How Would Failure On Raising The Debt Ceiling Play Politically?

By Big Tent Democrat, Section Other Politics
Posted on Fri Jul 29, 2011 at 02:24:20 PM EST
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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

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How Would Failure On Raising The Debt Ceiling Play Politically? | 34 comments (34 topical)

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To (5.00 / 1) (#2)
by kdog on Fri Jul 29, 2011 at 02:37:33 PM EST

apolitical Joe and Jane Blow (who understand all this even less than I do), the debt ceiling is all about Obama wanting to spend more of their grandkids money, nothing more...Brand R once again has misframed the debate, and I fear much of the public buys it.

Default would be cheered, at least until the consequences hit, and even then Brand R might spin the consequences in a way that it's socialist Brand D's fault their government paycheck bounced or they can't get a car loan. Ya can't go broke underestimating the electorate's intelligence either.

I don't see how Boehner pulls a Hoyer on this (5.00 / 1) (#3)
by andgarden on Fri Jul 29, 2011 at 02:41:09 PM EST

until incipient default (i.e., the President starts prioritizing the bondholders).

As for the politics; I agree, pretty unpredictable.

: Bondholders will get paid (none / 0) (#26)
by Warren Terrer on Fri Jul 29, 2011 at 04:38:44 PM EST

All that has to happen is the Fed can buy up Treasuries and coupons as they come due. They can even buy the individual coupons alone. The bondholder/coupon-holder gets paid, and Treasury now owes the money to the Fed. A default by Treasury to the Fed is inconsequential, just one part of the government owing money to another part. It can easily be remedied later when the debt ceiling is finally raised.
The problem is going to be for all other recipients of federal government money. Since no new bonds will be sold and overdrafts at the Fed aren't allowed, Treasury will only be able to make payments as tax money becomes available. After the Pentagon gets its cut, how much will be left over each month?

Here's how they'll balance it (5.00 / 1) (#5)
by Dadler on Fri Jul 29, 2011 at 03:02:14 PM EST

On the weakest, most vulnerable, spindly backs they can find.

Oh for a President not afraid to go Lenny Bruce on these morons. But ours prefers to go Republican on them. If they were smart enough to realize this, they could win all day.

Manufacturing dunce caps, now there's a little stimulus we could use.

Hmmm...The politics are for me impossible (5.00 / 2) (#7)
by masslib on Fri Jul 29, 2011 at 03:07:05 PM EST

to figure. I mean, I would have thought the electorate would be spitting nails at the GOP for playing around with what is a technical vote they've voted in support of dozens of times. But, no, I think because of the President's offer of a grand bargain, somehow the public hasn't grasped exactly what is going on here. I'll say this, I think people are sick and tired of this debate, and just want something done. So I think the politics heavily favor the President if he simply invokes the 14th and moves on. We'll see.

: That would be the best result (none / 0) (#12)
by Demi Moaned on Fri Jul 29, 2011 at 03:23:44 PM EST

James Kenneth Galbraith makes a persuasive argument that the debt ceiling itself is unconstitutional:

The debt ceiling was first enacted in 1917. Why? The date tells all: we were about to enter the Great War. To fund that effort, the Wilson government needed to issue Liberty Bonds. This was controversial, and the debt ceiling was cover, passed to reassure the rubes that Congress would be "responsible" even while the country went to war. It was, from the beginning, an exercise in bad faith and has remained so every single second to the present day.

The budget debates are bad enough (though necessary), but this whole idea of negotiating on authorizing spending that has already been budgeted is nihilistic.

Krugman (5.00 / 1) (#9)
by Warren Terrer on Fri Jul 29, 2011 at 03:16:55 PM EST

accepts the coin seigniorage idea as a plausible though ridiculous option.

His post also quotes an idea from Professor Jack Balkin called the 'option option' which I think is clever and works along the same lines. Instead of creating a coin, the federal government creates an option, which is a type of financial asset and hence purchasable by the Fed. The option would be to buy $2 trillion worth of federal government property. This option can be created out of thin air, like a coin, and the Fed would purchase it by adding the option to its assets and crediting Treasury with $2 trillion in its spending account. You don't even have to bother with the platinum!

: Krugman doesn't actually... (none / 0) (#27)
by Romberry on Fri Jul 29, 2011 at 04:42:35 PM EST

...say that the coin seigniorage idea is ridiculous. He says it (along with the "option option") sounds ridiculous "but so is the behavior of Congressional Republicans. So why not fight back using legal tricks?"
A lot of things that sound ridiculous, aren't. This (coin seigniorage) may be one of those things. Whether Obama has the balls to actually lead and use his available options, that is the question.

