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The Spectacle Blog
As President Obama gets involved in the debt limit talks today, the negotiations will probably be limited to whether and what kind of tax hikes should be included in the deal. It’s an odd situation, considering the divide between the two sides: the Republican leadership is now united in opposition to tax revenue increases, while top Democrats and the White House are insisting on them. Yet there are good reasons why the final deal has to take the form of the cuts agreed on by the Biden-led group plus whatever Obama, John Boehner, and Mitch McConnell hammer out on taxes.
None of the alternatives are viable. For instance, the preferred outcome of Tea Partiers represented by Mark Mechler and some Republicans is that there is no debt ceiling increase at all, and the government either immediately balances its budget, or defaults. This is simply not a realistic possibility, for a number of reasons, one being that the vast majority of members of Congress of both parties have no desire to risk a default, no matter what they might say publicly.
The next most aggressive alternative to immediately balancing the budget would be the cut, cap, and balance plan favored by Sen. Jim DeMint and others. DeMint has issued stern threats to Republicans who vote for anything short of the plan, which would, as its name implies, cut spending, impose enforceable spending caps, and passing a balanced budget amendment in Congress. DeMint’s maximalist demands make for a great bargaining chip for Republicans in the negotiations, but it’s hard to consider them feasible when a balanced budget amendment couldn’t clear Congress even if it had Obama’s backing.
Meanwhile, the ideal scenario for Democrats would be to simply ignore the debt ceiling, thereby avoiding having to deal with Republicans. Doing so isn’t impossible. Obama could raise the debt ceilling through the executive “nuclear option,” namely, simply ordering the Treasury to ignore the law and resume issuing debt. The budget expert Bruce Bartlett explained this possibility:
…I believe that the president would be justified in taking extreme actions to protect against a debt default. In the event that congressional irresponsibility makes default impossible to avoid, I think he should order the secretary of the Treasury to simply disregard the debt limit and sell whatever securities are necessary to raise cash to pay the nation’s debts. They are protected by the full faith and credit of the United States and preventing default is no less justified than using American military power to protect against an armed invasion without a congressional declaration of war. Furthermore, it’s worth remembering that the debt limit is statutory law, which is trumped by the Constitution and there is a little known provision that relates to this issue. Section 4 of the 14th Amendment says, “The validity of the public debt of the United States…shall not be questioned.” This could easily justify the sort of extraordinary presidential action to avoid default that I am suggesting.
Neverthless, this course of action would be extremely politically costly for Obama to pursue. Raising the debt ceilling is already an unpopular proposition, and doing so by riding roughshod over a Republican House would provoke widespread outrage. A more likely scenario would be that Republicans agree to a nearly clean ceiling increase, perhaps short-term, in return for vague but sizable spending cuts, in the case that the negiotations stalled out until the Treasury approached an event that really would spook investors. In other words, the end result of the bargaining would be similar to what happened with the 2011 continuing resolution.
Any of the preceding possibilities would create a clear winning team and a clear losing team. The most likely result, though, would be a compromise that both party wings found unpalatable. The Biden-led group already sketched out most of the terms: significant cuts to discretionary spending (much of it of it totally painless or even phony) along with significant but not structural cuts to entitlements. The sticking point is what kind of tax increases, if any, will be added to those spending reductions.
According to the AP, the administration wants $600 billion in new tax revenues, including through ending tax breaks for oil companies and taxing hedge fund and private equity managers at a higher rate. Meanwhile, the Washington Post reports that Republicans are considering including defense spending cuts as a substitute for tax hikes.
Such a compromise would be far off the promises of the Republican leadership, not to mention the demands of DeMint and co. But there may be no other way.
The options facing Republicans could be much worse, at least according to Dave Weigel. Weigel argues that the forms of the compromise taking shape are already a huge win for the Tea Party-wing of the GOP:
Look at [the] theoretical (and likely-sounding!) scenario, wherein the debt ceiling is raised only after $4 trillion in spending cuts over the next decade and an end to $1 trillion of tax breaks. That’s just miles far to the right of where Republicans were two years ago. If all Tea Party activists are doing is creating a right flank that makes a deal like this look moderate, they’re merely the most effective political movement in a generation.
