What good is a financial sector if it canâ€™t be counted on to panic?
The Republicans plan to demonstrate their horror of the economic consequences of policy uncertainty by creating a rolling series of debt-ceiling crises every three months. Doing that, rather than wrecking the national credit right away, is intended to show that the crazies are no longer in charge. Whatever.
The Republicans, having spent all of last campaign season fretting about how “policy uncertainty” was crippling the economic recovery, have now decided to impose a rolling series of debt-ceiling crises on the country every three months until Santa brings them the unspecified spending cuts they wanted for Christmas.
And this is how they’re trying to persuade the country that the crazies are no longer running the House Republican caucus? Really?
I understand that John Boehner thinks his kindergarten class needs to have a tantrum from time to time “to get it out of their system,” but this is pretty lame.
Keith Hennessey has a long piece noting that a debt limit fight is bad politics and bad economics, that prioritization won’t work and that Republicans should instead fight it out around the sequester and the continuing resolution that is funding the government. It is a reasonable strategy that reduces the chance of economic calamity, while allowing them to make their policy case in the House of Representatives. The weak point of his strategy is stated in a simple sentence:
Propose specific entitlement spending cuts to substitute for the sequester cuts you donâ€™t like (presumably in defense). On this one sit and wait for Democratic nondefense appropriators to panic. You wonâ€™t have to wait long. (emphasis mine)
Keith’s analysis of the politics of replacing the defense side of the sequester with specific entitlement cuts is likely correct, but the House Republicans will have to actually write down these entitlement cuts to trigger this effect. By entitlements, he means Social Security, Medicare and Medicaid. Given his past positions in health policy, he might include the tax expenditure on employer paid health insurance, which would be reasonable in my opinion. So, he is suggesting that House Republicans finally commit to a detailed health reform proposal and/or suggest cuts in Social Security (means testing Medicare and/or Social Security could also be proposed).
I completely agree with him that Republicans need to do this. That has been what is most missing from public policy debate since the passage of Obamacare–what Republicans are actually for in health reform. A few program specific thoughts:
The whole “dept ceiling” nonsense in two sentences.
The entire “debt ceiling” brouhaha in two sentences:
1) Raising the debt ceiling does not authorize one single penny in additional public spending.
Any reporter who doesn’t get those two basic facts into any story about the debt ceiling should be replaced with someone competent to do the job.
Although I sometimes disagree with Jonathan Chait (as in this RBC post), Iâ€™ve been a big fan since his days at The New Republic.Â He now writes for New York Magazine, which published his remarkably prescient mid-October essay about the fiscal cliff. Directly or indirectly, that essay shaped much of the subsequent public debate on the subject (and inspired one of my own recent NYT columns).
If you donâ€™t know Chaitâ€™s work, a good place to start is yesterdayâ€™s post about Republican rage at the trillion-dollar platinum coin proposal. If I were the business owner whose argument Chait deconstructs, Iâ€™d go immediately into hiding.
If you donâ€™t like this pieceâ€”well, thereâ€™s no accounting for taste. Â But if, like me, you canâ€™t think of anyone whose writings about the recent fiscal wrangling have been more reliably informative and readable, youâ€™ll want to bookmark his NY Magazine archive and read him first thing each morning.
“Cliff” speech mentions immigration, global warming, infrastructure, and gun violence.
A couple of things to note from the President’s statement after the House stepped back from the cliff (other than his strong reiteration of a refusal to deal about the debt ceiling, which he correctly identified as whether the Congress would renege on paying the bills for spending the Congress had ordered): his list of topics other than the budget that need the country’s attention included immigration, climate change, infrastructure, and gun violence.
The zipcode shutdown solution.
Compared to the last round, there’s one big plus: Obama has said he won’t negotiate this time and has proposed scrapping the wretched thing:
I will not play that game, because we have got to break that habit before it starts.
He also won the election, which counts for something if you are not a Republican.
The negatives: Republicans have learnt nothing; and Obama’s spokesman has taken off the table the option to declare that “the debt limit is a violation of the 14th Amendment”. The platinum coin was never on it, and Jack Balkin,
its inventor, an early populariser, doesn’t think it’s remotely realistic.
So partial government shutdown it it has to be. (The interest payments are sacred by the 14th Amendment. You may be able to protect food stamps and the pay of servicemen and women in combat, but not much else or it doesn’t add up.) Brad de Long is right: Obama should prepare the ground for negotiating by telling Republicans, in great detail, exactly what this would mean for their constituents.
