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Hullabaloo


Thursday, May 26, 2011

 
Winning on points

by digby

I've been hearing a lot lately about how the right hasn't really achieved much and that the whole idea that the Republicans have gained anything long term with this race over the cliff is delusional. Well, they may have destroyed whatever weak chances they ever had of winning big in 2012 with their mind-boggling Ryan debacle, but they've achieved a whole lot in terms of shifting the debate to the right.

Yesterday the Democrats managed to get all but five of the Senate Republicans on the record voting for the Ryan plan. But look what the Republicans have managed to get in return:
[T]he vote on the president’s plan turned into a rout, with neither Republicans nor Democrats voting in favor of taking it up. At one level, the 97-0 vote showed how out-of-date the February requests can seem after so much has changed in the spending debate already this year. But for Democrats, it also proved a convenient way to mask their substantial internal differences over how to proceed,

Obama himself has also substantially altered his February requests as part of a “new framework” announced last month just prior to House-Senate talks with the administration led by Vice President Joe Biden. The immediate goal is to find the votes needed to expand Treasury’s borrowing authority and avert default this summer, but Biden has also spoken of the package as a “down payment” toward a longer range deficit reduction plan akin to what was proposed last December by the president’s debt commission.

I don't think anything pertaining to the deficit has actually changed since February do you? And yet, everyone agrees that the President's budget "didn't cut enough." I'd say that's a substantial victory.

And as for the debt ceiling, the Republican Senators are going the distance. Led by the eminently responsible "grown-up" Jim DeMint, they sent this letter to Timothy Geithner yesterday insisting that the nation doesn't have to default if they don't agree to raise the debt ceiling --- after all, the Treasury will have more than enough money to make its interest payments, it would just have to stop sending checks to people Republicans don't like and everything would be fine.
In your February 3 letter to Sen. Toomey, you compare Sen. Toomey’s proposal to an analogous decision by an average citizen:

“A homeowner could decide to ‘prioritize’ and continue paying monthly mortgage payments, while opting to cease paying other obligations, such as car payments, insurance premiums, student loan and credit card payments, utilities, and so forth. Although the mortgage would be paid, the damage to that homeowner's creditworthiness would be severe.”

But of course, making necessary payments on debts, like a home mortgage, a credit card, a car, or a student loan, is different from other personal spending. The consequences of missing those payments are truly dire – default, bankruptcy, repossession, and eviction. But they are not at all the same thing as belt-tightening and prioritizing when times are tight. In the same way, cutting spending programs, reducing the federal workforce, and prioritizing payments to vendors and contractors is not the same thing as sovereign default.

The Treasury Department suggests that efforts to prioritize debt payments would bring about “catastrophic economic consequences.” Yet, this argument ignores the historical record. As you are well aware, the Treasury had to manage the nation’s finances in the past when the debt ceiling was reached. In 1995-1996, for example, the Department prioritized certain payments – including debt service. During this period, hundreds of thousands of federal employees were furloughed and many programs were temporarily suspended as a result of the two government shutdowns that occurred. And yet, this prioritization did not result in default on our publicly held debt nor did it cause the “catastrophic economic consequences” the administration predicts.

Unfortunately, Washington has shown time and again that it is perfectly content to spend money on whatever suits its whims. That is why the debt limit exists in the first place – to restrict the government’s profligate spending and borrowing impulses and so protect the citizens responsible for paying it all back.

We believe the time has come to employ this particular budget enforcement mechanism to finally force Congress to address the looming fiscal crisis, cut spending, reform entitlements, implement spending caps, and pass a balanced budget constitutional amendment before considering any increase in the federal debt ceiling. These are the contours of the debate before the American people this spring and summer.

In the event of reaching the debt limit in the course of that debate, the decision of whether to use available Treasury funds to honor the United States’ debt obligations – and prevent the catastrophe of default – would ultimately fall to you. Recent comments conflating debt service with other spending notwithstanding, the markets, the courts, and the American people know differently.

Apparently, we are to believe that if the US Government decides to massively lay off federal personnel, stop paying disability benefits, close down its Hurricane tracking centers, furlough half the doctors at the CDC or any number of other things the Republicans would like to do to prove a stupid political point and further degrade the public's trust in government, the rest of the world would think nothing of it because the Treasury would have fulfilled it's obligation to pay the interest on its debt.

They are literally saying "nothing to see here, folks, move along." Why would anyone think there was the slightest problem with the richest most powerful nation on earth conspicuously behaving like lunatics and likely throwing the whole world back into a recession?

I don't doubt for a minute the extreme stupidity of DeMint, Paul and a handful of other extremists in the Senate GOP caucus. But the list of signers is quite comprehensive and while they may not be the smartest people on the planet, they know enough to realize which side their bread is buttered on. This is yet another silly bluff.

Peter Orszag predicted that this will go to the wire and be passed under "TARP-like" circumstances when the markets show "turbulence."

He said a rise in bond yields as the debate in Congress continues likely would force Republicans and Democrats to reach a deal to raise the limit.


Great. We all know how well it goes when the Democrats are under pressure.

Let's put it this way. The Tea Party may not be winning any legislative battles outright and they may even fade into obscurity by the 2016 election. But they will have left a mark on American politics. If the Republicans successfully create a phony hysteria over the debt during a severe economic downturn (in which the wealthy are getting richer and richer), forcing huge cuts in spending without even allowing tax increases to be on the table, it's hard for me to see them as failures.


Update: I'm reminded by email of the fact that the Democrats may very well be planning a sort of suicide pact with the GOP. Tom Coburn left the Gang of 6 because Dick Durbin refused to go beyond the 400 million in Medicare cuts they'd already agreed to.

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