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America’s Fannie Pack
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The Obama Watch
Debt Demagoguery
Failure to raise the debt ceiling, pace Messrs. Obama-Geithner-Goolsbee, would not cause America to default on its debts.
Traditionally, when the national debt approaches the debt ceiling, the minority party in Congress engages in a little no-cost demagoguery. They let the majority take responsibility for the necessary “yes” vote, and then publicly denounce them for fiscal irresponsibility. This routine is so familiar that Donald Marron, a former Congressional Budget Office official, describes the debt-ceiling increase vote as a “a tax on the majority.” The Tea Party-minded Republicans, however, are making things play out very differently than in past years.
The Democrats only received one Republican vote in the Senate to raise the debt ceiling in 2010, and none in 2009. Similarly, in 2004 and 2006, with Republicans in charge, the debt ceiling increases went according to script. Senate Republicans received only two votes from their Democratic counterparts in 2004, and none in 2006. In 2006, notably, then-Senator Obama unloaded both barrels on George W. Bush: “The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure.… Americans deserve better.”
Now that his Treasury needs the debt limit raised from the current $14.3 trillion, though, Obama has changed his tune dramatically, He’s denouncing the Republicans’ refusal to raise the limit. The Treasury is expected to hit the ceiling as soon as March 31, and Republicans have shown no desire to raise it before then without first extracting concessions on spending cuts from Obama. Because the Republicans now possess a majority in the House and the ability to sustain a filibuster in the Senate (a threat that has been levied by freshman Mike Lee of Utah) the administration faces the real possibility of hitting the debt ceiling if it doesn’t win the GOP’s cooperation.
So the state of play is an inverted one: Republicans are daring the White House to test their resolve on the limit, while Obama would give anything just to accept the normal political ramifications of raising the ceiling without having to make concessions on spending. The Republicans’ strategy is to signal that they are willing to countenance the Treasury running out of debt to issue. For its part, the administration is overstating the dangers of a self-triggered debt default, and accusing the GOP of senselessly putting the public at risk.
In one of the administration’s first moves, Austan Goolsbee, the chairman of the Council of Economic Advisers, accused Republicans of “playing chicken” on the debt, and warned that “[t]his is not a game. The debt ceiling is not something to toy with.… If we hit the debt ceiling, that’s… essentially defaulting on our obligations, which is totally unprecedented in American history.… the impact on the economy would be catastrophic.”
Reacting to the administration’s demagoguery, Pat Toomey of Pennsylvania and Tom McClintock of California have introduced a measure in the Senate and House, respectively, that would ensure that hitting the debt ceiling would not immediately result in a debt default. Called the Full Faith and Credit Act, the bill would simply clarify that, in the event the ceiling were reached, the Treasury would be obligated to prioritize interest payments on the debt above other obligations, ensuring that an inability to issue new debt would not disrupt the market for bonds and destroy the government’s credit.
Shortly after the bill’s introduction, Treasury secretary Tim Geithner took the unusual step of addressing a letter to Toomey to criticize the bill’s provisions as “unworkable” and to claim that it was “factually incorrect” that the government had prioritized certain kinds of payment in the past.
But Geithner’s attack is not convincing. In an address to the Heritage Foundation, Toomey claimed that Geithner “would rather keep the specter of a debt default out there as a way to intimidate” Republicans, and reiterated that he wouldn’t support raising the debt limit without “significant reforms.” McClintock reacted similarly in a conversation with the Spectator, calling Geithner’s letter “a political polemic, with no basis in reality.” McClintock noted that many states, including California, have provisions similar to the Full Faith and Credit Act, and that California continues to issue debt even though it is a “worse credit risk than Lindsay Lohan.” McClintock says the principle of the bill is that “if you’re living off your credit cards, you better be sure to make the minimum payment on your credit card first.”
The Republicans have the facts to their advantage in this debate. Although it would be inadvisable, a failure to raise the debt limit would not have immediate dire consequences the administration claims. The mere introduction of the Full Faith and Credit Act establishes that fact, giving the GOP a valuable bargaining chip. The bill will likely never reach Obama’s desk, but it demonstrates that the Republicans aren’t deterred by the administration’s apocalyptic rhetoric.
Kevin Hassett, an economist for the American Enterprise Institute who has briefed the Republican caucus on the debt ceiling, disagrees with Geithner’s assessment of what constitutes a default, explaining that default “is really a debt market event” that cannot be triggered unless interest or capital payments on the debt are missed and that “there are a number of tricks the Treasury can pull out before it’s forced to borrow again.”
