All You Need To Know About The Debt Ceiling

Discussion in 'Politics' started by AAAintheBeltway, Jul 18, 2011.

  1. Step one, everyone assumes it will be approved after some griping. That's what happened the other 74 times, after all. Obama demands a clean extension with no extraneous budget matters.

    Step two, republicans become aware of the leverage they have and decide to apply it to get a handle of soaring expenditures. Biden begins talks with republicans. Nothing concrete ever emerges, except vague talk about cutting $1 or 2 trillion. Talks founder on republican refusal to agree to tax increases.

    Step three, republicans push their advantage, demanding bigger cuts. Obama gets involved, attacking republicans for favoring corporate jet owners over needy seniors and children. Obama demands "shared sacrifice", interpreted to mean he wants to not only cut republicans' social security and medicare(ie, by "means testing") but also sharply increase taxes on them. His constituents escape any cuts, even though they are the cause of the soaring debt. Republicans get cold feet about any deal.

    Step four, Obama plays to media with call for "grand bargain." Other than increased taxes, he is opaque on what he would actually cut or how he would guarantee that the promised cuts ever get made. Boehner goes wobbly under media pressure, but Cantor jerks him back into line. Pundits being to appreciate the influence of the Bachmann chorus of Tea Party freshman and decific hawks. Actual doubts about a deal are aired to disapproving hisses from mainstream media.

    Step four(present), growing sense of panic begins to emerge. Rating agencies begin to grumble. Liberals are furious at Tea Party recalcitrants and attack them viciously on Sunday morning shows. Journalists who hate everything republican generously offer suggestions as to how republicans can compromise and sell out their base or face disaster.

    Step five, end game. Gold soars. Bonds swing violently. Dollar soars, sells off, soars again. Furious debate ensues as to whether a failure to raise ceiling is good or bad for US credit rating. Good, in that spending is finally crimped. Bad, in that it looks like a default. House passes cap, cut and balance bill. It goes nowhere in senate. Senate passes McConnell plan. It goes nowhere in House. Obama goes on TV repeatedly to attack republicans in ever more demagogic terms. Bachmann demands no compromise. Romney is MIA.

    Step six, someone blinks. Probably some sort of smaller extension with no tax increases and smoke and mirrors spending cuts. Things go back to normal for another six months.
  2. Ricter


    ...proposing even more ambitious cuts, republicans refuse. Obama is either bluffing, and the reps are too cowardly to call it, or Obama is not bluffing and the reps are too cowardly to admit they couldn't really care less about the deficit.
  3. Consider who wins and loses. I realize this is the sort of thing that drives ordinary voters crazy. They see pols fiddling and playing games while the country circles the drain. True enough, but in the end it is all political. That is reality.

    Potential winners.

    1. Obama. He had total victory sooo close, until Cantor spoiled it for him. why do you think they are so angry at Cantor? Obama had the guileless Boehner ready to sign on to a grand bargain that would impose big cuts on medicare and ss through means testing and raise taxes. Republicans would have been selling out their supporters not only on raising the ceiling but also by increasing their taxes and taking away their benefits. Plus, obama could have run for reelection as the president who finally got the budget under control, and no doubt would have continued to attack republicans for cutting medicare and ss.

    Now it appears Obama will have to settle for a lesser win. At this point, a simple increase in the ceiling with no strings attached is looking good to everyone but the Tea Party crowd. Still, that would be a win for obama and the media would trumpet it.

    2. Bachmann. Her take no prisoners approach has resonated big time with primary voters, many of whom see the outcome of a default only hurting the same Wall Streeters who got bailed out before. Her approach offers her a win-win-win potential. If there is no increase and a default, she can criticize Obama and Geithner for mismanagement, claiming there was plenty of money to pay debt and essential expenditures. Hard to disprove. Plus, an economic disaster has to hurt Obama. If there is no increase and Geithner juggles accounts to avoid default, she can say she was right all along. And if there is some sort of compromise agreement to raise the ceiling, she will claim a sellout and proclaim the need for real leaders. Win-win-win.

    3. Cantor. He has clearly played to the Tea Party caucus, which carries risk for him but also offers a clear path to the Speakership.

    Potential losers.

    1. Obama. All this talk about his vastly increased spending and the failure of his policies can't help him. An economic disaster following failure to raise the ceiling can't possibly help him. Voters already sense he is in over his head and that would confirm it. Blaming republicans will sound like whining and failure to take responsibility.

    2. Boehner. He has shown unsteady leadership and many conservatives believe he would have given away the store without Cantor looking over hi shoulder.

    3. Romney. Putative republican front runner has been notably silent, despite basing his campaign on his fiscal expertise. Reminiscent of McCain in '08 bailout talks.
  4. Arnie


    What "cuts" has Obama proposed?
  5. Obama's idea of "shared sacrifice" is that republican voters not only give up chunks of the medicare and social security they have paid for over the years but get hit with huge tax increases as well. He never identified any other cuts he would agree to. Saying he would "look at' something doesn't exactly qualify as biting the bullet.
  6. Ricter


    From deficit I should have added.

    Google will get you there.
  7. bone

    bone ET Sponsor

    Nothing on record. Notice that the CBO has not scored the President's proposal, because in the words of the CBO Head: "we cannot score speeches".

    Vacuous, pretty speeches devoid of any content.

    Dems involved in the meetings want no short term cuts closer than two years out, but insist on the 'revenue enhancement' (taxes) portion immediately.

    Obama has increased discretionary spending 84% YoY annualized since he took office. Went two years without even bothering with a budget.
  8. Ricter


    It's speech, and so is the rep reply, "that's too much!"

  9. bone

    bone ET Sponsor

    Douglas Elmendorf, the director of the Congressional Budget Office, told the House Budget Committee that his office was unable to estimate the long-term viability of the "budget framework" President Obama outlined in his April 13 budget speech.

    "We don't estimate speeches," said Elmendorf. "We need much more specificity than was provided in that speech for us to do our analysis."
  10. Ricter


    But he damn sure knows how to estimate the long-term viability of a plan to cut the deficit by half as much as what Obama wants. Get busy, Douglas.
    #10     Jul 18, 2011