Oh my. If Amy Walters, George Will, and Major Garrett agree that Tea Party Republicans need to grow up before they wreck the US economy, maybe there’s hope . . . but not much. Follow the logic if you can:
First, Will opened by noting the Federal Government had bailed out Wall Street and the automakers, but now it faces the prospect of several states, including California (world’s 8th largest economy) declaring bankruptcy.
Next, Will disagreed with Amy Walters that the message from the elections was voters’ hope that everyone in D.C. could just get along and solve the country’s problems. The correct message, Will insisted, was that voters wanted the Tea-GOPs to “throw sand in the gears” and “make it stop.”
Finally, Will, Walters and Garrett agreed that John Boehner would have a problem getting his new Tea-troops to understand that sovereign nations shouldn’t needlessly default on their debt, which Will said would happen if Congress refused to raise the debt ceiling. He and Walters then repeated the theme that previous “no” votes on raising the ceiling were tolerated only because they weren’t the majority, but we’d have a serious financial crisis if there weren’t enough adults to override the crazies. My, my. Where have we heard that before?
In a rational, humane and grownup world, the US would, consistent with the view that the US Constitution was created to “form a more perfect union . . . ensure domestic tranquility . . . promote the general welfare . . .” be working hard to develop a plan to fund essential services that states could not afford to carry during a major economic downturn.
There would be sufficient federal funds to pick up the entire increase in unemployment insurance and Medicaid and other safety-net programs that explode when recessions occur and collapse state tax revenues.
There would be sufficient funding to keep states and local districts from laying off teachers, firemen, police, sanitation, health and other essential workers which states and cities struggle to fund when their own tax revenues collapse.
There would be funding to keep essential programs functioning, to keep infrastructure from collapsing, to keep parks and other civic amenities from deteriorating at a huge, irretrievable loss to their communities.
And these efforts would be linked to programs to put the unemployed back to work, doing all the things that state and local communities need done to keep things going now and to build the foundation for the next generation.
We’re in a national crisis playing out at the state and local level. We need a national crisis response that can only be led and funded at the federal level. That’s what the federal government is for. And that’s the agenda for the next Congress. It would require they become adults.
But to summarize the bipartisan Beltway view, while one of the most dangerous but solvable crises facing the country is the impending bankruptcy of several US states and the collapse of services in communities all over the country — welcome to Ireland and Greece — the Tea-GOP Party coming to power doesn’t have the slightest inclination to allow the federal government to respond but would prefer to “stop it, to throw sand in the gears.” And while this brings several US states crashing to the ground, the same Tea-GOPers think it’s fine to crash the US fiscal and financial system.
Where’s Richard Clarke? “US Taliban planning to attack America.” You’ve been warned.



45 Comments

Depression, depressing.
Gak, I can’t swallow the tea, this thin gruel of what G. Will would pass off as “leadership.”
Thanks, SC. So, is there any real chance, judged by looking at the Congressional numbers, that the debt ceiling would not be raised? Rand seems to feel safe voting for no raising because it isn’t going to pass. I mean, how close is it?
And can you outline what would be the real, on the ground effects of the US govt defaulting? Bond markets, interest rates, Stocks, govt operations on all levels, unemployment, etc. I’m wondering how quickly Congress could reverse itself if the real world consequences of sovereign default were made starkly evident.
If the Teabaggers bring down our economy then won’t Cry Baby Boehner be blamed for destroying the American Dream he gets so tear eyed about. Suck on those balls Mr. Speaker. I can’t wait to see the cluster F… coming with the out of control Righty’s.
California can’t go bankrupt.
It’s in its constitution.
Yes, but California can go a long ways toward a de facto bankruptcy, by reneging on state promises of funding or forcing workers, agencies and local governments to cut services or else. The legal prohibition doesn’t provide a lot of protection.
In the This Week segment, you’ll see they quote Boehner warning his colleagues about the dangers of default. I have to believe that (1) he’s plenty worried about his own crazies (and see my other post on Lindsey Graham) but (2) is even more afraid of what Wall Street is telling him about the risks to them if the US credit system becomes threatened.
Wall Street is a large purchaser of US bonds, and they must know that even a short period of major uncertainty could create havoc for them, never mind what it does to the US government and its financial credibility. They must be telling Boehner that interest rates could rise rapidly, as they have in Euro-based nations that face risks of sovereign defaults.
And since this could happen quickly, and occupy front pages for weeks, with editorials condeming the GOP every day, whom would voters blame? Obama? Or Boehner and his crazies?
