Here is the NY Times version of this story:
July 14, 2011
http://www.nytimes.com/2011/07/15/us/politics/15deficit.html?_r=1&hpw
Behind Battle Over Debt, a War Over Government
By JACKIE CALMES
WASHINGTON — The endgame in the fight to increase the nation’s debt limit
has only begun, but intense exchanges this week between the two parties
have made it clear that this is not so much a negotiation over dollars
and cents as a broader clash between the two parties over the size and
role of government.
What makes a bipartisan “grand bargain” so elusive is less the budget
numbers, on which compromise could be in reach, than each side’s
principles, which do not lend themselves to splitting the difference. President
Obama
wants deficit reduction, including tax increases for wealthier
Americans and corporations. Congressional Republicans, prodded by a
cadre of junior lawmakers, want a vastly smaller government constrained
by lower taxes. The two are not the same thing.
Mr. Obama will make his case on Friday in a White House news conference, his
third in just two weeks.
However this showdown is settled, it seems increasingly likely to define
not only the legislative record of this Congress, divided between a
Republican-controlled House and a Democratic-controlled Senate, but also
the 2012 elections and Mr. Obama’s prospects for a second term.
The two sides met for less than two hours at the White House on
Thursday, even as attention appeared to shift away from the prospect of a
bipartisan budget agreement to the likelihood of a backup plan to raise
the debt ceiling before the Aug. 2 deadline.
Having discussed spending cuts in past White House meetings, the
negotiators considered the administration’s proposals for raising taxes,
which Republicans have vowed to oppose. Mr. Obama previously had said
they would meet again on Friday to decide whether they could reach a
deficit-reduction deal; if not, they would spend the weekend negotiating
a way to raise the $14.3 trillion debt limit, and defer the bigger
budget-cutting clash.
Instead, at the end of Thursday’s session, he told the lawmakers to try
to work something out and be ready for his summons to a weekend meeting.
Underlying the budget drama between the White House and Congressional
Republicans is another compelling drama among Republicans, which exposes
an ideological and generational gap. On one side are older, more senior
conservatives like the two top leaders, Speaker John A. Boehner and
Senator Mitch McConnell, the minority leader, who remember the budget
fights and Republican setbacks of the 1990s and want some deal.
On the other are the proudly uncompromising junior lawmakers, many of them Tea
Party
sympathizers, whose ranks were so inflated by Republican gains in the
midterm elections. Representative Eric Cantor of Virginia, the House
majority leader, has emerged as their standard bearer, debating Mr.
Obama in the White House sessions and then boasting of it afterward.
Senator John McCain of Arizona, one of the older generation, reflected
the divide in an interview Thursday on Bloomberg TV.
“I think Eric Cantor is carrying out the mandate of last November, which
was to stop mortgaging our children’s futures, while the president
keeps talking about spending more money,” he said.
Mr. McCain then endorsed, as Mr. Cantor and most House Republicans do
not, Mr. McConnell’s proposal to empower Mr. Obama to raise the debt
limit through the 2012 elections in three stages, without prior approval
of deep spending cuts.
Mr. McCain, mindful of the Republican defeat in a 1995 budget showdown
with President Bill Clinton, said the McConnell proposal would absolve
Republicans of blame for a default. “But, it is the last option after we
have explored everything else, and, frankly, I hope my colleagues have
not forgotten what happened in 1995,” he said.
Republicans say the collisions between Mr. Cantor and Mr. Boehner are
indicative of Mr. Cantor’s efforts to stay ahead of potential rivals for
the speakership someday in keeping the allegiance of rank-and-file
House Republicans.
Mr. Cantor helped torpedo behind-the-scenes discussions between Mr.
Boehner and Mr. Obama. But now Mr. Obama, who earlier this year urged
Congress to increase the debt limit without a companion measure for
long-term budget cuts, has emerged to press for greater deficit
reduction than Republicans are.
That is because he demands a “balanced package” of both spending cuts
and tax increases on the wealthy and corporations, while Republicans
reject any new tax revenues.
Republicans have shown that their higher priority is not lower deficits,
as it was for the party through most of the last century, but a smaller
government. House Republicans in the spring passed a plan that would
not balance the budget for three decades despite deep cuts in Medicare and
Medicaid — largely because it also deeply cut taxes, adding debt.
For Republicans, “reducing the deficit implies tax increases, or the
possibility of tax increases, and that’s not something they want to do
under any circumstances because it doesn’t suit their political needs,”
said Stan Collender, a longtime federal budget analyst and a partner at Qorvis
Communications.
