The stock market is falling quick. I wonder if Republicans and particularly the Tea Partiers in Congress have checked their brokerage accounts today to see what their radical obstruction moves have cost them personally.

Even with my limited grasp of economics, I'm surprised more people aren't focusing on the danger of the second round of cuts, which seem to be a given. They will be made by a congressional commission, and not only don't we don't know the specific details of what they will include, they may be filibuster-proof and for all practical purposes, veto-proof.

By all accounts that I've read, the second round of cuts will include Medicare and Social Security. The writing is on the wall that in addition to losing Medicare for two years when the age is raised to 67 (since Obama doesn't object to that), there will be cuts to social security benefits. And now we can add losses in retirement savings caused by the stock market tanking. [More...]

Digby discusses the new Pew Poll findings on what Americans believe will help grow the economy:

I realize that the president has been more nuanced than the Republicans on the benefits of the massive spending cuts and contractionary nature of this whole debate. [. . .] But it is still the case that most Americans have come to believe that fixing the deficit will lead to jobs.

There's not much the President can do now to revive the economy. The GOP House will block any worthwhile initiative. But avoiding doing harm would be nice. Of course the President must do what's necessary to raise the debt ceiling but he should try to fashion a deal that does the least harm to the economy. Cutting the deficit now will be very harmful. Despite what Americans might think. And in November 2012, no one is going to be thinking about whether they were right or wrong about deficit reduction spurring economic growth. They'll look at the results and blame the guy in charge. Unless the guy in charge can blame someone else. Unlike the Obama team, and as the Pew poll demonstrates, "Independents" will not be won over by "reasonableness." Good policy is good politics. And not horrible policy is better than horrible policy politically. Yes, it remains "the economy, stupid."

Speaking for me only

Suppose that GOP House leadership won't allow a vote on a debt ceiling plan that can pass the Senate (imagine something like the Reid Plan with two votes.) I can imagine a bill that will lose all but say 25 House Republicans and getting all the House Dems passing in the House and the Senate. But what if House GOP leadership doesn't allow a vote on such a measure? How does that play politically? I'd like to think disastrously for Republicans, but I'm not sure.

The reason for my hesitation is that the GOP is making a flashing sign out of this cockamamie Balanced Budget Amendment. Let's be clear, there is zero chance of passage of such an amendment. It requires 2/3 votes in both houses of Congress. That's 290 in the House and 67 in the Senate. Not gonna happen. But no one ever went broke underestimating the intelligence of the Beltway Media. They might treat this as "reasonable" and then, given such signalling, the electorate might think 'what's wrong with that idea?' After all, didn't President Obama say the government is like a household and has to balance its budget? What's wrong with a balanced budget amendment then? In the short term, I could see the GOP not losing that debate. Of course in the long run, nobody is going to care, except with regard to the consequences in the economy. Thoughts?

Speaking for me only

Sorry to beat a dead horse, but this from Kevin Drum annoyed me:

If Obama had negotiated with nerves of steel, would he have gotten better deals throughout his presidency? I don't think so. Unlike labor bosses and Soviet bosses, who could be pressured because there were things they wanted that a president could provide, Republicans — and especially tea party Republicans — can't be. If Obama had been tough as nails, they would followed a path of total obstruction and nihilism anyway. Maybe some details here and there would have changed, but on the whole it just wouldn't have made any difference.

(Emphasis supplied.) In December, the President had his biggest bargaining chip - the Bush tax cuts. To pretend he did not is either wilful blindness or ignorance. Now you can argue for The Deal the President made, but don't pretend it was not a moment of maximum bargaining leverage. The debt ceiling increase is a moment of maximum bargaining leverage for Republicans. They are wringing out as much as they can from it (that the Tea Party is genuinely insane does not change that fact.) See my posts The Debt Ceiling Battle Was Lost Last December and Seeking Maximum Leverage In Political Bargaining. See also the Madman Theory of Political Bargaining.

Speaking for me only

While the debt ceiling debacle continues, the fact that the economy is tanking comes into clearer view. Today's reports:

Gross domestic product rose at a 1.3 percent annual rate following a 0.4 percent gain in the prior quarter that was less than previously estimated, Commerce Department figures showed today in Washington. The median forecast of economists surveyed by Bloomberg News called for a 1.8 percent increase. Household purchases, about 70 percent of the economy, climbed 0.1 percent.

More of the same with budget talks. Votes delayed.

Dominique Strauss-Kahn accuser's lawyer is still in desperation mode, holding press conferences, trying to save the case. I'm more convinced than ever the DA has already decided to drop the charges.... otherwise someone would have muzzled this accuser and her lawyer. It's the most inexcusable, unacceptable behavior by a lawyer and client (who is a prospective witness and not a party) in a pending criminal case I've seen yet. We can expect the filing of the accuser's civil lawsuit shortly. But of course, this was never about money.