This is a huge risk for the GOP — to blow everything they’ve done to come back, on one stupid play.
“…the message from the elections was…[blahblahblah]”
They are both wrong.
The surge of voters, many newly registered in the Democratic Party, that elected an apparently progressive Democratic President and a Democratic Congress in 2080 simply withheld their votes in 2010.
Alan Grayson said it in a postelection interview in November: Democrats stayed home. This is evident in his district. In 2008, Grayson beat his opponent 172,854 to 159,490. In 2010 Grayson lost, 84,036 to 123,464. Grayson’s vote total was down fifty per cent. Note that the Republican vote total was down also. Results across the country were similar (but obviously not identical).
Voters who voted for an apparently progressive ticket in 2008 withheld their votes from Democrats in 2010 to say “We don’t want Democrats who act like Republicans.” They did not transfer those votes to Republicans. Those voters joined the “Stay At Home” Party. They did not vote. “Not voting for anyone” does not mean “voting for TeaPers/GeOhPeepers”.
(Musically, with apologies to Johnny Mercer: “TeaPers/GeOhPeers, where’d you get those ide-ers? TeaPers/GeOhPeepers, where’d you get those lies?…”)
Without a “None of the above” ballot option, or better yet, a progressive ON THE BALLOT [emphatic, not yelling], election results will be vulnerable to this spin.
Why don’t the pundits mention this? Is ten minutes of research on the internet too difficult?
Except, of course, that Grayson wasn’t a Democrat who acted like a Republican — but was punished by Democratic voters as if he was.
Yes, narrowly true.
Nevertheless, the broad point stands: Voters chose an apparently progressive government in 2008 and did not choose (by shifting their votes) a TP government in 2010.
Are you suggesting that Grayson’s presence on the ballot and his loss can be interpreted as a voter rejection of progressives? Maybe, but his loss more likely reveals how politically caustic Obama and the DINOs are. The coattail effect worked in both elections.
John Boehner said essentially the same thing back in November.
http://online.wsj.com/article/SB10001424052748704264804575626850936997596.html
The Debt Ceiling is now $14.294 trillion. The National Debt is now $358 billion away at $13.936 trillion and rising at the approximate more-or-less average rate of $4 billion per day.
Hell hath no fury like a teabagger scorned!
I have serious doubts that the Republicans will be blamed for anything because the Blue Dogs will join in the fun and make it a bipartisan effort. That’s all we’ll hear from Republicans after the shit hits the fan, “But the Democrats voted for it too!”
And even if this is a majority Republican effort, we have seen how adept these current Dems are at snatching defeat out of the jaws of victory. I don’t see much downside for the Republicans. They certainly don’t have to worry about the media getting on their case.
Everyone take a deep breath and read the excellent diary by letsgetitdone http://my.firedoglake.com/letsgetitdone/2010/12/26/altogether-now-there-is-no-deficitdebt-problem/
(sorry I don’t know how to make it a clickable link)
We should send a copy of this to every single congresscritter and senator. Over and over. and the White House too.
This whole argument is a bunch of hot air.
The very real effect of even a threat of the US defaulting would be a complete and total collapse of the entire global financial market. Not just ours. The dollar is the de facto global currency – and the only reason it has any value at all is the “full faith and credit” – even the idea of a default would send shock waves through the world money markets. If all this posturing begins to look more serious after Congress reconvenes – don’t expect the global money markets to wait until an actual vote before the shock waves begin.
And if the vote actually happens – reversing themselves will not fix the problem. Once they destroy the “full faith” that cannot easily be restored. It is a trust issue. As anyone knows – trust once destroyed is difficult if not impossible to restore.
Since this debt ceiling is just an artificial construct anyway – why not just do away with it altogether? It doesn’t make any sense. It is just a bunch of hot air and something for politicians to use to windbag about every so often (mostly Republicans it seems like). After all – who is really counting? Almost $6 trillion went out the back door of the Fed while Congress was fighting over the measly $700 billion TARP and that isn’t even mentioned anywhere. Most of the war funding until this year is “off the books” and isn’t counted. The SS Trust Fund is NOT counted as part of the deficit – because it is “borrowed”. Another $3.2 trillion. How about all the money we owe for all the oil we have “purchased” for the last 30 years from all the OPEC countries? We have never paid a dime for any of it. It’s all off the books too. The national debt number is a joke. It is a lie and an obfuscation and a bunch of hot air. Just do away with it. It’s a bookkeeping scam.