View all comments (22) | Leave a comment
More Blog Posts by Joseph Lawler
http://spectator.org/blog/2011/06/27/debt-ceiling-scenario
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CalMark| 6.27.11 @ 6:33PM
Amazing how all of these AmSpec "conservative" writers are talking about tax hikes as inevitable and necessary. During a huge recession.
No doubt you would have counseled Ronald Reagan to raise taxes in 1981.
Tom T Piperson| 6.27.11 @ 7:08PM
The writers at AmSpec are mostly pragmatists of the dinosaur elite. And pragmatically speaking the debt ceiling is a booby-trapped issue that the Republicans have played badly.
They pretended that there would be no bad consequences if the debt ceiling wasn't raised, which not only made them look inept it gave the Democrats the chance to call the bluff. Now they're entertaining the idea of tax increases because they've been backed into a corner.
The absolute worst thing they could do is let Obama use an executive order to keep us from defaulting on our debt. The idea that raising the debt ceiling is unpopular is just dumb. A tiny percentage of voters even know what the debt ceiling is.
But everyone understands what it means to default on debt. And the idea of letting Obama take credit for swooping in to keep us from defaulting on our debt is nuts.
That seems like the most likely scenario though. The Democrats can afford to hold fast to the demand of closing tax loopholes and other tax gimmicks that will sound good to voters. The Republican dinosaur elite can't give in to those demands without making the Tea Partiers even angrier, and yet they if they refuse to allow it then they enable Obama to single-handedly sign the order that keeps us from defaulting on our debt.
Dixie Pixie| 6.27.11 @ 8:02PM
Has anyone considered that there is too much Federal Debt to be serviced and a full or partial default is a certainty.
However if the Federal Government defaults on the Federal Debt that the Federal Government owns then that effectively destroys that debt.
That may be the reason that the Treasury Department has been buying up the Federal Debt through QE1 and QE2.
The Treasury Department may be planing a bonfire of governmental debt to pave the way for another Liberal spending bender in the next administration.
Of course the Republicans will take the fusillade of bullets when the government defaults on its own debt due to holding firm on the debt ceiling.
That may be Liberal plan, to leave the Republicans with the blame while spending the governmental money on themselves.
buckeyeman| 6.28.11 @ 7:26AM
"But everyone understands what it means to default on debt..."
I disagree, Tom. In fact, I don't think even the author of the article understands what it means. Our federal "debt" is the amount of money which has been loaned to our government through the sale of government bonds to individuals or others (like China or Japan). There is plenty of revenue to pay the interest on these bonds and to repay the principle when the bonds expire.
Refusing to raise the debt ceiling would not result in a "default on debt". This is now and has always been a straw man intended to confuse and frighten the public. The question is how the government would apportion the remaining yearly/quarterly/monthly/weekly/hourly revenue. Someone would have to prioritize non-debt government expenditures and something would have to get cut (the scary part is that others have suggested that Timmy Geithner might be the one in charge - OMFG!).
There is clearly NOT enough revenue to pay other non-debt government expenses such as Social (in)Security, Medicare, Medicade, AFDIC, NPR, student "scholar"ships, TARP XIV, bailing out Greece, and the rest of the detritus of the international socialist welfare state.
The author quotes budget "expert" Bruce Bartlett as stating:
"Section 4 of the 14th Amendment says, "The validity of the public debt of the United States...shall not be questioned." This could easily justify the sort of extraordinary presidential action to avoid default that I am suggesting."
The vague language quoted above "might" justify extraordinary presidential action (but not easily) with regard to actual debt, but the cost of redistributing wealth ("easily" argued as outside proper governmental authority) could not be so justified at all. Hiding Obama's life story through executive order (Executive Order 13,489) was one thing but giving himself unlimited power to spend through an Executive Order might just be Obama's Bastille Day moment.