"Didn't President Obama say ..." (5.00 / 4) (#10)
by Demi Moaned on Fri Jul 29, 2011 at 03:19:25 PM EST

That's the crux of the matter. Your point about leverage lost in 'The Deal' back in December is valid, IMO. But public opinion is a political factor, too. And the President has spent almost his whole term in office echoing Republican talking points on fiscal matters and treating them as honest, responsible players.

That is the signal failure of the Obama Administration, IMO. In January, 2009 the public was disgusted with Republican antics and policies and was ready to hear something different, but the President acted as if his chief mission was to rehabilitate the Republican Party in the public's estimation. It's hard to see how anything gets better from this point on perhaps until after the next Republican Presidency. Yikes!

It's all theater ... (5.00 / 4) (#15)
by Robot Porter on Fri Jul 29, 2011 at 03:37:33 PM EST

to hide the dismantling of the welfare state. Which now both parties are in favor of.

It's also nice cover for other recent over-reaches, like extending Mueller's term at FBI.

And it's all rather brazen. They're trying to get us to care about Moody's rating?!? A company which acted illegally for years. And was complicit in the downfall of our economy.

Pull the other one.

Hmmm, maybe we can all play this game (5.00 / 1) (#17)
by ruffian on Fri Jul 29, 2011 at 04:04:15 PM EST

Time for a citizens revolt:

it has been brought to my attention that the amount of money I have committed to pay my creditors has exceeded my self-imposed debt ceiling. Ooops. Guess I will just stop paying my bills on Tuesday.

It's even worse than that (5.00 / 1) (#19)
by Warren Terrer on Fri Jul 29, 2011 at 04:09:22 PM EST

Your debts are all denominated in 'ruffian-bucks' which only you can create. You promised to pay these people ruffian-bucks and they want ruffian-bucks, but you've just decided 'sorry but I don't feel like creating any more ruffian-bucks'.


I may even ask for a pay cut (5.00 / 2) (#22)
by ruffian on Fri Jul 29, 2011 at 04:26:31 PM EST

: As an issuer of 'ruffian-bucks' (none / 0) (#30)
by Warren Terrer on Fri Jul 29, 2011 at 05:22:27 PM EST

a pay cut would be called a 'tax cut'. Good idea, since you don't really need other people's ruffian-bucks anyway.

I wonder how to start a twitter storm (none / 0) (#24)
by ruffian on Fri Jul 29, 2011 at 04:30:49 PM EST

'I'll pay my mortgage when a clean debt ceiling bill is signed.'

I have no followers. Maybe I'll send it to someone big.


: Well, per the Hollywood near riot, you (5.00 / 1) (#32)
by oculus on Fri Jul 29, 2011 at 06:24:03 PM EST

need to promise a block party with live music. If you Twitter, they will come.

anytime i hear or read (5.00 / 1) (#21)
by cpinva on Fri Jul 29, 2011 at 04:18:19 PM EST

of some someone claiming the government should be run like a business or a household, i reach for my aluminum softball bat (it'll dent, but not break). fortunately, cooler heads (my wife) prevail, and the idiot speaker is allowed to walk away uninjured.

you're correct though, this republican trope has been spewed since reagan, and the villager ignorati has stupidly bought into it. it's far easier to be lazy, than to exercise the intellectual heft necessary to show it for the bs that it is. "don't you know dahlings, i have the loveliest cocktail party to attend, with the best shrimp in town, i cahn't be bothered having an actual clue what i'm talking about, that would require me to work!"

Not just Republicans. Obama says it, too. (5.00 / 0) (#25)
by caseyOR on Fri Jul 29, 2011 at 04:36:00 PM EST

Obama has been insisting that, just like families must tighten their belts and live within their means, so must the government. I had to stop listening to him because every time he made that ridiculous and untruthful claim I very nearly kicked in the TV. And I don't have the money to buy a new TV.

He is either completely ignorant of basic economics (never good in a president) or he's a liar.


Yes, and even though he asserts that families (5.00 / 1) (#33)
by Joan in VA on Fri Jul 29, 2011 at 06:32:05 PM EST

ONLY tighten their belts, he also recounts the letters he receives from people working multiple jobs-increasing their INCOME-to balance their budgets. Guess he thinks if they were smarter, they would have taken a PLEDGE to never increase their household revenue and, thus, they could never be criticized if their kids had no food.


Have you considered the fact (none / 0) (#29)
by Ga6thDem on Fri Jul 29, 2011 at 04:51:13 PM EST

that maybe he's a liar and not good at economics?

To me, he's more like an empty suit just blathering on about beltway conventional wisdom.


: Nah (5.00 / 1) (#31)
by MO Blue on Fri Jul 29, 2011 at 05:43:46 PM EST

Obama has an agenda and he is pursuing it tenaciously.

