesn’t approve with enough votes to pass, ie 218. The only thing that could conceivably make a difference in that would be extreme pressure from the CEO eminences grises of the party. Whether they could break enough teaper thumbs would be the question, and failing that, whether Boehner can be forced to settle for an overall majority that included Dem votes. It must really suck to be him right now, evidenced by his obvious anguish and inability to split the knot within his own caucus.

    The debt ceiling thing is patently ridiculous, and the sensible way out of it is to deal with it at appropriation time. One clause of every appropriation bill should simply state that passage of the bill authorizes any and all borrowing required to finance the measures enacted. It isn’t like they authorize *new* borrowing when they raise the debt ceiling, only borrowing to cover what they’ve already spent (and how many of them actually understand that?). But I put the odds of such a simple and logical solution at about zero.

  5. doretta says

    “But the day after we go over the cliff and rates rise all by themselves, it becomes much easier for Republicans to vote for what would then be a pure tax cut.”

    This makes no sense. The bill passed by the Senate is also a pure tax cut. It simply authorizes a continuing tax cut on income up to $250,000 in exactly the same terms that a new bill in January would authorize a new tax cut on income up to $250,000. Mathematically and technically they are the same. For them to be different even psychologically you have to posit that the new year will bring mass amnesia as to what the Bush tax cuts included. Even the Tea Partiers aren’t going to fall for that one.

    • says

      Mass Amnesia? You mean like alternately demanding cuts in Medicare and then campaigning against them? The entire political history of the past 15 years (at least) is incomprehensible unless you assumes that everyone is born afresh each morning with no access to the past beyond the snippets of history reported in the major newspapers and on Fox News.

  6. Brett Bellmore says

    How many times do I have to remind you? “Abolishing the debt ceiling” doesn’t give the President the power to borrow. It takes away from him the periodic delegation from Congress of the power to borrow. Prior to debt ceilings, the President had to go to Congress for each individual act of borrowing, because the Constitution gives Congress, not the President, the power to borrow. The “debt ceiling” is nothing more than Congress authorizing the President to borrow up to the ceiling without coming to them for each individual bond issue.

    “Abolish the debt ceiling” I do not think this phrase means what you think it means.

    Perhaps you mean, “Raise the debt ceiling to infinity”?

    • Josh G. says

      Congress can’t repeal basic mathematics. If they pass bills ordering that money be allocated and spent, then that money has to come from somewhere, whether it’s taxes, T-bills, or just running the printing presses. The responsibility of the President is to ensure that the laws are faithfully executed. What do you think is supposed to happen if we hit the “debt ceiling”? Should President Obama decide on his own initiative what Congressionally-approved spending should be carried out and which should not? Would this really be more respectful of the Constitution and Congressional prerogatives than simply declaring that the 14th Amendment prohibits the debt ceiling, or pulling the platinum-coin trick? Remember, all this would do is allow funding for laws that Congress has already passed. As President Lincoln once put it in a different context: “Should the Government itself go to pieces, lest that one law be violated?”

      The debt ceiling is crap, and it’s time to stop playing these silly games every time it comes up.

    • Ken Rhodes says

      Brett–If I read you correctly, you are saying the periodic legislation by Congress is not a “ceiling,” but rather is an “authorization up to a certain limit.”

      That sounds plausible, though I don’t have direct knowledge it’s correct. If so, though, then “abolish the debt ceiling,” in practical terms, should mean “pass authorization to borrow to fund approved and/or mandated expenditures.”

      Since Congress approves and/or mandates all expenditures, that wouldn’t seem like much of a stretch to me. It would simply eliminate the charade by Mr. Boehner and his compatriots whereby they approve expenditures and mandate others, then tell the President (not in legislation, but in highly publicized speeches and press conferences and talk show appearances) “Oh, no, you can’t borrow any more, because we haven’t authorized it yet!”

    • Byomtov says

      How many times do people need to remind you, Brett, as Josh has just done, that “abolish the debt ceiling” does not mean “authorize the President to borrow whatever he feels like.” It means “authorize the president to borrow the money needed to execute the laws passed by Congress, within the budget limits set by Congress.”

      You are being willfully obtuse.

      • Brett Bellmore says

        Look, constitutionally, the President can only borrow when Congress authorizes it. They can make a general authorization in advance, which is what the debt ceiling is. They can authorize specific instances of borrowing, which was the practice prior to using “debt ceilings”. Or they could write borrowing authorization clauses into spending bills, as some advocate.

        But they have to actually, explicitly, authorize the borrowing. There isn’t anything you could simply “abolish”, which would end up with the President being able to borrow. Because the “debt ceiling” isn’t a limit, it’s limited permission. It’s like telling your bank, “I’m tired of coming to you every so often to increase my indebtedness. Abolish my line of credit!” They might well oblige, but you probably wouldn’t like it when your card got declined the next time you used it.

        The “debt ceiling” is the administration’s line of credit!

        You’d have to replace the debt ceiling with something else.. Not “abolish” it, or there’d be no borrowing without individual bills authorizing bond issues.

