Debt Ceiling Strategies

December 19th, 2012 at 6:35 pm

A number of progressives are scratching their heads over why the President would be interested in pushing a debt ceiling showdown with Republicans down the road a year or two.

Jon Cohn (and link to Brian Beutler):

As recently as a few days ago, the administration was refusing to negotiate with Republicans about the debt ceiling…Then Boehner made his offer merely to push back the debt ceiling by one year, so he could maintain true to the Republican Party’s newly established position—that the government could borrow more money only to the extent that it cut spending. The administration, along with plenty of its allies, is taking this idea seriously. It’s hard to understand.

I think I understand (with an emphasis on “think”—Cohn and Beutler are deep analysts of such matters).

When it comes to the debt ceiling you either a) negotiate with terrorists or b) you don’t.  If it’s ‘a’ then I don’t understand either, but I take the President at his word that it’s ‘b.’

Earlier today, the President completely and unambiguously underscored that he will not negotiate on the debt ceiling (see transcript below).  Which is as it should be.  Strategically, you make it the R’s problem and if they insist on default you somehow go over their head and tell your Treasury secretary to go forth and sell T-bills to credit markets.

Then there’s a horrible scrum where they impeach you, they try to sue the Treasury, and Buddha knows what else.  But if that’s where they are, and they are quite assetive that it is, then it’s a fight that cannot be avoided and it would be better for the economy’s sake to have it a year or two from now than in February (the recovery remains fragile and the cliff debate followed a month later by a major debt-ceiling throwdown is not exactly “pro-growth”).

There may be those who believe the WH could use cliff leverage to get the R’s to give away their debt ceiling leverage. I don’t see it.  So your best option if you’re the WH is to say and mean that you’ll not negotiate on the debt ceiling. And you’ll be doing the nation and posterity a huge service.

 

Transcript from presser earlier today:

QUESTION: If you don’t get it done, Republicans say they would try to use the debt limit as the next pressure point. Will you negotiate with them in that context?

OBAMA: No. And, I’ve been very clear about this.

…the idea that we lurch from crisis to crisis, and every six months, or every nine months that we threaten not to pay our bills on stuff we’ve already bought, and default and ruin the full faith and credit of the United States of America, that’s not how you run a great country.

So I’ve put forward a very clear principle. I will not negotiate around the debt ceiling. You know, we’re not going to play the same game that we saw happen — saw happen in 2011, which was hugely destructive. It hurt our economy. It provided more uncertainty to the business community than anything else that happened. And, you know, I’m not alone in this. You know, if you go to Wall Street, including talking to a whole bunch of folks who spent a lot of money trying to beat me, they would say it would be disastrous for us to use the debt ceiling as a cudgel to try to win political points on Capitol Hill.

So we’re not going to do that. And — and — which is why I think that, you know, part of what I hope over the next couple of days we see is a recognition that there is a way to go ahead and get what it is you’ve been fighting for, these guys have been fighting for spending cuts. They can get some very meaningful spending cuts. This would amount to $2 trillion, $2 trillion spending cuts over the last couple of years.

And in exchange, they’re getting a little over a trillion dollars in revenue. And that meets the pledge that I made during the campaign, which was two to — two dollars and fifty cents of spending cuts for every revenue increase. And that’s an approach that I think most Americans think is appropriate. But I will not negotiate around the debt ceiling. We’re not going to do that again.

 

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4 comments in reply to "Debt Ceiling Strategies"

  1. readerOfTeaLeaves says:

    Glad to see the President draw a line in the sand and clarify that the antics of August 2011 will not be repeated. No doubt there were people in the markets who made money on swaps against the dollar; however, allowing hostage-taking on the debt ceiling is deeply irresponsible as a policy.

    I think this will come to haunt the GOP, and I interpret their current behavior as a symptom of their desperate, last-ditch clutching at the reins of government. The GOP is acting like a pack of traders, mistaking the halls of Congress for the pits of a commodities exchange. This is a foolish and probably mortal error on the part of the GOP.


  2. Bud Meyers says:

    It seems that the GOP has found a crack in the wall, a chink in the armor, regarding Social Security in the New Deal with “Plan B” for the “fiscal cliff”. But Obama needs to stick it to the man, instead of sticking it to the poor, the disabled and the elderly.

    http://bud-meyers.blogspot.com/2012/12/social-security-obama-needs-to-stick-it.html


  3. Russ Abbott says:

    You wrote, “then it’s a fight that cannot be avoided and it would be better to have it a year or two from now than in February.”

    Why? It would be better to have it now and get it over with. Also, Obama is at his strongest now. The only reason I can imagine to put it off for two years is that Obama thinks that having it then will make him stronger then, that it will be a boost to his power and prestige. That may or may not be a valid political calculation. But even if it is, then he is guilty of using the debt ceiling for political purposes.


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