: Exactly (none / 0) (#34)
by klassicheart on Sat Jul 30, 2011 at 12:51:40 AM EST

Prediction: (none / 0) (#1)
by jbindc on Fri Jul 29, 2011 at 02:36:48 PM EST

House passes bill with BBA in it as Tea Partiers come on board. Senate, of course, kills it. Compromise (Hybrid of McConnell / Reid plans) gets worked out and passes. Obama signs.

Republicans can claim "they tried" to the country (the household budget argument plays well because it makes sense to most people). When things get bad or worse because of the delay and ensuing bad bill that is to come, the Dems get blamed.

I think the R's come out of this looking pretty good. Unless, by some miracle, the economy greatly improves by November 2012 - but I'm not holding my breath.

whatever happens (none / 0) (#4)
by CST on Fri Jul 29, 2011 at 02:46:45 PM EST

I don't think R's, or D's for that matter, come out of this looking good.

The Republicans certainly don't look good right now, they are yelling at each other all over the place.

Especially since they haven't passed a bill yet, and I'm still unconvinced that they can. Admitedly, if they pass something, that will surely look better for them than passing nothing. But I think it's way too late for anyone to come out of this looking "good".


Good may be a strong word (none / 0) (#8)
by jbindc on Fri Jul 29, 2011 at 03:07:05 PM EST

"Better" might be, well, a better word.

The voters will vote for someone. Hey - maybe the R's are stealing the Democrats' 2012 slogan - "Vote for us because we don't suck as bad as the other guys!"


Actually, the Republicans (none / 0) (#11)
by itscookin on Fri Jul 29, 2011 at 03:21:49 PM EST

have passed a bill in the House, but Reid tabled it.


and yet (none / 0) (#18)
by CST on Fri Jul 29, 2011 at 04:05:04 PM EST

they've still managed to come off looking like complete fools.

Maybe there is hope for the Dems after all.


Really? (none / 0) (#20)
by jbindc on Fri Jul 29, 2011 at 04:18:04 PM EST

They look like complete fools to evreyone or just to those inclined to believe they are fools anyway?


: Um (none / 0) (#23)
by CST on Fri Jul 29, 2011 at 04:30:13 PM EST

look at polling. Obama isn't doing great, but the republicans aren't either. Only half of REPUBLICANS approve of the job Boehner is doing on the debt ceiling. The GOP is completely splintered right now.
You can twist that any way you like, but to me it says "they look like complete fools to everyone"

: Look (none / 0) (#28)
by Ga6thDem on Fri Jul 29, 2011 at 04:47:48 PM EST

at this like Teri Schaivo. The bloviators are screaming as loud as they can to make you think they are more popular but the numbers just aren't there. Or impeachment. Nobody like Clinton having an affair and certainly didn't approve but the idiots in the GOP wanted the death penalty for it.
It's the same scenario here. The GOP is so crazed and insane that the Dems look good no matter how piss poor their policy is too.

The Republicans will lose (none / 0) (#6)
by mmc9431 on Fri Jul 29, 2011 at 03:05:05 PM EST

Everyone agrees on cuts to spending until they affect them and their's.

This FAA fiasco is an example of the Republican disaster. Millions of dollar lost per week while they talk about spending cuts and lack of revenue. Jobs being eliminated as they talk about the need for jobs.

People are also upset that the Republicans are being totally unreasonable. It's their typical "My way or the highway" routine. That may play for the tea party base, but nationally it will hurt them.

Dems are harmonizing with the GOP (5.00 / 3) (#13)
by Anne on Fri Jul 29, 2011 at 03:24:08 PM EST

on the refrain to the same song, trading off the lead on alternating stanzas, so what I expect when the economic sh!t hits the fan is for them to take up a blame game of epic proportions that will suck all the time and energy that should go into job creation and stimulus; they will be like the parents so consumed by their argument that they fail to notice the baby has crawled out the open front door and is headed for the busy street.

Americans will be livid, and both parties will pay - but not nearly as much as the people themselves.


: Quote from Katrina van den Huevel (5.00 / 1) (#16)
by ruffian on Fri Jul 29, 2011 at 04:02:43 PM EST

"Obama is playing in the Republican Field of Dreams"

Hey, we just need a half-Bachmann (none / 0) (#14)
by Dadler on Fri Jul 29, 2011 at 03:29:27 PM EST

No, not a wrestling hold, though I would love to body slam a few pols and media twits right now. But like Michelle said about science, ahem, we should just put it all out on the table and let the kids decide. Sadly, I think the kids would do a far better job at separating truth from fiction than the adults currently are.

I think the kids, if they really knew what DC was up to, would put all of 'em in the garage on permanent timeout. Spider eggs and water-heater condensation are about what they deserve to survive on at this point. I'd let them out for hair appointments and volunteer poop scoop duty at the Humane Society. I believe in redemption.