The price of averting a debt payment crisis

Congressional Republicans are threatening to shut down the government unless Obamacare is defunded.  But the real danger to the government’s functioning, as blogger Steve Benen pointed out, is the refusal of the Republicans to raise the debt ceiling unless their demands are made.  These demands are shown in the graphic above.

These demands are basically the Mitt Romney presidential platform, which the American electorate rejected a year ago.   All of them, in my opinion, are bad for the country.  But if I’m wrong about that, then let the proponents enact laws through the regular lawmaking process.

The fact that the Republicans have a majority in Congress at all is due to the way congressional districts are drawn.  Democratic congressional candidates last year got a million more total votes than Republican candidates.

I don’t know what the effect of refusing to raise the debt ceiling would be.  It seems to me that the Federal Reserve Board could solve the problem by creating money to buy up the excess debt.  Maybe this would set a bad precedent.  In any case, I don’t expect this to happen.

One of the big assets of the United States is the world’s confidence that our government debt will be repaid.  To the extent this is damaged, it could add untold billions in the government debt service costs and maybe even undermine confidence in the U.S. dollar as the world’s reserve currency.  Risking this is deeply irresponsible.

The criticism that is made of President Obama is that he refuses to compromise.  But the ordinary meaning of the world compromise is to give up something in order to get something in return.  There is no question of compromise here—only the question of whether and to what degree he will give in to threats.

Six years ago, we had the same political situation that we do now, in reverse.  Republicans occupied the White House and had a majority in the Senate, Democrats had a majority in the House of Representatives.  Congressional Democrats never threatened to close down the government or damage the credit rating of U.S. Treasury bonds in order to get their way.  Nor, for that matter, did Senate Democrats insist on a 60-vote majority for routine business.

When I studied political science in college in the 1950s, I was told of the superiority of the pragmatic American political culture to the ideological French and Italian political parties, who pushed ideology to the limit regardless of consequences.  But that was then.  This is now.

A bipartisan march into disaster

President Obama said the compromise budget deal with the Republican congressional leaders will bring non-defense discretionary spending to its lowest level since the Eisenhower administration.  Andy Kroll, a writer for Mother Jones magazine, explained:

Andy Kroll

The Obama-GOP plan cuts $917 billion in government spending over the next decade. Nearly $570 billion of that would come from what’s called “non-defense discretionary spending.”  That’s budget-speak for the pile of money the government invests in the nation’s safety and future—education and job training, air traffic control, health research, border security, physical infrastructure, environmental and consumer protection, child care, nutrition, law enforcement, and more.

The White House’s plan would slash this type of spending nearly in half, from about 3.3 percent of America’s GDP to as low as 1.7 percent, the lowest in nearly half a century, says Ethan Pollack, a senior policy analyst at the left-leaning Economic Policy Institute.  Pollack’s calculations suggest the cuts in Obama’s plan are almost as deep as those in Rep. Paul Ryan’s slash-and-burn budget, which shrunk non-defense discretionary spending down to just 1.5 percent of GDP.  The President has claimed that the debt deal will allow America to continue making “job-creating investments in things like education and research.”  But on crucial public investment, Obama’s and Ryan’s plans are next-door neighbors. “There’s no way to square this plan with the president’s ‘Winning the Future’ agenda,” Pollack says. “That agenda ends.”

via Mother Jones.