More interesting: Roy Black on why those accused of rape need more legal protections, including not having their names dragged through the mud while the accuser retains anonymity.

New season of Project Runway starts tonight, and it's eviction night on Big Brother.

This is an open thread, all topics welcome.

Bob Bradley Fired.

Geithner soon, I hope.

Boehner does not have the votes yet. If he is having problems now, how is he going to survive a compromise bill? Tea Party won't take yes for an answer. If nothing passes today, I think the markets take a big hit tomorrow.

Open Thread.

Robert Kuttner:

This may sound churlish at such a moment, but in addition to blaming the recklessness of today’s Republican party, the man who deserves substantial blame for this impending economic doomsday is Barack Obama. For two and a half years, he has been all but training the Republicans, Pavlov fashion, to keep rejecting compromise. He has done this by rewarding them with a treat every time they up the ante or move the goal posts. [. . ] if the Republicans, like Europe’s leaders of 1914, miscalculate and create disaster, the responsibility will partly be theirs but also partly our overly eager-to-please president.

His words, not mine. I will say this, now is not the time for Obama to get tough. The failure to raise the debt ceiling would be catastrophic. But Obama's failures in December are very much a cause of today's debt ceiling crisis.

Ezra predicts:

[W]e’re looking at [a debt ceiling] deal with no new revenue, significant new spending cuts, a spending-cut based enforcement mechanism for further deficit reduction, a series of debt-ceiling votes designed to embarrass Democrats, and a vote on a balanced budget amendment that’s also designed to embarrass Democrats. It’s a pretty good deal for Republicans, but it’s also a deal that observers expect a substantial number of Democrats could vote for.

That's a win for the GOP. And it is a loss for the President. Why? It helps the President not at all politically (no voter gives a crap about the debt ceiling) and is not good for the economy in the short and medium term (and thus not good in the long term either.)

It is an amazing thing that in the middle of the worst economic times since the Depression, this is what our federal government is doing. This is a bigger failure of our ruling elites than the Iraq Debacle.

Speaking for me only

Ta-Nehisi Coates:

Obama has been much praised for the magnanimity he shows his opposition. But such empathy, unburdened by actual expectations, comes easy. More challenging is the work of coping with those who have the disagreeable habit of taking the president, and his talk of “fundamentally transforming the United States of America” seriously. In that business, Obama would do well to understand that while democracy depends on intelligent compromise, it also depends on the ill-tempered gripers and groaners out in the street.

Coates references Eric Foner's great book The Fiery Trial, which I wrote about here:

Once the country is saved from debt ceiling kabuki, what happens to the economy? New jobless claims are down this week:

First-time claims for state unemployment benefits fell more than expected last week, dropping below the important 400,000 level for the first time since April, according to a government report on Thursday. Jobless claims dropped 24,000, to a seasonally adjusted 398,000, the Labor Department said. [. . .] The prior week’s figure was revised to 422,000 from 418,000.

But this is a stalled economy which has not been creating jobs in a meaningful way:

The government is expected to report on Friday that the economy grew at a 1.8 percent annual rate, according to a Reuters survey, after a tepid 1.9 percent pace in the first three months of the year. On Wednesday, the Federal Reserve said growth had slowed in much of the country in June and early July.

And there is no reason to expect improvement. After the President enjoys the debt ceiling fight's result - while he is not trusted on the debt ceiling, the GOP is even less trusted - will he realize that no one is going to give a crap about that next November?

Open Thread.

Reading the apologias for the bad bargaining by Democrats, I've come to the point that I can see only two alternatives: (1) either Bill Clinton was the greatest political bargainer in recent memory, or (2) a lot of people do not understand bargaining. Consider this Matt Yglesias post:

I’ve been in a few conversations with various people this week citing one strategy or another that they claim could have produced a “clean” debt ceiling increase and avoided the current legislative crisis. I basically agree with all these theories. Obama could have gotten a debt ceiling increase built into the December 2010 tax deal [. . .] But I’m not sure this is a case of bad negotiating strategy or good negotiating strategy.

We’ve seen so much mockery of “11-dimensional chess” that I think people have gotten unduly reluctant to credit the idea that there’s a bit of regular old chess happening here where you have to think one or two moves ahead. [. . . R]easonable people can disagree as to whether having the fight now is better than having the fight then, but I don’t think it’s by any means crazy for the White House to suppose that the current timing is more favorable to the progressive side or crazy to believe that they did, in fact, see two moves ahead and decide they preferred this outcome.

I do not know how a reasonable person could see it Yglesias' way. Not raising the debt ceiling is the most dramatic doomsday point that could be imagined. Failure to raise the debt ceiling would be catastrophic in the short and medium term and likely the long term. Indeed, the President will end up by caving at the end, and rightly so. This is not the moment for brinksmanship. More . . .