According to Hassett, those tricks can include painless actions such as withdrawing funds from the U.S. Treasury General Account at the Federal Reserve, which currently stands at about $80 billion, or drawing on money the Treasury has set aside for contingency interventions in foreign exchange markets. These funds alone would probably be enough to tide the Treasury over until April 15, when tax revenue begins to come in.
And, contra Geithner, the Treasury does have a history of prioritizing payments in the past. As recently as 2003, Congress failed to act before Treasury approached the then-$6.4 trillion debt ceiling. In late February of that year, Treasury was forced to stop issuing new debt and took a number of measures to pay interest on the existing debt, including skipping payments to investment funds for federal worker retirees, drawing down money from the Exchange Stabilization Fund, and withdrawing from the Treasury general fund. Using these stop-gap measures, Treasury was able to continue meeting its obligations until May 27, when Congress finally voted to increase the debt ceiling. At that point Treasury repaid the funds from which it had taken money or skipped payments.
Plainly, recent history shows that a failure to raise the debt ceiling would not result in immediate disaster. In fact, according to Josh Barro, a fellow at the Manhattan Institute, the government “could muddle through for months or, theoretically, years without a debt limit increase, and without an acute crisis in the bond markets.”
The Obama administration’s dire warnings about the debt, then, amount to nothing more than a bluff to discourage Republicans. But the Republicans’ goal — reducing federal spending — is undoubtedly a good one. Federal spending is on an unsustainable trajectory, and yet the Obama team is engaging in scare tactics and demagoguery to prevent the GOP from addressing the problem.
About the Author
Joseph Lawler, former managing editor of The American Spectator, is editor of Real Clear Policy. Follow him on twitter: @josephlawler.
Letter to the Editor View all comments (45) | Leave a comment
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Lawrence Boccardi| 2.18.11 @ 7:23AM
So, as recently as 2003, the debt ceiling was $6.4 trillion. Now, 8 years later, it approaches $15 trillion, and "there's nothing to see here, keep moving!"
Intelligent Design| 2.18.11 @ 7:31AM
Obama's "budget" puts the national debt on a trajectory to double (to $28 billion) in less than 10 years. Voters should keep in mind that since the Democrats gained control of Congress in January 2007, up until the new Congress in January 2011, the national debt has increased from about $8.6 trillion to $14 trillion, a gain of 63%. George W. Bush helped them with this recklessness, but spending has to be approved by the House.
Spoonman| 2.18.11 @ 8:41AM
And signed by the president!
ENOUGH ROPE| 2.18.11 @ 12:14PM
Recognize that Obama is a saboteur who wants America to become a third world country. Obama regards America and its upper and middle classes as oppressors of the world and the poor in the same way that European colonial powers exploited their colonies.
Obama is an habitual liar in order to bankrupt and destroy America. He is a SMILING COBRA.
Intelligent Design| 2.18.11 @ 7:24AM
Obama's budget shows that he isn't qualified to run a lemonade stand. CNBC said yesterday that the budget assumes federal tax revenues will grow at approximately the same pace as Apple Computer's sales (per estimates) over the next five years, or 65%. Sounds real for Apple, but it's Fantasyland for the Treasury. A day earlier it was reported that Obama's budget does not include interest expense on the national debt. Hey, that's only a few hundred billion dollars. Now, it could be that the media has made mistakes in reporting. They are not exactly reliable. But it would not surprise me if Obama's budget includes a long list of bogus assumptions, some based on his goal to deceive voters, and some based on his ignorance.
Appleby| 2.18.11 @ 1:02PM
It's not his money, so why shouldn't he blow it all on beer and popcorn?
Ken (Old Texican)| 2.18.11 @ 7:34AM
Mr. Lawler,
thanks for the clarifications.
Pecos Pete| 2.18.11 @ 7:38AM
There ain't any money to pay for all of the goodies.
We is broke.
Solution: We could sell the Rocky Mountains to China for $15 Trillion and be on the road again.
SpiralArchitect | 2.18.11 @ 10:50AM
Good Call.
Then again we could simply use some of the resources within and pay the debt down no problem.
The only hold up there, aside from it would benefits the counrty our 'leader despises' ( re: America) htere would be an enourmous increase in the workforce.
People not on the Gov dime are not under the thumb - But, worry not, the 'man' is working on a plan for a larger blanket to place over 'we the people'.
