Oh, how I long for the time when politicians lied to get elected. When a Democrat could run as a hawk and govern as a dove. When a Republican would run as a conservative and it meant they were cautious to change and represented traditional values, not the values of a mob. Oh, for the days when we knew the contract with America was not worth the paper it was printed on.
When getting things done was the goal of both parties and compromise was seen as a victory for each. Incrementalism was the result. Respect was the rule, not the exception. Peace was a goal. Being patriotic included doing what was best for all Americans. Believing in Democracy included supporting majority rule. Laws were meant to protect people. Justice was non-partisan. Giving a leg up to someone less fortunate was an ideal. Educating our young and taking care of the aged were bi-partisan platforms. Delivering jobs in your district was a good thing, because it meant jobs. A time when campaign promises were quickly forgotten to be replaced with the reality of American life. And flip-flops were what you wore on the beach.
Oh, how I long for the time before entertainment news. Before celebrity politicians, pundits and talking points. When extremists didn’t get air time. When politics was dull and before it became a made for TV sport with avid fans* on both sides.
It was Dick Cheney, who said in 2002, “Reagan proved that deficits don’t matter.” It was also Reagan, who proved that raising the debt limit doesn’t matter – he raised it 17 times in his eight year mythological reign. Bush, Jr. raised it seven times. But now, Obama is President, so it does matter.
It matters, because to win as a Republican, you must, no matter what:
- Keep a promise to Grover Norquist never to vote for any additional government revenues, including, but not limited to taxes, fees or ending subsidies;
- Keep a promise to the Tea Party to reduce the size of government** and the reach of government regulation;
- And keep a promise to Republicans everywhere to defeat President Obama.
Passing a debt limit extension, which has been done 74 times since the law that required it was passed in 1962, may violate promise number three: to defeat President Obama, no matter what.
President Obama did not cause this problem. In fact, he has done more than any President in two generations to help the Republicans keep their promises. Federal, state and local taxes are the lowest per capita since 1955 – well below the high water days of Nixon and Reagan. It is a fact that President Obama has presided over cutting taxes more than any President in history.
But Obama’s help to the Republicans doesn’t stop there. He has secured the Republican promise to reduce the size of government – the number of government workers has gone down by 500,000 since Obama took office.
What more must he do? For the answer, just look back to April when the House Republicans voted to privatize Medicare and increase the costs to seniors an average of $6,000 a year (not a tax). The House Republicans also voted to turn Medicaid, the medical safety net for the poor and disabled, into a voucher system so the states could make Medicaid meaningless (not a tax). Immediately after their votes, House Republicans poll numbers fell off a cliff. They have only one chance to save themselves: force Democrats into drinking the poison tea, too.
Now, we are being held hostage to a crisis totally of Republican promise making – a demand that any agreement to raise the debt limit be matched by permanent spending cuts and include entitlements (not a tax). At least two trillion in additional debt is needed to fund authorized spending through the next election.
Obama, true to his campaign promises saw this as an opportunity to enroll the Republicans to do something meaningful. Why not take the advice of Simpson-Bowles? Cut four to six trillion of the debt by a fair combination of revenue increases and cuts to discretionary and entitlement spending. Nasty compromises required for both parties for the good of the nation to secure our future. No new taxes would be included – just plugging of corporate loopholes, ending of subsidies for corporations who don’t need them, and allowing the Bush tax cuts to finally expire. To protect the fragile economy, neither the revenue enhancement, nor the spending cuts would be immediate. Nor would the entitlement changes privatize Social Security, Medicare or Medicaid — more likely, a means test, and some reimbursement and cost of living changes.
Too bad for all of us. To keep their campaign promises, Republicans won’t do the big deal and may not do any deal. Republicans were gamed last spring by Obama in the continuing resolution deal. The $30-40 billion in cuts turned out to be only a few hundred million – maybe less. Republicans don’t trust Obama – he’s considered too smart for them.
Who will blink and when? The White House told seniors today that they may not get their August 3rd Social Security checks. The pundits are camped in the cable network parking lots. The rhetoric talking points sound as if both sides are going to the mattresses. This is going to be close.
Without an agreement, the Republicans are likely to pass something partisan in the House. Depending on the details, and they are likely to be onerous, it is doubtful that it could even come to the floor of the Senate.
Thursday, Senate Republican leader Mitch McConnell has suggested a back up plan that would give the President new power and release Republicans from having to vote for anything that they have promised not to vote for. Lending authority for the balance of this Presidential term would be granted in three installments of up to $2.4 trillion, provided that the President cut spending by the same amount. Congress’ role would be reduced under special rules such that they would only be able to vote against a Presidential plan. Which of course, Republicans would. Which would then be vetoed by the President. The McConnell plan would give Republicans 100% authority to blame Obama for all of the economic woes, while keeping their agenda of fear in the news, and keep moving the day the world ends as we know it until just before the 2012 election. This plan, is likely a non-starter, as it would be giving the President way more power than Tea Partiers’ are likely to approve in the House.
Scenarios for default are unprecedented and no one really knows how one would play out. The White House may not have the authority to prioritize spending – allowing them to default on some debt to make payroll and pay other bills. At this time, the White House doesn’t plan to use the 14th Amendment, but may anyway. The Supreme Court will surely be called to decide many emergency details.
Should a deal not be done, what happens next is almost too dark to describe — sounding more like apocalyptic fiction than what is so seriously possible.
Inaction by Congress before recessing on August 5th would mean that revenues would only be available to pay 40-45% of our bills (that is 10% of our economy that would be missing in August). Our debt would be downgraded by ratings agencies. Smart money would likely already have made their bets — shorting everything — especially instruments guaranteed by our government — and almost guaranteeing things will get worse quickly. Safe places for cash would be almost impossible to find. The market impact of would be immediate. Everything will begin to go down. At 1000 Dow points down, margins calls will become commonplace forcing the markets lower and increasing computer trading.
The Treasury would be called to make hard and unpopular choices on who to pay with the estimated $172.4 billion of August revenue. Non-essential government workers would be sent home. The parks would close and campers evicted. Payments for Social Security, disability, VA benefits, food stamps, unemployment benefits, Medicaid and Medicare reimbursements, rental assistance, public housing funding, children nutrition programs, Pell grants, state education grants, IRS refunds, military active duty pay, federal employment salaries and others would be at risk. As would contracts for defense, Homeland Security and others.
“Handling allpayments for important and popular programs (e.g., Social Security, Medicare, Medicaid, Defense, active duty pay) will quickly become impossible.” – Bipartisan Policy Center
Here are examples of some of the choices we would have in August from the Bipartisan Policy Center:
The Treasury must also rollover $507.4 billion in debt in August and there may be no takers – interest rates could skyrocket increasing the national debt even more, while reducing funds available to pay bills — and the Fed may have to intervene. Home sales would stop. As markets and currencies tank, people, banks and countries would begin to fail. There will be chaos on all world exchanges and many would be shut down. People would take to the streets. Then it gets really bad.
Even if Congress passes a bill by mid-August, there is great risk that the damage to markets and interest rates would already be so great that we would be thrown back into a deep recession.
More money could be lost in the markets during the first week than is needed for the debt increase. More money could be lost in the subsequent weeks than our national debt. Recession could easily turn into depression. People would jump out of windows. War might be threatened. All because of campaign promises. Oh, how I long for the time when politicians lied to get elected.
* Short for fanatics.
** Officially, the Pentagon, CIA, NSA, etc. are not included.
Editor’s note: The post was updated at 7:43 am on July 13, 2011 to correct and provide new details of the Mitch McConnell back up plan as they became available.