All of us running businesses in the real world recognize the difference between debt and expenses. If my business is stressed financially, I can and must control my expenses. I cannot default on my debt, short of bankruptcy.
Requiring a constitutional amendment as a prerequisite to raising the debt ceiling doesn't make any sense either. Just don't raise the debt ceiling. The constitutional amendment is then not needed.
Republicans: Just say NO.
Have you considered| 6.28.11 @ 10:09AM
Agreed Buckeyeman.
Also, I would like to point out that "expert" Bartlett changed the text, and therefore the meaning of the 14th. Here is the relevant part:
""4: The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. ""
Seems he missed the "AUTHORIZED BY LAW" part.
Then you have the Article 1, Sec.8, Item 2 which authorized Congress ONLY "" To borrow Money on the credit of the United States;""
Boy, when they want to kill the Constitution they go all in don't they?
Bill Hussein O'Stalin| 6.27.11 @ 6:34PM
There's another scenario that could knock the Republicans off their keisters and that is the one that the White House is engaging in at the last minute, claiming that they anticipate not ending the Bush tax cuts, all the while claiming that Obama still wants to end them.
It's my opinion now Obama never will end the Bush tax cuts and never intended to but merely made the statements to keep his base happy.
The White House has apparently come to the conclusion they no longer need the support of the base because theoretically the base will support Obama in deference to any Republican.
In the scenario unfolding Obama is about to lay claim to being the biggest tax cutter of all time much bigger than Bush, and 8 times larger then Reagan, all the while stealing the greatest issue from the Republicans for the next election cycle.
In the background the Obama commies continue their evil work, using the EPA to crush the American economy.
The Republican problem is that problems associated with federal mandates are to explain to the average citizen, and many do not care, because about half of America does not pay taxes.
The Republicans only have themselves to blame for reaching the across the aisle time after time.
The bill for all that alleged bipartisanship has now come due and the Republicans continue to look like welterweights up against a heavyweight.
They should dump Boehner immediately, he's like a waif in the forest when it comes to these negotiations.
They should also forget about Obamacare for the time being and start coming up with some real meat on jobs. If they can come up with some convincing job incentives they will still look like winners.
Right now they look like what they are, uncoordinated wimps. They have no nerve, courage or conviction. Go down fighting but at least put up a convincing fight. So far, the message from the Republicans is confusing and they keep getting sidetracked on sure losers, like Medicare. Stick with the winners and get back to the contentious issues later.
http://thehill.com/homenews/ad.....debt-talks
Ryan Ellis | 6.27.11 @ 6:36PM
This is simply not accurate, Joe. Your scenario doesn't account for an absolutely unavoidable fact--no tax increase of any size or any form can pass the House. With that variable, if you want to have a debt ceiling hike at all, it cannot have any tax hikes attached to it.
The two are simply mutually-exclusive.
Chuck| 6.27.11 @ 6:52PM
If the GOP agrees to raise the debt-ceiling this time then it will be raised again and again no matter what limitations are placed on the budget, hence the entire '12 election cycle paradigm changes giving Obama an easy re-election win, Congress, state and local elections up for grabs. The defining moment for the Republican Party, stand fast and prosper or fade into oblivion like the Whigs.
Tom T Piperson| 6.27.11 @ 7:26PM
Except that "stand fast" in this case means letting Obama be "the one" who steps in to keep us from defaulting on our debt when the Republicans wouldn't agree to things like closing tax loopholes for oil companies. Is that a fair summary? Well, TOUGH. That's exactly how it's going to look to most voters who've never even heard of the "debt ceiling."
The Republicans had a strong hand and blew it.
The sad thing is that there are a lot of Republicans from the old guard elite who seem to want to lose this battle in the most damaging way possible.
Look at what's happening over at redstate. Erickson's goal seems to be to force the Republicans to walk away from the table with nothing, let Obama "save the day" with an executive order, and on top of all of this, define the issue in a way that drives a wedge between the Tea Partiers and the old guard Republicans.