What an (O')bummer this is turning out to be.
coal carrier| 2.18.11 @ 7:38AM
Why doesn’t this Harvard graduate understand that $14 trillion in debt means we don’t have any money? Why doesn’t this Harvard graduate understand that year after year raising the debt ceiling just causes us to go deeper and deeper into debt? Doesn’t this Harvard graduate know that money doesn’t come from a printing press? Doesn’t this Harvard graduate see our nation is on the verge of collapse? It can’t be that he is stupid or incompetent, after all he is a Harvard graduate. Can it be that he really wants to see our nation collapse? No, it can’t be. He only wants to spread the wealth around.
irish19| 2.18.11 @ 10:03AM
No, he doesn't understand. It's because he was a law student. Lawyers seem to think that the rules of reality don't apply to them. Yet another reason we need to stop electing lawyers to office.
SpiralArchitect | 2.18.11 @ 10:52AM
The Community Organizer is brilliant, well, quite smart anyway.
The fact of the matter is he is accomplishing, with tremendous success, exactly what he has dreamt of for years, perhaps his entire (adult - term used lightly) life. The destruction of America, land of the free.
The only thing standing in his way is the (people in) the home of the brave. Too bad so many think Marxism is of any benefit to...anyone.
Anthony| 2.18.11 @ 11:32AM
You are correct, Obozo is indeed fulfilling the "Dreams from my Father". The son of the Kenyan anti-colonialist is out to destroy America, along with his allies on the left.
The people of America however, have news for the Imposter-In-Chief. We've beaten bigger and better than you, Obozo. November 2nd was just the beginning!!!
Mimi| 2.18.11 @ 11:46AM
It used to be hard for me to think this horrible mess he has made was deliberate....Nah...Don't be nuts!....I'd tell myself.
Well... things have gotten so darn BAD...YES, it MUST be deliberate....I am just trying to figure out WHY....WHY .....WHY !....( He's DUMB..Not for AMERICA... Just in it for the PERKS....) I just don't KNOW..now!! Everything he touches turns bad, or says isn't true or right, nothing goes WELL, just bad. Something in my GUT tells me something is dreadfully WRONG!!!
coal carrier| 2.18.11 @ 1:19PM
"Something in my GUT tells me something is dreadfully WRONG!!!"
Mimi, this is exactly what I thought when he first showed up in the Senate. I said, who is this guy and all the fanfare? Something’s up. Needless to say when he showed up on stage next to Hillary in the primaries I knew my gut was right.
VBMax| 2.18.11 @ 4:53PM
Quite simply he is an anti-social personality. Chief characteristic is intention to destroy.
setpoint| 2.21.11 @ 2:17PM
Harvard U. ain't what it use to be. People go there for the prestige it lends to their credentials, not the education it provides to make one qualified. You can get a PhD. in Maori Basket Weaving which is absolutely worthless for any practical use from Harvard. More substantial education is from such schools as Stanford University and Hillsdale College which teaches economics after the Austrian School of Economics.
Harvard isn't the premier school any more! It has a reputation which will go down as the quality of its graduates demonstrate!
martin j smith| 2.18.11 @ 7:49AM
I say call Obama's bluff. his whole administration including Geithner and Bernanke should be investigated. Let Obama go on the pipoe and threaten to shut down the Government. That will really earn him brownie points with voters !!!!!!!!!!!!!!!!
Further: As in the case of Wisconson I think it is imperative that the Government Unions be confronted on their selfishness --translate AntiAmerican behavior. They will threan fellow citizens if the don't get their way-screw them--again le the voters decide if this is the kind of government --AND IT IS OBAMA BEHIND GOVERNMENT UNION ALL THE WAY--they want. I bet NO1!!!!!!!!
Then what will the Socialist Marxists do ? Onto the barricades ? Then I say--send in the Marines and squash them!!!!!!!!!!!!!!!
Oldefarte| 2.19.11 @ 12:43PM
Agreed, but the easiest way to solve this problem is to simply get most everyone [or the intelligent ones] to VOTE FOR THE REPUBLICANS IN NOVEMBER OF 2012!!!!!!!!!
wodiej| 2.18.11 @ 7:51AM
Obama and his band of merry followers continue to display their utter ignorance for economics and what is needed for stability and growth.
Curly Smith| 2.18.11 @ 8:27AM
Obama Announces Government Shut-Down
In a surprising move, President Obama announced today that the Federal Government would close on Monday, February 22nd. Speaking for the Administration, Vice President Joe Biden said "While President Obama cares deeply for the American people, he feels that it's time for some "tough love" and the government shut-down is necessary to move the budget talks in a more helpful direction. The expected rioting, looting and death toll in the tens of thousands is regrettable but the responsibility lies fully with the Tea Party renegades who are intent on destroying this fine country. The unconscionable budget cuts openly discussed by Tea Party members would result in billions of deaths, mothers eating their young, and conservatives finally realizing their goal of reinstituting slavery. Hopefully, after witnessing the impact of the one-day shut-down, which will be shown 24/7 on State Run Television, the American people will realize the importance of an economically sound budget and will petition the President to raise their taxes and fully fund his austere, bare-bones $7 trillion budget. The President, Biden stressed, will not allow this to become a country of Wisconsins." "
Mimi| 2.18.11 @ 11:51AM
HEH BOOGER ...Is that YOU???
