The president has said that he won’t play the debt ceiling “game” with the Republicans anymore. When he said it, he seemed to be suggesting that he wanted the debt ceiling raised or put under his control as part of any potential Grand Bargain. But, since it appears that we are going to go over the cliff and there will be no Grand Bargain, I wonder how Obama plans on avoiding the game next year. I don’t think he will mint trillion dollar coins. He might invoke the 14th Amendment, but probably not preemptively. I guess the real question is whether the Republicans would dare to threaten our credit rating again so soon after allowing us to go over the fiscal cliff. I think they might wind up finding themselves friendless in the business community if they do that. On the other hand, they don’t seem to be able to help themselves.
What do you think?
I think he’s saying that after the cliff, the only way they get out of owning higher taxes on the 98% is by agreeing to a deal that not only cuts those taxes while leaving the 2% out AND agreeing to permanently disarm on the debt ceiling in some shape or form. Otherwise they can explain to America why they insist on higher taxes AND destroying our nation’s credit rating AND shutting down the government.
Bwaaaaaa ha ha ha ha ha ha !!!!!
I think Obama means he will let them shut down the government, like in ’96. (Was it 1996?) Instead of defaulting on debt, he’ll shut down offices to find the money to keep making debt payments.
Watching the cable nooz is strange, because they all seem determined to report that the two sides are making progress, and they very plainly are not. We’re going over the cliff.
He probably won’t mint trillion dollar coins, which do sound ridiculous. But I do expect him to mint a more reasonable denomination, like 1 million, which after inflation adjustments is similar in value to the old 100,000 dollar bill. Really, since Congress (assuming no deal) will be requiring certain spending and allowing an inadequate level of taxes Obama is legally obligated to get the monies if possible. Since borrowing will be prohibited and platinum coinage permitted, he’ll be required to coin. He can’t just not make required payments because he doesn’t like the way he’ll get the money.
On a side note, treasury coinage might be very good for the economy. The Fed has attempted to inflate the money supply, but the method they use (buying government bonds) basically results in the megabanks having more money, which they deposit at the Fed, leaving the economy unaffected. Treasury coinage will get spent and increase the bank balances of people and businesses who may actually spend it.
The problem is that the Treasury is statutorily limited in what denominations it can issue in bills. The trillion-dollar coin idea is authorized under an loophole in the coinage law that was intended for high-value commemorative coin minting. And the idea is to deliver the trillion-dollar coin to the Fed’s account in payment of a trillion dollars in existing debt, which the Fed will then purchase from the market.
If the T-bill market is panicked by a default, the Fed taking these issues out of the market ahead of maturity winds up saving the taxpayers money in interest. And the lowering of the debt by a trillion dollars allows the government to function.
Apparently the current statutes prevent the Treasury from operating the government off coinage or currency, forcing it to operate off debt.
Doing the trillion-dollar coin and placing it with the Fed allows the minimal departure from the current system (despite first appearances) and allows the Fed to adjust do its routine monetary manipulation to offset any inflation from the additional government spending.
The law was intended to prevent funding via coinage or printing, but, dang, that platinum coin “loophole” is big enough to fly a 747 through:
Personally, I’d prefer the coins be something that could serve some functions. Trillion dollar coins are ridiculous; while it doesn’t change the functionality (whatever gets coined will mostly or entirely get deposited as you lay out) but the optics do matter politically.
I’d like to see one, just out of curiosity. It’d have to be a pretty big coin to get all those zeros on it.
Here’s how the Grand Bargain plays out.
Republican driven entitlement cuts: Folks have less money for food, medicine, rent. Some will have to live on the streets, in cardboard boxes under highway overpasses. Some will sicken and die.
Democrat driven tax hikes: The numbers on the spreadsheets go down a bit. No lifestyle changes. Five-figure vacations, multiple mansions, schooners, and paid help to run it all continue on undiminished.
In order to pull off this moral repugnancy, the predator class threatens to tank the world economy?
I say invoke the 14th and explain in careful detail to these slimy creatures, in a nation-wide presidential address, why their asshole behavior makes it necessary.
Take away the illusion of respectability that wraps their goals; call an abomination for what it is.
Let them defend their hideous ideology without benefit of the pompous, smarmy language they prefer to hide behind.
One more piece of this is what happens to crime rates when more folks get tossed into the underclass.
Too bad cities can no longer afford to hire more cops to keep up.