Grayson had a better analysis – every Democrat that won by less than 10 points in 2008 lost in 2010. Because the Dem voters stayed home. And it was mostly voters in the 18-25 group that stayed home – and that was the margin of victory in 2008.
That is the group that was energized by Obama with all the new media and the organizing by OFA. They dumped them after the election instead of keeping them busy. So all those energetic young people went on to other things.
Duh!
Spot on -
The parties biggest mistake was buying Rahm’s pushing more Blue Dogs on us – we now have no brand and are in bed with everything that the GOP makes go wrong.
Calif. should be a good rehearsal for the US default.
has it ever occurred to anyone else that amy walter’s whole purpose in life is just to be groomed to be the next ruth marcus? or, in the same vein, that ezra klein’s whole purpose in life is just to be groomed to be the next ej dionne?
Well, let’s not go overboard. Grayson had a lot of swing voter support in 2008, like many democrats that year. A non-trivial number of them voted for the Forces of Evil in 2010.
Saying he was punished by democratic voters is a bit much; if anything, looking at the vote totals, it could almost entirely be explained by those wretched swing voters.
That’s very interesting, but I wish that he would have shortened it, simplified it and made it more undestandable to financial neophytes like me. I guess he’s saying that as long as the dollar holds its value then it doesn’t matter how much the US raises or spends, but I’m not even sure of that.
I need Ecahnonomics.
Regarding html link code go here:
http://www.quackit.com/html/codes/html_link_code.cfm
(Just don’t forget to include the closing code or you’ll link to everything that follows.)
Boehner saw what you describe in January 2009:
“Instead, they [Boehner and Cantor] walked through a by-the-numbers picture of Democratic vulnerability that had been lost in the excitement over Mr. Obama’s election. Some 83 Democrats held seats in districts that once supported President George W. Bush; more than two dozen won their last elections by wafer-thin margins, according to a Republican document provided to The New York Times.” (Source: http://www.nytimes.com/2010/11/04/us/politics/04campaign.html?_r=1&scp=15&sq=boehner%20strategy&st=cse)
The dispute with the pundits is reinforced by your point, which is more detailed than mine: The TP/GOP won by default, not by popular choice.
P.S.: Do you have a link to the 18-25 data? I’m not challenging it, just looking for a source of more info. Thanks.
George Will wanting the Tea Party to grow up.
That’s a sick joke.
George, face it, you created the Tea Party, you are the Tea Party, it’s called the Republican party, you dumb fuck.
to mytwocents (your post didn’t have a reply button on it)
Sorry, I don’t have a link – Grayson said it when he was discussing why he lost. Someone was questioning why he lost when he was such a progressive when so many of the Blue Dogs lost. He said it was more of that ‘below 10%’ thing and then went further to explain the demographics of just who made up the voters that didn’t turn out.
I think the short version is this:
1) The US basically is not like your average household or your average State or local government in that it controls its own currency
2) That the debt/deficit and the debt ceiling are all arbitrary constructs set up by Congress as a way of keeping track of (and control of) various programs and expenditures) but that other than that, they are just that – arbitrary.
3) That by causing a “default” by refusing to raise this artificial debt limit – we destroy what is essentially a trust issue – the “full faith and credit” that is the actual backing of the US Dollar both in our internal economy and on the world market.
4) That we could just remove the debt ceiling altogether, stop issuing debt – both to ourselves and others, spend whatever it takes to get our economy going (since that is actually what keeps our money sound) and it will not matter.
5) That “printing as much money as it takes” is not a problem and will not be a problem unless and until we reach full employment and full utilization of our production capability. We are currently operating at about 70% right now. And when we reach that point – inflation can be controlled by raising taxes and lowering spending.
There, how’s that?
Never mind the Democrats. If the Republicans did something as stupid as not raising the debt ceiling, Democrats would be the least of their worries. Wall Street, the big banks, the bond market and the Fed would be gunning for them. The Street may whine about Obama’s bad-mouthing them, but they would gut and filet the Republicans for forcing the Treasury into default. No, Republicans will raise the debt ceiling, but they’ll cry that the Democrats made them do it.
the GOP is bought by Wall St and there is no way they will allow the US to default as they would be killing those who paid for their ticket to Congress…Obamabush and the Neoliberals know this…it a smokescreen to cut SS and Medicare…will any cuts in the debt create jobs? no but they have to make it look like they working for us! Lies are truths and truths are lies…Even the Germans are laughing at us interesting the Socialist heavy Unionized Germans are better off then us…wonder what the Tea Bags think of that!