        So stop raving about abolishing the debt ceiling, and explain what you want in place of it.

        • doretta says

          That’s been answered here already. Abolish the debt ceiling and replace it with a general authorization for the President to borrow when needed to meet the budget obligations passed by Congress. That is not, by the way, raising it to infinity. The spending authorized by Congress has limits and the authorization to borrow would be similarly limited.

        • massappeal says

          Speaking just for myself, I’d replace it with something like the solution Dick Gephardt came up with: when Congress authorizes spending in excess of revenues it is “deemed” to have authorized a hike in the debt ceiling. Pretty much what doretta says.

          • Brett Bellmore says

            Personally, I’d rather have Congress writing things into bills, and voting on them, rather than have somebody “deem” it to have happened. “Deem” is one of those words you don’t resort to unless the thing you’re ‘deeming’ never actually happened.

            But I can see the advantage of the position to anybody who doesn’t want there to be any restraints at all on spending.

          • navarro says

            admittedly congress has been known to say one thing and mean something different but if we take congress at its word then the whole concept of the debt ceiling is really congress arguing with itself. i would think that simply enacting the ongoing authorization for the president to create bond authorizations necessary to fund the obligations of the government which have all been created by congressionsal actions in the first place would be a suitable replacement for the so-called debt ceiling. i realize it wouldn’t be as dramatic for the parties and would take from them the ability to grandstand with the faith and credit of the u.s. economy but that seems more like a feature than a bug.

          • Byomtov says

            But I can see the advantage of the position to anybody who doesn’t want there to be any restraints at all on spending.

            Brett, Stop it!! It’s pure trolling at this point. It’s deliberate refusal to admit something you understand perfectly well.

            Of course there’s a limit on spending without a debt ceiling. It’s the total of the amounts authorized by Congress in connection with the laws it passes. That’s it.

            The “deeming” is not a blank check. It’s a common sense implication of passing a bill.

    • Matt says

      The debt ceiling, in effect, gives congressional Republicans two opportunities to gum up the works. Once when a bill involving expenditures comes up for a vote, and a second time when they can hold the economy and Americans hostage by refusing to authorize a raising of the debt ceiling so those projects can be paid for.

      Republicans love a mechanism for channelling their face-reddening rage into trolling the entire economy and the American people as well. The debt ceiling gives them one.

      It’s an adolescent temper tantrum in the form of congressional procedure.

      • Byomtov says

        I think it’s more like a parent giving in to a child’s temper tantrum. Boehner knows perfectly well what the debt ceiling means and does not mean. By raising hell about it he is catering to the ignorant and destructive forces in the GOP, including some Representatives, who don’t understand it.

        • Dennis says

          I’m not convinced that Boehner knows perfectly well what the debt ceiling means. The man is clearly not the sharpest knife in the drawer.

          I agree that I ought not conclude that he doesn’t know what the debt ceiling means on the basis of his public statements: he is a Republic, after all. That means we can assign a high prior probability to any particular political utterance he makes being a lie, provided the lie furthers his party’s perceived interests.

          But neither should you conclude that he does know those things.

    • OKDem says

      Mr. Bellmore is quite correct that the history of the debt ceiling is not what most people caught up in the lunacy of the last year think it is.
      http://en.wikipedia.org/wiki/History_of_United_States_debt-ceiling_increases
      http://www.theatlantic.com/business/archive/2011/04/the-us-debt-ceiling-a-historical-look/238061/

      The single ceiling was created in 1917 in anticipation of the costs for WWI. Prior to that each bond issue [not tied to any particular expenditure]had to be approved. In answer to the [rhetorical?] question ‘Perhaps you mean, “Raise the debt ceiling to infinity”’ that was the case for most of WWII. Historically the ceiling was a tool to streamline the approval of bond issues.

      This history is why so many sought a Constitutional solution through the 14th Amendment. Initially, the Administration found that avenue did not look feasible. If Boehner persists, I wonder if that interpretation will “evolve”.

      It is also a case of terminology being turned toxic by propaganda. Image the glazed eyes if we more accurately spoke of Bond Authorization Limit. The “Chinese debt” BS is another poisoning of discourse with the same aim.

      What the ceiling has done is render untenable the solution of individual bills authorizing their bonds or authorizing bonds on an as needed basis [since rates are near zero, you can't really hurt to dump huge issues of bonds]. As I understand it, the ceiling covers most indebtedness and so you operate within the ceiling.

      • Brett Bellmore says

        “If Boehner persists, I wonder if that interpretation will “evolve”.”

        Ah, the joys of motivated reasoning. I would not be surprised.

  7. CharleyCarp says

    I should think that passing the sequester deadline will roil the markets for a couple of days, prompting hysterics from various places. This can be seen as a necessary part of the DC kabuki, I think. I’m thinking of maybe making a move with one of my larger savings accounts — if there’s a big drop in the stock market, I’d expect it to be made up within a fairly short time, and so it’s a pretty good buying opportunity.

    Then again, I’m not the only one thinking this. So we’ll have Wall Street kabuki as well as DC kabuki.