Tuesday, January 04, 2011

GOP Depending On Obama To Blink


At first it seems kind of crazy or, as a Firedoglake blogger puts it, "bats--- crazy" (no hyphens in original).

Presumably, Austan Goolsbee thinks so, as the President's chief economist (video, below, from Crooks and Liars) told ABC News' Christiane Amanpour on Sunday

This is not a game. You know, the debt ceiling is not something to toy with. That`s the -- if we hit the debt ceiling, that`s the essentially defaulting on our obligations, which is totally unprecedented in American history. The impact on the economy would be catastrophic.

I don`t see why anybody is talking about playing chicken with the debt ceiling. If we get to the point where you`ve damaged the full faith and credit of the United States, that would -- that would be the first default in history caused purely by insanity.





But if it's crazy or insane, it's a calculated form of insanity. Senator Jim DeMint has called for a "showdown" so as not "to increase our debt ceiling anymore."

The Hill reports

Sen. Bob Corker (R-Tenn.) has said he's trying to build a bipartisan bloc to accomplish just that, while Rep. Paul Ryan (R-Wis.), the incoming chairman of the House Budget Committee, has wondered what Republicans would "get in exchange" for raising the debt ceiling.

And the other- the one the mainstream media calls "moderate"- South Carolina Senator, Lindsay Graham (video below), said on Meet the Press (transcript here) on Sunday "I will not vote for the debt ceiling increase until I see a plan in place that will deal with our long-term debt obligations, starting with Social Security, a real bipartisan effort to make sure that Social Security stays solvent, adjusting the age, looking at means tests for benefits."

When Gregory asked Graham to confirm that he wants to "raise the retirement age and means-test health benefits for older Americans," the Senator wisely shifted to the euphemistic "seriously look at entitlement reform by adjusting the age and means assessing benefits."




Fortunately, Graham will have to contend with the sentiment of the American people as reflected in the CBS New/Vanity Fair survey (graph below), summarized as "In order to balance the budget, 61 percent of Americans would rather start by taxing the rich more and 20 percent would cut defense spending. Very few people would mess with Medicare (four percent) or cut Social Security (three percent)."


















Unfortunately, the GOP has reason to believe it will prevail. With Goolsbee's remark bespeaking panic or desperation, Chris Hayes observed

the White House is putting itself in a position where they`re forced to give in. If this game sounds familiar to you, it`s because it`s exactly the way the tax cuts deal worked out last month. Republicans say, we won`t vote for any tax cuts deal that doesn`t include a tax cut for the richest Americans. The White House says, well, if we don`t get something passed it will be economic Armageddon and then presto-chango, the richest Americans get their tax cut.

Republicans played it perfectly because the White House never bothered to call their bluff.

The American people oppose a cut to Social Security- er, entitlement reform- but they also opposed a tax cut on upper incomes. But given the Obama Administration's modus operandi on taxes, the GOP is not "crazy" or "insane, merely playing to its tea party and Wall Street base. But Dean Baker explains that no one would be hurt by a debt default more than that latter plank of the party's base, and

not only Democrats, but also independents and even Tea Party Republicans overwhelming support Social Security and Medicare. Furthermore, the gun, in the form of a potential debt default, is actually pointed at the Wall Street banks, not the public.

A debt default would be a very bad situation and one that we absolutely should try to avoid. But the day after the default, the country would still have the same capital stock and infrastructure, the same skilled labor force and the same technical knowledge as it did the day before the default. In other words, the ability of our economy to produce more than $15 trillion in goods and services each year will not have been affected.

One thing that would not be around the day after a default is Wall Street. The default would wipe out the value the assets of the Wall Street banks, sending Goldman Sachs, Citigroup and the rest into bankruptcy. The recovery for the economy from such a situation will be difficult, but the shareholders of the Wall Street banks would be wiped out and their top executives unemployed.

For this reason, the threat of a default is a gun pointed most directly at Wall Street. Given the power of Wall Street over Congress, is inconceivable that they would ever let the Republicans pull the trigger.

This means that if President Obama is prepared to take the right and popular position of supporting Social Security and Medicare, he will win. This is both good policy and great politics. The public just has to force President Obama to stand up and show some leadership.


It should be easy for Obama to "stand up and show some leadership" because, as Guy T. Saperstein notes

The Republicans are running a total bluff. They don't want the government to default on government bonds anymore than Obama. It would cause economic chaos, cost Wall Street trillions and lead to a civil war within the Republican Party between the Wall Street Wing and the Lunatic [aka, Tea Party] Wing, with the Wall Streeters threatening to give the Democrats $2 billion in the next election if the Republicans don't come to their senses. And it would provide Obama a chance to show the country what a bunch of dangerous lunatics the Republicans are.

Support the American people, who oppose cuts to two of the most successful and popular government programs ever. Drive a wedge between two powerful wings of the Republican Party. Defend the interests of elderly Americans, who have deserted the Democratic Party in the age of Obama and represent a demographic group with high voting rates. Barack Obama cannot be unaware that he is playing with a strong hand and should be able to out-negotiate his adversaries. If he fails to do so, doubt must emerge as to whether he is willing to drive a hard bargain, and what that implies about his core values.




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