I did read that but the realist in me resists the idea of getting something for nothing. In the extreme case, it defies logic (to me) that it doesn’t matter how much income there is, the expenses can all be covered by simply printing money, and debt doesn’t matter. Debt, at least external debt, requires interest payment and payback on demand but apparently (according to this theory) it’s all covered by the printing press. I guess we just repeat “debt doesn’t matter” until we believe it?
letsgetitdone’s diary (and Warren Mosler’s comments to his post) are must reads. FDL is a scary place – an awful lot of very smart folks like these two make hobbyist/amateurs like myself nervous about commenting, even if we have a bit of background.
When I first read the money supply velocity equation 50 years ago I concluded that it was a fudge factor – I’m glad to see that there are those that have made that fact, and a whole lot of better and more advanced thought, into Modern Monetary Theory – and with a free downloadable by Warren Mosler book – 7 Deadly Innocent Frauds – which should be a FDL book salon choice, IMO.
I did some research last month into the “disaffected Democrats” versus “disaffected swing voters” as the source of the election results.
In Grayson’s district, registration totalled 454,682 in October 2010, with 182,031 D, 169,976 R and 102,675 neither R nor D. Grayson’s drop in votes from 2008 to 2010 was 88,818. Even if we assume that all voters who were registered as unaffiliated withheld their votes from Grayson (which implies that all of them, 100%, voted for him in 2008), there would still be 13,857 votes – probably Ds – to account for. Grayson may have lost many unaffiliated voters, but the extremeness of the assumptions indicates that he clearly lost a lot of Ds. (The numbers are from the Florida state website http://election.dos.state.fl.us/voter-registration/statistics/elections.shtml#2010)
How many of each in Grayson’s district and in other states??
That’s hard to tell. In some districts, like in Pennsylvania, the number of independent voters is relatively small compared to those registered as D or R. In turnover seats, you’d have to assume that all of the registered independents abstained to explain the Democratic nominees’ vote drop from 2008 to 2010. That suggests that registered D voters did withhold their support. Other states, like Ohio (iirc), prohibit recording party registration. Yet other states, like Massachusetts, have a large contingent of unaffiliated voters, but general election results suggest that they usually vote D.
Nevertheless, the TP/GOP won by default, not by popular choice.
Perfect. You nailed the summary, and he nailed the situation. Of all the people I have asked, “What’s the worst that can happen if the U.S. continues its deficit spending and the debt continues to rise.” No one had an answer that didn’t include “morality” or “inflation,” and no one even mentioned the bond market. People have no idea why “the deficit” is giving them such heartburn.
No. You have to understand that neither the assclown in the White House nor the assclowns in congress do not actually write the legislation or make the critical decisions. They receive their marching orders from the banksters.
So, the issue is: will the banksters permit the US to go bankrupt? Answer: nuh uh.
Congress is just performance “art”
CANCEL “neither the assclown in the White House nor the assclowns in congress do not actually write”
REPLACE WITH:
“neither the assclown in the White House nor the assclowns in congress actually write”
Right effin ON.
Not voting is a way of saying that neither candidate compels you to vote, reflects your values or has your approval.
On the other hand, a mindless and reluctant quadra or bi-annual ritual visit to the polls to vote for the so-called “lesser” of evils only legitimizes a political process that is completely corrupted and makes voters 100% responsible for putting these criminals in power.
As a non voter my conscience is 100% clear. I stopped trying to choose between a turd and a douchebag decades ago.
Voting only encourages them.
Correction. Wall Street owns BOTH parties and has for years.
They all work for the banksters now.
Right!
Sometimes people invoke some version of “You get the government that you deserve.” to criticize nonvoters, but that’s wrong. Apathy may cause some people not to vote, but many are in effect voting “None of the above”. The only way to register that opinion is to write in the name of someone who does reflect your views.
Ir’s bad enough that the voting system forces a choice between “lessers”; even worse is the result we see in 2010 where the worse of the evils got elected.
Third parties would have a better chance of success if the election system were not based on geography.
Maybe it’s finally time to throw the fucking Blue Dogs out of the Democratic Caucus. They are of no use, their votes are neither reliable nor useful, we as Democrats lose nothing by getting rid of them now after the losses in November.
Then we can at least have the “cover” of saying ‘they are not us’.
Does that include O?
Rand Paul was talking about his “freezing hire” in another interview.
Pray that the Tea Party dummies are stupid enough to roil the bond markets. Pray for it! A huge interest rate spike caused by their nonsense would be directly laid at their feet, have no doubt.