Not so bad of course if your community is gated.
Let the moochers self-incarcerate.
It is certainly not clear what Obama means by refusing to “play the game”. My guess is that Joe from Lowell is correct, and that it means that Obama will calculate what money Treasury will have, pay all maturing debt and interest, and then prioritize all other payments due and owing from the federal gub’mint. Thus he may furlough troops, defer weapons system payments, shut down federal agricultural agencies, defer crop subsidies, etc.
There are many payments that can be deferred or cancelled which will suffocate and annihilate “conservative” interests, and perhaps teach our fine GOoPers that their vaunted gub’mint shutdowns aren’t so fab and that maybe, just maybe, our beloved Founders wouldn’t agree with today’s tricorne-wearin’ Teaturds.
Payment of the debt and interest followed by prioritized payments of all other obligations is what Yale Prof Balkin argues the 14th Amendment debt clause means. It doesn’t allow the Prez to simply issue new debt to pay the enacted spending, and he doesn’t think too highly of the large denomination coin gambit. See his posts at his blog Balkinization.
Anyway, Obama appears to be saying the debt ceiling is your problem, Boner, don’t come cryin’ to me when we run out of funds—funding gub’mint operations is the very essence of Congressional power. And if you don’t like what I pay using what you gave me, take it to Justice Scalia, like you do everything else these days.
I don’t really have much faith he’ll specifically target conservative interests, but one can hope he prioritizes as best he can.
Here’s his argument (from 2011).
I’ve learned not to have confidence in “our side” going into the negotiations, but do credit Obama for not pre-negotiating this time and also not offering cuts to Medicare and SS. Some Dems unfortunately haven’t but others (thank you, Nancy Pelosi), have clearly said no way.
The most important thing the Democratic leadership should understand is that, as much as I’d like the discussion to be about optimal policy, in this case it is ALL about politics and perceptions. What happens here will either give the Democrats a shot at getting the house back in 2014 or not.
And the political advantages are far more favorable to the Democrats than usual. Oh, we have the standard disadvantage of the millionaire news talkers who favor seeing other people’s grandparents suffer and who pretend the Republicans are sane.
But otherwise the Democrats have in their favor the facts that: A) the GOP is out of control – this isn’t Ronnie-and-Tip who can negotiate then whip up the needed votes, the GOP rank-and-file is out of control. And this pre-dates the tea party – remember that the first bailout that Bush asked for in 2008 had few GOP votes in the house. While that means getting a rational deals is probably impossible until after the so-called cliff kicks in and public pressure builds, it also means that the GOP is incapable of complex maneuvering. All they can do is stonewall and spout far right talking points to the press. B) It is ludicrously easy for the Democrats to position this as a GOP stoppage. The Democrats can offer temporary extensions and the GOP can only turn them down. The Democrats can offer simple popular bills like returning to Clinton-era tax rates and the GOP can only turn them down.
C) If the Democrats can actually get on message strongly enough they can also hammer home that NONE of these kinds of ultimatums occurred until the GOP took the house in 2010. That the GOP routinely voted for deficit ceiling increases without problem under Bush.
Basically, if the Democratic leadership plays it right they can, and should, be able to firmly paint the GOP as what they are – holding the country hostage while they have a tantrum.
It’s an opportunity to retake the house and – with filibuster reform – demonstrate what quasi-progressive policies can do for the country (unlike in 2009-10, when you couldn’t get any more progressive than the 60th Senate vote).
Course, the last time I said we had that opportunity it was before the first debate, when I said Obama had an opportunity to confirm the Romney reputation as being a spoiled entitled rich dude and link his whole party to that – thus paving the way for a House victory in 2012. We all know how that went. But this is a very different situation. Maybe the team can pull it off.
If they force us to hit the debt ceiling will the country even make it to the 2014 elections?
Assuming no deal on the austerity bomb, we could run without borrowing by minimizing war spending and stopping Ag subsidies. In addition, either coinage or the 14th amendment would allow things to run without restrictions, although the 14th amendment interpretation might cause some increases in the federal bond rates.
Now the Republicans can shut things down for real by refusing to put through appropriations but that’s true with or without a debt limit deal.
“And this pre-dates the tea party – remember that the first bailout that Bush asked for in 2008 had few GOP votes in the house.”