Truth to Power| 6.27.11 @ 9:01PM
According to Tom our best opportunity was to surrender early. What a plan. "The voter is just too dumb to understand this" is what the progressives and strangely Tom are counting on. Taking the credit card away from the spendthrift is just too complicated. I don't think so. I like our plan better. Republicans should never turn into tax collectors for the Democratic Party again. This is a spending problem and needs a spending solution. We don't need to permanently trash our economy for the Democratic Party's unsustainability. This is why Obama won't and hasn't put out a plan since he has been President and wants all negotiations in foggy back rooms. He is vainly trying to share blame. Republicans should leak their shenanigans to the press and bring Harry and our dumb President into sharp focus. The other factor that Lawler isn't taking into play is that Republicans can't vote for this and survive. If it was a great hand Obama would come out with a plan. His actions speak louder than his lies. He will eventually be forced to fold and still get his butt handed to him next year. Thanks for the help Tom.
Tom T Piperson| 6.27.11 @ 9:13PM
You like what plan better? The Republican plan was to bluff about not giving in on the debt ceiling, then when their bluff was called to whine loudly and continue betting after their cards had been exposed.
I'm not disagreeing with you about the problem. I'm not disagreeing with you about the need for spending cuts. I'm just pointing out that the Republicans have played this hand so badly that they're left with a choice of either giving in on letting the Democrats close some tax loopholes and other revenue enhancing gimmicks that would drive the Tea Party nuts, OR refusing to make a deal. The kicker is that refusing to make a deal enables Obama to claim to be the adult in the room who steps in with an executive order to make sure we don't default on our debts.
Few voters know what a "debt ceiling" is. Everyone knows what it means not to pay your debts, especially these days.
By all means, if you want to goad the party into betting more money on a bluff, after everyone at the table knows that they're bluffing, go ahead. That seems to be Erickson's plan at redstate.
Truth to Power| 6.27.11 @ 11:41PM
The debt ceiling can be explained in an election year. Everybody knows what a spendthrift is as well. It is simply taking the credit card away from the Democratic Party. You act dumb like a Democrat. There is no bluff. There needs to be major spending cuts and no tax increases. If we have to do this through the debt ceiling then so be it. It will not be the end of the world. No more tax collecting for Democrats. They have led us toward Greece and it is time to get off those tracks. The faster the better. By the way there was no other way to play this. The Democrat's control of the Senate and the Presidency represent real power. Republicans just control the House. We are driving a hard deal because of the 2010 elections and what they might mean to Democratic survival in the 2012 elections and that is it. You seem like a coward who doesn't understand that your enemy has risks as well. You act like the dinosaurs who want to cut crummy deals and keep the Democratic Party from taking responsibility for their unsustainable policies. That is the road to Greece.
Tom T Piperson| 6.28.11 @ 2:01AM
No other way to play it? They bluffed! When they got caught bluffing they doubled their bet. You think they're driving a hard bargain? Seriously? With what leverage?
If they give in on closing tax loopholes on oil companies or whatever, the Tea Party hates them. If they don't give in, they end up getting NO cuts and they give Obama an excuse to do an end run around them with an executive order. Brilliant.
The bluff about letting us default on our debt was NOT the only option. It was a stupid option pushed by people like the redstate crew who these days seem intent on splintering the Republican party. You'd be right at home there.
Truth to Power| 6.28.11 @ 9:02AM
This is what Tom offers.
http://www.nationalreview.com/.....linardatos
Cowardice is not a virtue. Tom has had several chances to offer a path forward and all he comes up with is surrender. Your skirt is showing, Tom. I think that maybe Obama could use your help. Maybe that is what you think you are doing.
AZ CoJones| 6.27.11 @ 7:08PM
Should President use his Executive Order authorization only as described above, due to the Republicans not allow any changes to the debt ceiling, then Congress including the Republicans, in 90 days make some real headway in overall cutting of the Federal Debt, and null and void the President's Executive Order. This would definately make President completely disenfranchised with what the American tax payers have been clamoring for. This would definately put the financial purse in the hands Congress and make great campaign foundations for those who would be running against the President and portions of his party.