Merely making enough stupid public comments threatening debt ceiling shenanigans could do it.
Finally, Will, Walters and Garrett agreed that John Boehner would have a problem getting his new Tea-troops to understand that sovereign nations shouldn’t needlessly default on their debt, which Will said would happen if Congress refused to raise the debt ceiling
Oh brother, this is as dumb as worrying about the 2037 Social Security trust fund instead of the 2011 unemployment rate. High powered money can be created either 1. with debt by selling Treasuries or 3. without debt by coining money. We know that the Secretary of Treasury has the authority to issue platinum or gold coins of any variety or denomination. We know that the US Mint sells coins to the Federal Reserve at face value. Of course, face value of coins have no economic relationship to minting costs, $1 coins cost far less to make (and $50 gold coins far more) than face value. The net revenue from these coin sales to the Mint is called “seigniorage”. Net revenue from coin sales to the public is simply called “profits”, but as we’ll see, seigniorage and profits have the same destination– they are to pass through to Tsy General Fund. To quote from the Federal Register (publishing a 2007 US Mint regulation establishing civil fines for misuse of Mint trademark):
Pursuant to the United States Mint Public Enterprise Fund (PEF) statute, 31 U.S.C. 5136, all receipts from fines assessed under the regulation would be deposited in the PEF and the Secretary of the Treasury would transfer these amounts, along with regular United States Mint seigniorage and profits, to the General Fund as miscellaneous receipts…the drawing of funds from which are subject to appropriation by Congress…”
http://www.federalregister.gov/articles/2007/10/26/E7-21132/assessment-of-civil-penalties-for-misuse-of-words-letters-symbols-and-emblems-of-the-united-states
The Fed has long understood that the government doesn’t actually levy taxes or sell Treasuries to fund the federal budget, but rather to control inflation and short term interest rates respectively (see 1946 article by NY Fed Chairman Beardsley Ruml, “Taxes for Revenue Are Obsolete”). Since Fed now pays interest on reserves (IOR), it no longer needs to sell Treasuries to peg the Federal Funds rate (debt sales drain excess reserves from the banking system which would otherwise push the FFR down to zero). So by use of coin seigniorage and IOR payments, the US Government can fund its operations indefinitely without ever raising the debt limit.
beowulf, Time to blog this.
OK OK
http://my.firedoglake.com/beowulf/2011/01/03/coin-seigniorage-and-the-irrelevance-of-the-debt-limit/
To end the mass corruption, fraud and greed that has overtaken our country and to put America on sound footing in the 21st century, President Obama needs a vision –
1. Enact Fair Elections Now Act ($100.00 maximum donation, matching funds for federal office candidates – strictly voluntary to comply with present laws)
2. The public owns the airwaves. FCC mandate that all political advertising is a public service and therefore free
3. Permanently ban anyone who has served in the federal government from becoming a lobbyist
4. Break up the big banks
5. End ALL wars and lower the bloated defense budget
6. Enact The Bipartisan Tax Fairness and Simplification Act of 2010 – (Eliminate $1 trillion in tax givaways. Change the top tax bracket to 70% to help pay down deficit)
7. Reduce health care costs by adding the public option. Allow Medicare to purchase drugs. Allow drug re-importation. Move away from fee-for-service
8. Climate Change Legislation – put a heavy price on carbon to encourage alternative energy investments
9. National Infrastructure Bank – Run by engineers, not politicians. Find $2 trillion over 10 years to create jobs now and increase productivity later. Put millions back to work. Fund with a millionaire’s tax
10. Federal government make massive investments in R & D to create quality jobs long term in areas like biotechnology, alternative energy, IT, materials, science, alternative-fuel automobiles, and clean technology
11. Enact entitlement reform by seriously means testing Social Security, Medicare and adjusting retirement age.
12. Raise educational standards through a national core curriculum. Advocate the firing of the the bottom 10% of teachers nationwide and replace them with good teachers. Make higher education free to families that can’t afford it to encourage upward mobility in society
Republicans seem best when saying one thing, doing another. Clearly it works for them. The new speaker of the House Boehner uses crying like a magician uses slight of hand. He cries for the children, and cuts education for them, while everyone concentrates on the poor man’s tears.
The Republicans will raise the debt ceiling, but that will not stop them from wringing as much as they can out of a willing and compliant Obama.
Kabuki. Triangulation. Obama wants it. Republicans and Democrats (most of them anyway) want it. They will get what they want.
Keep your eyes on their prize: Manipulating information to such an extent that the public asks to be legislated into a state of corporate servitude.