The Debt Ceiling Fight Continues

Wonkbook this morning:

A bit more information has trickled out over the last few days detailing the exact state of the budget negotiations when they collapsed. Both sides, as they often said, were shooting for about $2.4 trillion in deficit reduction over 10 years. They’d already agreed on around $1 trillion in spending cuts and were making good progress on the rest of it. But Democrats insisted that $400 billion — so, 17 percent — of the package be tax increases. And that’s when Republicans walked.

Specifically, the Obama administration was looking at a rule that lets businesses value their inventory at less than they bought it for in order to lower their tax burden, a loophole that lets hedge-fund managers count their income as capital gains and pay a 15 percent marginal tax rate, the tax treatment of private jets, oil and gas subsidies, and a limit on itemized deductions for the wealthy….Republicans say, is that there can’t be any tax increases, full stop.

Matt Yglesias, Jonathan Chait, Kevin Drum, Greg SargentChait again and Ross Douthat all debate, using Obama’s December 2010 press conference and Obama’s indifferent and confused answer to the question about the then upcoming debt ceiling fight, whether or not the current debt ceiling battle is a disaster based on Obama’s generous naivety about debate and good faith in the GOP (“I’ll take John Boehner at his word…You can’t just stand on the sidelines and be a bomb thrower”) or more-or-less where he wants to be, using the GOP as the villains to get the agenda he’s always wanted (“we will have tough negotiations around the budget, but that ultimately we can arrive at a position that…is prudent when it comes to taxpayer dollars”).

The two things that jump out from the press clip for me are, first, re-watching President Obama’s response to Ambinder’s question he clearly didn’t understand it at first, either the stakes or the concerns about this being an ugly battle.  That is shocking to me.

Second, his administration has been pushing for some sort of deficit reduction for some time, but if I had to bet I bet he expected the GOP to meet him half-way through the power of debate and good faith in your opponent.  That they aren’t going to, and that it’s even money he goes along with some awful plan to cause a double-dip recession and massively rupture the safety net, is exactly what anyone could have told him last year.

Eric Cantor is short U.S. Treasuries.  Hmmm…..Doug Henwood has comments, as does Jonathan Easley at Salon.  Annie Lowrey noted this last summer along with Yglesias.

What are the Republicans up to?  The most cynical take I’ve seen, and somehow I don’t even find it that cynical.  Chris Hayes on the Rachel Maddow Show last night (transcript, video, my bold), on the twofold approach for the GOP:

HAYES: …I think in some ways what we‘re seeing now is if you look at this in the long scope, they have starved the beast, to use Grover Norquist‘s words, right, they have cut taxes.  Now, they‘ve got everybody in the deficit debt, and now, the welfare state is in their sights….

They understand they‘re going to get one shot at it, and they also understand the only way to kill it is to get a Democratic president to do it.  Bush could not have gotten Social Security, couldn’t privatize Social Security.  Bill Clinton could have.  Barack Obama can.

The only way to go after the big game they are hunting, which is Medicaid and Medicare, that‘s the social—that‘s the fundamental social insurance is on to get a Democrat to do it, and they have it in their sights, they‘re basically just standing there.  They don‘t want to—they‘re going to pull the trigger when they can…..

I want to be even more cynical interpretation than that, which is the one thing that refutes the deficit hysteria, which so benefits the Republicans in their mission to go after Medicare and Medicaid is the fact that interest rates are at historic lows.  So, you can say, oh, no one is going to lend us money, and then you look out you there, and everybody is lending us money at historically low rates.

What is the one thing that could screw that up?

MADDOW:  Debt ceiling.

HAYES:  Exactly.  A partial default, a delayment of payment—the last time this happened, it went up 50 basis points for a few months.  I mean, that‘s a significant chunk of change…

So, the most cynical, the absolute most cynical interpretation of this is that they want some sort of crisis because that produces in the markets exactly the uncertainty they‘ve been claiming was already there, but has not manifested until now.

10-years at historic lows:

In other words, the GOP enters your store with baseball bats and go: “Nice all-time low interest rates on US treasuries you have here.  Be a real shame if something happened to it…..”

So Republicans are risking the global economy to try and shred health care access for the poor and the safety net more broadly, and Obama looks to be playing a weak hand because he believes in the power of deliberative democracy to overcome ideological differences and make-believe confidence fairies to get unemployment down by 2012.

Related to this and everything else going on these days, David Bowie and Trent Reznor, I’m Afraid of Americans:

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8 Responses to The Debt Ceiling Fight Continues

  1. JW Mason says:

    This is very good & important.

    We could take one more step: Are the relevant actors here “the Republicans”?

  2. Misaki says:

    “So Republicans are risking the global economy to try and shred health care access for the poor and the safety net more broadly, and Obama looks to be playing a weak hand because he believes in the power of deliberative democracy to overcome ideological differences and make-believe confidence fairies to get unemployment down by 2012.”

    Something that might be interesting to anyone surprised by this outcome: while only 18% of economists think that preventing inflation is an important national priority, 84% of the general public think that it is.

    While the US does have the option of simply printing money to satisfy any debts it has unlike say Greece that doesn’t have the same option, the general public does not like the idea of destroying the US’s reputation as a financially responsible country. The failure of the Democratic party to come up with solutions to the unemployment problem so that a reduction in government welfare does not cause problems is something the GOP feels the need to concern itself with.

  3. Misaki says:

    *does not feel the need to concern itself with. Spending too much time writing the same sentence…

  4. njorl says:

    “…if I had to bet I bet he expected the GOP to meet him half-way …”

    I fear Obama may be attempting to disprove Zeno’s paradox.

  5. Sandi says:

    If Mitch McConnell could bring Obama down by burning the US to the ground, he’d be striking a match as we speak. It makes me crazy that Obama can’t – for whatever reason – see that.

  6. MostlyAPragmatist says:

    Someone going by MostlyAPragmatist* made Chris Hayes’s point in a comment on Brad DeLong’s blog about a month ago. It sounds like a crazy conspiracy theory and yet…

    http://delong.typepad.com/sdj/2011/05/ghost-rider-bond-market-vigilantes-in-the-sky.html

    *and I know for a fact it’s not Chris Hayes

  7. ginandtacos says:

    I am pretty much done at this point. Aside from the sociotropic concerns that have been gnawing at all of us for a decade now, I am having a hard time focusing on anything except finding a damn job for myself before we sink into the second dip a drift away into our own Japan-style lost decade (or two).

    He’s not naive. He’s an Eisenhower Republican getting exactly the outcome he wants in this situation. I’ll bet you a dollar he declares victory by getting Boehner to agree to twenty bucks in cuts to the Pentagon budget.

  8. Rick Taylor says:

    “The two things that jump out from the press clip for me are, first, re-watching President Obama’s response to Ambinder’s question he clearly didn’t understand it at first, either the stakes or the concerns about this being an ugly battle. ”

    That is what hit me too, and I’m not sure I can believe it. I think he must have known, and was uncomfortable with the question, and so stalled. The president is a smart man; it’s hard for me to believe he didn’t understand the question.

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