Appleby| 2.18.11 @ 1:05PM
And after the government was shut down for a month, suddenly people noticed that nobody was harrassing them from said government, no new laws had come forth to eat up their substance, Obama was not pre-empting NA$CAR races with stupid speeches, and there were no expense accounts being approved or per diems being doled out.
And the people looked at each other and said, "Hey, it' s crazy, but it just might work!"
Redstateboy| 2.18.11 @ 9:05AM
my question is Obanana trying on purpose to destroy the Nation or is he just completely incompetent?
Deborah D | 2.18.11 @ 9:20AM
The answer is "A." He doesn't like his country very much, which is obvious by the fact that everything he has done and continues to do is against the will of the people. He's encouraging the unions in the halls of the Wisconsin legislature, but badmouths the Tea Partiers. He's the president of left, not of the entire country. He doesn't know how to be anything else.
MacDaddy| 2.18.11 @ 10:01AM
I-m-p-e-a-c-h-m-e-n-t!
Anthony| 2.18.11 @ 11:02AM
Yep, the party's over, turn out the lights. While the states are going bankrupt, and union thugs and Democrats are pitted against the rest of America, it would be really cool of MILLIONS of us Americans didn't file our income taxes on April 15th!!! Wow, wouldn't that send the Washington establishment rocking!!!
Obozo and the Democrats need to know they're done,... toast,... finished. The Second American Revolution has begun. God bless the Tea Party Movement!!!
glenny| 2.18.11 @ 2:50PM
Next best thing would be to file for an extension of time to file the returns. Technically, if you owe money w/ the return, you're required to send the $$ with the extension request. If you don't send the money w/ the extension, you can be penalized but it might be worth the small add'l cost just to NOT send the feds any tax revenues. Also could be a bit "late" sending in the 1st estimated tax payment for 2011, say, around the middle/end of May!
glenny ; )
cicero| 2.18.11 @ 11:44AM
Our fearless leader has a law degree, but is hardly a lawyer. That would be like calling George Gilder a baseball player. He may have studied the game, but he has never played. Same with the Pres. A lot of people get law degrees (most say too many do). Not many of them ever do or can go to batttle in the arena.
I know he went to Harvard, and to Columbia, too. I don't care where he was born. What I want to know is how did he get into these two schools, and who paid his way?
cicero| 2.18.11 @ 11:44AM
Our fearless leader has a law degree, but is hardly a lawyer. That would be like calling George Gilder a baseball player. He may have studied the game, but he has never played. Same with the Pres. A lot of people get law degrees (most say too many do). Not many of them ever do or can go to batttle in the arena.
I know he went to Harvard, and to Columbia, too. I don't care where he was born. What I want to know is how did he get into these two schools, and who paid his way?
cicero| 2.18.11 @ 11:44AM
Our fearless leader has a law degree, but is hardly a lawyer. That would be like calling George Gilder a baseball player. He may have studied the game, but he has never played. Same with the Pres. A lot of people get law degrees (most say too many do). Not many of them ever do or can go to batttle in the arena.
I know he went to Harvard, and to Columbia, too. I don't care where he was born. What I want to know is how did he get into these two schools, and who paid his way?
cicero| 2.18.11 @ 11:44AM
Our fearless leader has a law degree, but is hardly a lawyer. That would be like calling George Gilder a baseball player. He may have studied the game, but he has never played. Same with the Pres. A lot of people get law degrees (most say too many do). Not many of them ever do or can go to batttle in the arena.
I know he went to Harvard, and to Columbia, too. I don't care where he was born. What I want to know is how did he get into these two schools, and who paid his way?
Lois C.| 2.18.11 @ 12:31PM
We must return to sanity in this country. We now have an entire generation who thinks the government owes them be it health care, a job, welfare; what ever when in truth the government owes them only a country where they are safe from foreign attack and free to persue their fortune.
I can remember when it was shameful to have to take public assistance or accept charity to make it, now that assistance is expected, how did we get here?