Let me revive an idea I floated earlier: do it by zipcode. The constituents of Congressmen on board for fixing the limit get paid in full. Constituents of holdouts – from Medicare providers to defence contractors – get paid in IOUs, to the extent necessary to balance income and receipts week by week. If that isn’t enough, you pay the first group partly in IOUs; but they get the cash first. The accompanying letter, signed by Obama and Geithner, explains why. The constituents really, really won’t like that.
The first stage of torture by the Inquisition consisted in “showing the instruments” to the suspect. It was often enough.
Mitch McConnell gets too cute, winds up filibustering his own debt-ceiling proposal.
The Congress appropriates money. The Congress levies taxes. (Subject, of course, to the President’s veto power.) The President must spend appropriated money and collect the revenue due under the tax laws. That’s part of taking care that the laws be faithfully executed. He can’t collect a nickel more than is due or spend a nickel less than appropriated.
Expenditures minus revenues constitute this year’s Â deficit. Last year’s debt plus this year’s deficit determines this year’s debt. In order to pay the bills Congress has ordered him to incur, the President needs to borrow money. Â So having Congress pass a separate piece of legislation authorizing the President to borrow the money the Congress has already told him to spend makes no logical sense.
Barack Obama’s proposal – based on an election-year stunt dreamed up by Mitch McConnell during the last artificial debt crisis – Â that the President be given the power to extend the debt ceiling subject to Congressional veto doesn’t make much more sense logically than the current system: it merely gives the Congress the power to order that the United States of America default on its lawful obligations. But at least it shifts the initiative in a way that would probably end the recurrent hostage situations arising under the new law: the Congress would have to actively order the Executive to default rather than being able to do so passive-aggressively. And it could matter enormously if Obama sticks to his public commitment not to negotiate with the hostage-takers in the future.
McConnell, who cares more about a potential Tea Party challenger than he does about the health of the economy or the good credit (not to mention the national honor) of the United States, decided to play a trick on Harry Reid. McConnell proposed to bring the President’s version of McConnell’s own proposal up for a vote, assuming (not unreasonably, based on the historical record) that the cowardice of some of his Democratic colleagues was as deep as his own fathomless scoundrelism and that the proposal therefore couldn’t command a majority in the Senate. McConnell could then make fun of Reid for not being able to muster the votes for the President’s proposal.
But Reid, after hastily counting backbones, seems to have found at least 50 of them present and accounted for, and proposed to take McConnell up on his offer: at which point McConnell decided to filibuster the very provision on which he had asked for a vote.
Nothing could better sum up either the profound unseriousness of the contemporary Republican Party or the utter folly of allowing that party to convert the Senate from an body where majority rule was tempered by extensive powers of delay, and a very occasional filibuster, into an institution where a super-majority is required for every bit of routine business.
Now that Reid knows he has a majority for ending the debt-ceiling nonsense, I hope he brings it up at every opportunity, and in particular insists that it be part of any “Fiscal Cliff” deal. And I hope that the newly vertebrate Senate Democrats continue to stand erect in January for major filibuster reform.
Looks as if Obama & Company have RTFM.
… such as Boehner and McConnell, operate by their own set of rules. The Democratic Strategist offers some useful reflections, along with an actual law-enforcement guide to dealing with the more ordinary variety of extortionist, referred to as a “hostage-taker” (HT).
* The first priority is to isolate and contain the HT.
*Set the standard of mature, adult conversation from the outset.
* Allow productive venting, but deflect dangerous escalation of speech tone and content … Allow [the HT] to freely express his frustrations and disappointments, but donâ€™t let venting become ranting or spewing, which can lead to further loss of control.
* Hostages represent power and control to the hostage taker, so try not to do anything that will remind him of this fact.
* Make the HT work for everything he gets by extracting a concession … don’t give anything without getting something in return.
* Don’t solicit demands; don’t give anything not explicitly asked for; and don’t deliver more than absolutely necessary to fulfill the request. The conventional wisdom is to never say “no” to a demand, but that’s not the same as saying yes. The negotiator’s job is to deflect, postpone, and modify.
* Always be looking ahead to the next incident.
So far, looks as if Obama & Co. have been reading the manual. But the nature of the GOP will make a couple of points really hard:
* Compliment the HT for any positive actions heâ€™s taken so far. If the HT does something constructive, reinforce it. The aim here is to establish a pattern of constructive actions that allow the HT to reap repeated positive reinforcement, leading ultimately to his surrender with no further injuries to anyone.
(cross posted at freeforall)
Bob Pozen writes that reform of Social Security is the route to a deal to avoid the looming ‘fiscal cliff.’ I wrote something similar in March, 2011, and followed up with more on my view of the benefits of moving sooner rather than later on Social Security reform, a theme that is echoed in my book. Several quick points about Social Security and the myriad policy problems we face.