While the government is for now allowed to resume normal operations, it is operating under the sequestration of funds. The sequester, which went into effect in March, is the result of the previous budget standoff between the President and congressional Republicans. It consists of across-the-board budget cuts so drastic that it was thought that the two parties would compromise rather than allow them to go into effect.
This is not what liberals want.
On January 15, the continuing resolution to fund the government expires and a new round of sequesters goes into effect. If the Senate and House agree on another “clean” continuing resolution, that will be in effect a victory for the conservative Republicans. I won’t call it a defeat for President Obama because his own stated goal is a “grand bargain” to reduce the deficit.
Would the radical right wing of the Republican Party be satisfied with this? Will liberals and Democrats counterattack and, if so, how? Stay tuned. We live in interesting times.
When I studied political science in college nearly 60 years ago, we were taught to contrast the sensible, pragmatic American and British political cultures with the ideological, gridlocked French and Italians.
In France and Italy in the 1950s, governments fell and new governmental coalitions had to be formed every few months, or so it seemed, and the diverse political parties could never agree on policies to address their nations problems.
But I never heard of any French or Italian political party that tried to stop their governments from carrying out their lawful functions or paying their lawful bills, as happened during the past couple of weeks here in the United States. Today it is we Americans who set an example of ideological, gridlocked government.
Our Constitution sets up a legislative process that says enactment of a law requires agreement among a President elected by the nation, a House of Representatives elected by districts on a population basis and a Senate elected by states on a state sovereignty basis. That is a more complicated and difficult process than in most democratic governments. But now agreement among these three bodies is required merely to allow the government to carry out responsibilities mandated by law.
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.
The Atlantic’s James Fallows says these two sentences should be part of all discussion of the debt ceiling
Raising the debt ceiling does not authorize one single penny in additional public spending.
For Congress to “decide whether” to raise the debt ceiling, for programs and tax rates it has already voted into law, makes exactly as much sense as it would for a family to “decide whether” to pay a credit-card bill for goods it has already bought.
Tom Ferguson, a professor of political science at the University of Massachusetts and a fellow of the Roosevelt Institute, has a lot of good sense and good insight about current issues.
Here he is in an interview in July about President Obama, the Congress and the debt ceiling. [Added 2/16/2019] Click on this link to view the video.
Many countries have suffered financial crises. The United States is exceptional in creating a financial crisis where none existed before.
Click to view
The debt ceiling crisis would not have been a crisis unless political factions in Washington had not decided to create for their own purposes. It is an example of what Naomi Klein called The Shock Doctrine — how political and economic elites use crises to force changes on the public they would not have accepted otherwise.
The Associated Press reported that the bipartisan agreement signed by President Obama and House Speaker John Boehner provides for an immediate $900 billion in reductions in discretionary spending over the next 10 years, followed by an addition $1.5 trillion in spending reductions to be proposed by a bi-partisan committee of Congress by November and to be voted on by the end of the year. If that happens, the debt ceiling would go up by $1.5 trillion; if not, $1.2 trillion in spending cuts would take place automatically across the board. Social Security, Medicaid and food stamps would be exempt from the automatic cuts, but apparently not from the cuts proposed by the bipartisan committee.
Since the agreement does not specify exactly what will be cut, it is hard to argue against it based on specifics. But once the cuts are specified, it will be too late to do anything about them. The agreement pretty much commits the President and Congress to accept whatever is proposed.
President Obama said the agreement will leave the government with the lowest levels of spending, as a percentage of the overall economy, since the Eisenhower administration. I can’t imagine how that could be accomplished and still provide a social safety net, still provide aid to state governments necessary to maintain basic services, and still make the investments the President has said are necessary to the nation’s future, not to mention continue on-going wars and an ever-growing proliferation of intelligence and surveillance agencies. As Jonathan Cohn wrote in The New Republic:
That first round of cuts to discretionary spending might reduce some waste, but it would also undermine vital government services. At the same time, it would deplete the opportunities for easy spending reductions, making it more likely that second round of cuts had an equal, or harsher, impact. … There’s just no way to enact spending reductions of this magnitude without imposing a lot of pain.
And contrary to the common understanding in the Washington cocktail party circuit, “pain” does not simply mean offending certain political sensibilities. Pain means more people eating tainted food, more people breathing polluted air, more people pulling their kids out of college, and more people losing their homes — in other words, the hardships people suffer when government can’t do an adequate job of looking out for their interests.
More immediately, but equally troubling, this agreement would not address our most pressing economic problem: lack of jobs. On the contrary, by reducing deficits starting next year, this deal would do the very opposite of what virtually every mainstream economist now believes we should do: increase consumer demand by pumping more money into the economy.