Dixie Pixie| 6.27.11 @ 7:38PM
If Obama ignores the Congressional debt ceiling and has the Treasury Secretary simply issue more debt, then the 1st American Republic is effectively dead.
Our system is one of a balance of power by checks on power on one branch of government by the other branches of government.
The most powerful check on the Executive Branch is is the “Power of The Purse”.
If Obama is allowed to decide alone where, when and how much the federal government spends by ignoring the Federal Budget by not having one and has unlimited spending with no debt ceiling, the the Congressional “Power of The Purse” is effectively gone.
The Executive Branch is the power which enforces the Law.
If it is allowed to decide which Laws to obey and which it will not, then Congress is nullified and rendered powerless.
The Executive Branch can then create Law through the writing of Regulatory Rules and alone decide how much money is to be issued and to where and when it is to be spent.
This will centralize all governmental power in the Executive Branch which may have been Obama's plan and objective.
The TEA Party Movement could find that Congress is nothing more but a powerless hollow shell leaving the Ruling Class able to ignore it and to rule as it pleases itself.
That too may have been the objective in the first place.
C Bowen| 6.27.11 @ 7:56PM
This reveals the foolishness of supporting TARP Ryan's Plan which calls for raising the debt ceiling.
The Republicans have already lost and there will be some last second "miracle" compromise to cut the rate of growth in spending in the 2016 budget, and close loopholes, right now--which aren't tax increases, just fairness dontchaknow?
Michael L. Hauschild| 6.27.11 @ 7:58PM
They will posture, strike heroic poses, and make excuses. They will then raise taxes and the debt ceiling; it is what they do, always have done, and untill 2012 will be what they do.
Clint| 6.27.11 @ 8:21PM
" If the debt ceiling is not increased, the Treasury can prioritize interest and debt payment to avoid a default and essentially put the government on a stringent pay-as-you-go basis. Would that involve extreme cuts in government spending? Certainly. But it could be done, if it had to.
Let's remember that the Treasury still rakes in quite a bit of money in revenues — it took in $604 billion (seasonally adjusted) in the third quarter of 2010. In FY 2010 the annual debt service was some $414 billion, working out to an average of about $104 billion per quarter. Although the numbers won't be quite the same going forward, the debt service will soak up only about one-sixth of the incoming revenues."
Clint| 6.27.11 @ 8:31PM
We've Had Enough " DEMOCRAP LITE " From The GOP Ruling Elite & Their Apologists.
The Tea Party Rebellion Escalates.
Carpe Diem.
smokedaddy| 6.27.11 @ 9:09PM
Why doesn't AmSpec just give up and throw in our first borns as part of the package. The truth is, the Republicans hold the whip hand but Boehner, McConnell are refusing to use it. When push comes to shove, we need to enable the administration to prioritize expenditures, while making some pointed suggestions on what should be prioritized & what not, and repeatedly, articulately point out the revenue streams and the budgetary facts. Sure, you'll have some of the anti-debt limit expansionists fold when push appears to come to shove, but plenty of others won't and will blame Obama when he keeps pouring $ into rail projects over paying the soldiers. Of course, Boehner & co appear to be taking Lawler's line so he she should be a happy guy.
CalMark| 6.28.11 @ 12:14AM
Reading all of these comments, I conclude that we are doomed, doomed. Let's all just drink Jonestown Kool-Aid and let the Dems have their way. Oh, woe is us!
Hey folks, listen up: there's more than enough Federal income to service the debt, and even reduce big chunks of it. That would mean cutting wasteful extra-Constitutional spending that buys votes and launders money for the Democrat party, however.
Therefore, the Democrats won't even think about that, so the Republicans won't either, because it wreaks havoc with getting invited to cocktail parties hosted by Important People in the Cool Kids Club, which is the REAL reason gutless sissies like Boehner and Cantor to Washington.