The party’s dynamic in the debt talks reflects the culmination of a
30-year evolution in Republican thinking, dating to the start of
President Ronald Reagan’s administration. The change is from emphasizing
balanced budgets — or at least lower deficits — to what tax-cutting
conservatives have called “starve the beast,” that is, cut taxes and
force government to shrink.
The starve-the-beast philosophy is even more problematic now because the
population is aging as baby boomers retire even as medical costs keep
rising — a combination that is driving the projections of an
unsustainably growing federal debt.
While the new-generation Republicans venerate Mr. Reagan, those who were
in Congress when he was president say he would not understand their
refusal to compromise on a package of the size Mr. Obama proposes.
“He had a rule: If you can agree on 80 percent, take it,” said Alan K.
Simpson, who was the second-ranking Senate Republican leader back then.
“He raised taxes 11 times in eight years,” Mr. Simpson added. “He did it
to make the country run.”
Almost lost in the tax debate with Republicans is how much Mr. Obama has
conceded to them this year on spending cuts, including for those
entitlement programs Democrats favor.
“He believes that we have now in front of us the potential to do
something big — the holy grail,” the White House press secretary Jay
Carney said.
------------
From: [email protected] [[email protected]] on
behalf of Shane Mage [[email protected]]
Sent: Friday, July 15, 2011 10:32 AM
To: [email protected]
Cc: Activists and scholars in Marxist tradition; Progressive Economics
Subject: [Pen-l] Barack Obama, the first tea-party president
http://www.nakedcapitalism.com/2011/07/marshall-auerback-barack-obama-the-nations-first-tea-party-president.html
"In 2007, investors had, in Minksy fashion, been conditioned by the Great
Moderation, abundant liquidity, and the Greenspan put to believe nothing that
bad could happen, and if it did, investors would be able to exit with their
hides intact. Now, these reflexes
have been reinforced by the Bernanke put and Geithner’s attentiveness to the
needs and wishes of banks. The assumption is that even if the Congressional
gridlock continues, Timmie will find a way to keep paying Treasuries, even if
everyone else suffers.
The troubling bit is that the Administration has said it’s unwilling to
consider any of the creative ways out of this mess suggested in op ed pages and
in the blogosphere: use of the 14th Amendment, canceling Treasuries held by the
Fed, or using other loopholes
to have the Fed monetize the debt. But Geithner dissed those ideas. From
Bloomberg:
There’s “no way to give Congress more time” on lifting the debt limit, Geithner
said after meeting with Democratic lawmakers on Capitol Hill in Washington. He
has repeatedly said U.S. borrowing authority will end on Aug. 2 without
congressional action.
Geithner’s remarks suggested the Treasury Department is approaching the end of
its efforts to shift federal cash flows to avert a breach of the mandated
borrowing limit.
Normally, one might view this rigidity as a negotiating posture. But this
Administration doesn’t do negotiations, it does concessions ..."
and
"...the President could, as we and others have
suggested in the past, simply invoke the 14th amendment and refuse to enforce
a statute that he believes violates the Constitution.
Professor Scott Fullwiler has suggested an even more creative way around the
debt ceiling: Fullwiler notes that Fed is the monopoly supplier of reserve
balances, but that the US Constitution bestows upon the US Treasury the
authority to mint coins (particularly
platinum coins). Future deficit spending by the federal government could
thereby continue to be carried out by minting coins and depositing them in the
Treasury’s account at the Fed (for more details see here).
Curiously, the President won’t pursue any of these options. Why?
If, for example, the President genuinely believes that the 14th Amendment does
not give him the right to ignore the debt ceiling, he has been loath to give
any reasoning for this publicly. He is, after all, a constitutional law
professor. Much like the single
payer option in health, the President refuses to even put it on the table,
even as a negotiating posture. Is it caution, or does the President genuinely
believe this guff about the deficit?
By the same token, the President might well dismiss Professor Fullwiler’s idea
as nothing more than a “gimmick”. But if the alternative is the economic
apocalypse regularly described by Treasury Secretary Geithner, then why not
deploy this “gimmick” if the
alternative is (in the words of Mr Geithner), “catastrophic damage across the
American economy and across the global economy”?
As Bill Mitchell has
pointed out:
[T]he whole edifice surrounding government spending and bond-issuance is also
‘just an accounting gimmick’. The mainstream make much of what they call the
government budget constraint as if it is an a priori financial constraint when
in fact it is just an
accounting statement of the monetary operations surrounding government
spending and taxation and debt-issuance.
Shane Mage
"scientific discovery is basically recognition of obvious realities
that self-interest or ideology have kept everybody from paying attention to"
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