At one point, the debt ceiling agreement included promises to extend unemployment insurance and renew a break on the payroll tax. Those two would have provided a modest but very real boost to the economy (not to mention financial relief to people who need it). This deal would do neither.
Most Americans are relieved that the government is not going to default on its bond payments or delay payments of government salaries or Social Security pensions. It makes President Obama’s proposals, which once would have been considered an extreme right-wing agenda, seem reasonable in comparison.
But the debt ceiling crisis is not over. It has merely been postponed until after the 2012 election. After that we can expect a continuing series of debt ceiling crises, as long as (1) the debt ceiling exists and (2) a 60-vote majority requirement in the Senate gives any 41 Senators a veto over government policy.
The federal debt ceiling has long been a political football. The political party in power favors increasing the debt ceiling, many members of the party out of power oppose increasing the debt ceiling, but, until now, the debt ceiling always has been raised.
Democrats are running the following broadcast by Ronald Reagan in 1987, appealing for an increase in the federal debt ceiling.
Republicans might well run a clip of Senator Barack Obama, opposing an increase in the debt ceiling under President George W. Bush.
Truly, where you stand (in this case) depends on where you sit. The Republican congressional leaders some time back argued that the recovery has been retarded by business uncertainty about future government policy. If they really believed that, they would not be engaging in brinksmanship now.
But the inconsistencies of the two sides are not the main point. The main point is that the debt ceiling needs to be raised (or better still, abolished) before the crisis point is reached. Senator Obama was wrong. President Obama is right. The Tea Party is wrong. President Reagan was right.
Senate Minority Leader Mitch McConnell proposed giving President Obama the responsibility for addressing the federal budget deficit. If I were a conservative Republican banker, I would be very happy to entrust President Obama with that responsibility.
As Jonathan Zasloff, a contributor to the Reality-Based Community web log, commented:
Just a year before a general election, the country’s unemployment rate is over 9 percent and its effective unemployment rate might be twice that. Obama’s solution to the searing crisis of the middle class apparently is to raise the Medicare eligibility age from 65 to 67, in exchange for tax increases that will occur anyway. Oh yes, and $2 trillion of other unspecified cuts, which always figure to work beautifully during a recession. … What is there in any of this that a progressive could possibly object to?
President Obama has managed to make McConnell, House Speaker John Boehner and House Majority Leader Eric Cantor look like fools, by conceding the substance of what they demand. His characteristic political tactic—giving his opponents enough rope to hang themselves—has worked well for him once again. At the same time he has abandoned historic Democratic principles and constituencies. What price victory?
Zasloff sees two ways to interpret President Obama’s actions.
1. Obama is a Democrat, and he is a political moron.
2. Obama is a Republican, and he is a political genius.
The refusal by the Republican majority in Congress to raise the ceiling on federal debt means that, on the one hand, they think this issue is so important they are willing to put the functioning of the federal government at risk, but, on the other hand, they are unable to come up with a plan to actually bring the budget under control, and so leave it to President Obama to figure out.
A lot of people who discuss this issue assume that this would mean that the federal government would default on its existing debt. A default would be catastrophic. U.S. government bonds would no longer be considered an absolutely safe investment, which means the Treasury Department would have to pay more interest to attract lenders. This would not only mean the federal debt would compound at a faster rate. It would push up U.S. interest rates generally. It would be more expensive to take out a car loan, a home mortgage or a small business loan.
Fortunately there are other options.
The most likely option would be a partial shut-down of the federal government. I can’t guess what would be cut. Presumably the military and Homeland Security would be exempt. Would the national parks be closed? Would the Postal Service suspend or reduce mail deliveries? I don’t know. Would it be legal to reduce or suspend payments for Social Security, Medicare and other so-called entitlements programs mandated by law? I don’t know. Would federal employees have to take a pay cut or suspension of wages? Maybe.
Another possibility would be that the Federal Reserve system would simply create money to pay down the national debt. That, in fact, is the normal mechanism by which money is “printed.” It is what was done with “quantitative easing.” I can’t guess the long-term consequences of this would be, but it doesn’t seem like a good idea. But it is an option (if the Fed agrees – admittedly, a big “if”). Creating money by buying Federal bonds would provide a means to keep the federal debt within the legal limit while continuing the normal operations of the federal government.
The final possibility is that President Obama would simply refuse to comply with the debt ceiling on Constitutional grounds. But such a confrontation wouldn’t be his style, and the Constitutional argument seems weak to me. It rests on Section 4 of the 14th Amendment states that “the validity of the public debt of the United States, authorized by law … shall not be questioned.” But it is an option. He could make his Constitutional claim and see what the courts say.
This is not what liberals want.
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