It does pre-date the Tea Party, but it’s not a good example. The first bailout plan sucked. It provided no relief for ordinary taxpayers and families. I myself was opposed to it and greatly relieved when it didn’t pass. It’s true that 2/3 of the House GOP voted against it, but it’s also true that 1/3 of the House Dems voted against it.
For the version that passed a few days later, 32 Democrats and 25 Republicans changed their vote and it passed comfortably. The second version wasn’t that great either, but something had to be done and that was it.
I have a lot of respect for Democrats Marcy Kaptur from Toledo and Pete De Fazio from Oregon, who didn’t vote for the second version either, because they had an alternative bill, the No Bailout Act.
http://www.youtube.com/watch?v=Q_m5u6rLaSU
http://stopforeclosurefraud.com/2012/03/18/congresswoman-marcy-kaptur-lets-address-the-systemic-mort
gage-fraud-in-our-country/
I think they might wind up finding themselves friendless in the business community if they do that.
Now, why would they do that? Have you ever thought that businesses might be secretly cheering the GOP on? After all, they haven’t brought Orange Julius to heel yet, have they?
I thought the WH has been pretty clear on this. They have said there would be no negotiations on the debt ceiling. Period. They have not muddied their message with ‘well if we can’t reach a deal and we go over the cliff, then we can talk during the debt ceiling deadline’. In fact, they have repeatedly said ANY deal includes a debt ceiling increase! They have said very clearly, “we won’t play the came of holding the debt ceiling hostage. If the republicans try that, we won’t return phone calls, we won’t hold meetings, we won’t open emails.”
http://www.motherjones.com/politics/2012/12/debt-ceiling-obama-boehner-fiscal-cliff
http://www.washingtonpost.com/blogs/wonkblog/wp/2012/12/11/the-gops-dangerous-debt-ceiling-gamble/
The message has been that the debt ceiling is congresses job, and they can either give that job to the WH, or own the consequences.
It appears to me that the WH, without an election to worry about, is no longer going to help the republicans. Reports the last few days are that at meetings the WH has asked for the cuts the republicans want, and there is no answer. No commitment. And the WH is not suggesting any. Combine this with the above statements about the debt ceiling, and it looks like Boehner has to solve his own problems.
So either the republicans raise the ceiling, or they own the consequences. No deals on this issue.
Everything seems to point to a different attitude at the WH. I think that last year the WH actually wanted Boehner to keep his Speakership. This year I don’t think they care one way or the other.
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I like Obama’s pre-emptive strike here. The debt ceiling vote has served no purpose other than for political theater (at least in most of our lifetimes) and needs to go away permanently.
It seems to me that the choice is whether the nation (and the world and the treasury markets) must wait with trepidation every few months while the Repubs hold another hostage crisis or we call the Repub bluff.
Obama is right to call it out and lay the responsibility for it on Republicans. That’s the reality. If the administration can handle the messaging well, calling the bluff may well be the best way to go.
I think we’re going over the cliff and possibly over the debt limit as well, since Obama the best cards in both situations.
This is pretty familiar territory for Obama. He used to teach this same exercise, in fact, providing organizer trainings for future community and union organizers when he worked for the Gamaliel organization in Chicago. They start their famous “week-long” trainings with the Melian Dialogue game. The purpose of the exercise is to encourage justice-minded activists to start thinking like the Athenians, which is the position of Obama in the current stand-off. The secondary purpose is to encourage leaders to think pragmatically and not fight a lost cause, like the Melians do, and which the GOP appears headed to portray.
The Fed has just started regular buying of treasuries with printed money. It is contrary to their policy, but not to law, for them to effectively burn them. just canceling the debt that they own. Unless I am missing something, this would reduce the outstanding debt by whatever quantity of treasuries they wanted to cancel and thereby keep us below the ceiling. Bankers and conservatives hate the idea of funding the government with printed money, but it is no more inflationary than pumping printed money into the banking system, which is what we have been doing. The Republicans are sure not wanting to see it exposed that some of this debt crisis can be made to go up in smoke, and that the government (to the extent the Fed is “the government”; this is deliberately opaque and complicated) really can just print money. It generates inflationary pressure, but at times like this, that is not a problem.
I guess I want to make clear that this is a prediction. If the Repubs go to the mat on the debt ceiling, I expect the Fed to start erasing debt.
If they could just get it through their tiny brains that Obama and the Democrats are not the only ones who want to raise the debt ceiling.