Pat| 2.18.11 @ 12:33PM
“Go out and win one for the Gipper” – a quote attributed to Ronald Reagan as George Gipp in “Knute Rockne – All American” and one of President Obama’s all time favorite movies, he’s watched it at least 100 times – at least that’s the case according to Time magazine. Surprised? You’d be even more surprised to learn that Obama “loves” Ronald Reagan - his Columbia School of Journalism allies within the traditional media outlets are insisting that’s the simple truth – and insisting on this obvious truth to anyone who will listen. What they mean by “love” is that Conservatives and the elusive American Swing Voter need not fear Obama, he’s really just a black Ronald Reagan, not some Left-Wing boogie man you wouldn’t want raking leaves anywhere near your daughter’s bedroom window.
Could such a ridiculously transparent ploy – this I’m not a Left-Wing Nutcase, I’m really to the right of Ronald Reagan assurance - actually work to ensure Obama’s re-election in 2012? Yes, it could. Unlike the ramifications of increasing the Federal debt ceiling, whether or not Obama shares the philosophy of Ronald Reagan lacks intellectual substance, it’s absurd to even debate it. Which is probably why this nonsense will leave a greater impression on Swing Voters than debates related to government financing.
Look at it this way: The I’m just like Ronald Reagan argument lives in Apt. 3A within the mind of a Swing Voter. The raising the debt ceiling is highly irresponsible argument lives in B15, that basement apartment, way down that dark, musty hallway, take two lefts, then a right turn. Everyone sees the guy in 3A coming and going constantly, waving cheerfully to one and all. But the guy living in B15 is somewhat reclusive as well as hard to understand, Mr. Swing Voter tries to avoid him on the stairs and would rather meet that smiling guy in 3A and hear his argument.
Oldefarte| 2.18.11 @ 1:25PM
I recall that during the governmental shutdown which occurred in the 1990's, that the termnology the government proclamated was that NON-ESSENTIAL GOVERNMENTAL EMPLOYEES DID NOT HAVE TO REPORT TO WORK DURING THE SHUTDOWN. The question then becomes that if there are [were] indeed non-essential employees, then why in hades DO THEY HAVE JOBS???????????????????
Kelly| 2.18.11 @ 3:04PM
He didnt think it would when he was a senator and Pres. Bush requested one..and the dems were in charge....
Clint| 2.20.11 @ 11:24AM
Obama Is The Leaderless Leader In Deficit Cutting.
Obama Has Compromised The Future Of America.
The Tea Party Rebellion Escalates.
Rise Up.
martin j smith| 2.20.11 @ 11:46AM
The day of reckoning politically will come in November of 2012, but economically speaking the day of reckoning may come sooner. Will Obama try with his allies to play a fast one on the American people to avoid an election. Will he create a crisis or allow a crisis to happen ? Obama cannot be trusted one bit.
But lets say the reckoning comes in November of 2012 and Obama and the Left loses the election. What will they do ? Will they accept the results or have like Bolshevicks and try some monkey business. Sorry if I offended monkeys I meant funny business. These are not games boys and girls this is how have felt about this guy even before he got election and I feel this way even more so now having observed his act.
Mistral| 2.20.11 @ 3:28PM
The longer this idiot continues in office the more of a buffoon he appears.
Vita Men| 2.20.11 @ 10:15PM
----PLEASE! --stop sounding like the Rockefeller
front op you are with these FALSE paradigms.
OUR last 4 Presidents have been RIIA/CFR
Globalist set-ups. ON RECORD
The 'shadow government'
has been, beyond dispute, dismantling our soveriegnty in the name of RED China enabling,
'Globalism'
and 'population easing' (i.e incremental genocide
via cultural destruction and MASSIVE covert
sterilization programs).
OBAMA is just as 'in the loop' as the Luciferian
Freemasonic BUSH family ever were. One day we
will know the truth of the Dunham bloodline.
MEANWHILE we're dealing with 'continuity of
agenda' ----in the form of TREASON.
HUAC meets NUREMBERG for the global
banking cartels, FREEMASONIC et al TAX FREE
foundations, NGO's and their 'fave' instrument of
manipulation and control --the illegal FED.
BEYOND high time to draw out and prosecute their
century long legacy of wars, assasinations, 'ideological virsuses' , social
upheaval and cultural and economic destruction...
Christian Louboutin | 6.23.11 @ 6:13AM
The Democrats only received one Republican vote in the Senate to raise the debt ceiling in 2010, and none in 2009. Similarly, in 2004 and 2006, with Republicans in charge, the debt ceiling increases went according to script.
Reebok | 8.11.11 @ 3:18AM
is good
العاب بنات | 4.11.12 @ 4:59PM
Obama and his band of merry followers continue to display their utter ignorance for economics and what is needed for stability and growth.