Deal Will Come, but May Disappoint

July 13th, 2011 at 2:22 pm | 41 Comments |

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Confusion usually reigns in Washington, D.C., negotiations just before a solution emerges.

Thus, small signs can signal big things to come.

As Federal Reserve Chairman Ben Bernanke concluded his testimony Wednesday morning before the House Financial Services Committee, Committee Chairman Spencer Bacchus made an interesting and perhaps important comment.  In short, Chairman Bacchus said that members of his committee and many members of his party understood the difference between raising tax rates and closing tax loopholes.

Chairman Bacchus hardly qualifies as a RINO nor is he considered a renegade Republican.  His remarks, therefore, may well hint that the many senior members of the House Republican caucus are beginning both to tire of the ideological rigidity of some of their “Tea Party” members and to believe that it is time to stop playing games with the debt limit negotiations. In recognition of the coming reality of a debt ceiling increase failure,  Rep. Steve King of Iowa introduced a bill today in the House that would require payment of the sovereign debt, military pay and pensions above all other payments that might be owed by the federal government.  Thus, King acknowledges that failure to raise the debt ceiling would lead to utter chaos within the government and would have catastrophic impact on United States military activities oveseas. Soon, we will see similar bills to protect Social Security, education, Medicare, and so on and so on.  CYA is in full throat.

Clever  legislation announced yesterday by Senate Minority Leader Mitch McConnell  would essentially empower a President to raise the federal debt limit himself, subject to a two-thirds vote to the contrary by Congress.  One begins to sense the uneasiness of Congressional Republican leadership and even among many GOP backbenchers as the real results of debt default becomes clearer to them. McConnell’s gambit, as one would expect from a consummate Congressional leader, does the most important thing that the GOP needs right now–to change the trend of the debate.

As we have said often before, when the face of the Republican Party on debt negotiations is Rep. Michele Bachmann, Rep. Eric Cantor, Sen. Pat Toomey or Sen. Jim DeMint, the party loses ground in the public relations battle.  “Hell no, we won’t go” over time becomes a losing message.  McConnell has said, “Yes, raise the debt limit, let’s dispose of all this Congressional-Presidential hostage-taking, and bring some stability to paying the nation’s bills.”  McConnell’s suggestion avoids direct confrontation over spending versus taxes–it begins to change the subject.

We smell a deal in the works.  It will be small, it will be disappointing to those of us who fear the fiscal future of the nation, but it will get the debt ceiling increased.  The fact that it will be relative trivial will be,  in the short run, of little moment.  Market participants, who expect nothing useful from Congress in most fiscal matters, can breathe a sigh of relief that their financial engineering will be safe for another 6, 12, or 18 months.  The debt default question evaporates until 2013.  American debt as the “best house in a terrible neighborhood” will continue to be a safe haven while turmoil throughout the rest of the world continues.

Then in the midst of the most anemic economic recovery in America’s post-World War II history, Congress can revert to political manuevering and the American people can safely revert to concern over whether or not they or their neighbors will have jobs later this year.

The true dis-connect between both parties in Congress and the fundamental concerns of  Americans in the work force will increase.  Anger will continue to mount, demagogues will flourish, our national debt will increase, and loss of faith in America’s governance will expand.  This cannot end well.

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41 Comments so far ↓

  • Watusie

    We saw off the British, the Confederacy, the Germans, the Japanese, the Klan, the Mafia, the Soviet Union, and Al Qaeda. I think we will eventually see of the current incarnation of the Republican Party as well.

  • Frumplestiltskin

    I pray to God you are right. It only takes 26 Patriotic Republicans in the House to do what is right (assuming Pelosi can get 100% of the Democrats on board)

    Democrats offered 2 trillion in cuts, and tax hikes to raise additional revenue. As the Democrats have already offered the 2 trillion Republicans should take it and Democrats won’t have any trouble leaving the hikes behind, after all they call the shots when the Bush rates expire anyhow.
    Leave it all for 2013. If Obama wins, the Republicans can’t claim to have a mandate, if Republicans win…well, we will see how much they are willing to own their rhetoric when they actually run the show.

  • ottovbvs

    The true dis-connect between both parties

    What nonsense. The GOP as the WSJ oped page (of all places) openly admitted this morning tried extort the president by taking the entire US economy hostage. When it comes down to it, it looks like the crazies in the GOP aren’t willing to shoot. There’s no equivalence between the action of the parties whatever. Since when were the Democrats threatening crash the entire US economy? If Bell thinks there is any equivalence he’s either morally blind or dissembling.

    • armstp

      otto,

      All the “right” has got all the time is endless false equivalencies. When they get called on their bullshit their final defence is always the same, which is the Democrats are doing the same, which is always not the case. The current bullshit in the MSM is that both side have to give or have failed to give, but that is BS because the Dems have always talked about and have agreed to massive spending cuts, but it is only the Repugs who have not given on anything. This is the same story on everything since Obama took over in 2009. The only party that has proven to be fiscally irresponsible for the last 60 years in the Republican party. Their fiscal record is horrible and is 100% the reason we are in this current mess. How do the Dems and Obama get blamed for anything to do with the deficit and debt? They did not create the problem in the first place and are only trying to clear up the mess of the GOP. That is not a “false equivalency”.

  • LFC

    A real piece of fiscal reform is there for the grasping. It would contain spending cuts and revenue increases, much more of the former than latter. The Repubs get mostly what they said they wanted. Obama has stood up and said he’d be responsible for corralling a Democratic majority. And we know Obama obviously wants a deal, even one that not 100% what he’d like, because he tried creating a debt commission to create an up or down vote on a “pain all around” fiscal reform package.

    If this falls through and the opportunity is lost, it’s because the Republican leadership never took deficit reduction seriously in the first place … not that I ever believed that they did.

  • beleg

    “The true dis-connect between both parties in Congress and the fundamental concerns of Americans in the work force will increase. ”

    I think that disconnect comes directly from the Americans in the work force. Most Americans want the government to fix the economy, but all their ideas of what that means are backwards. So what they end up demanding their reps do, and what they vote based on, is directly contradictory to the goal they have in mind.

  • balconesfault

    John Cole at Balloon-Juice notes an interesting dichotomy between how Obama has been discussing the potential ill effects of a default … and how the GOP leadership has been discussing the potential ill effects of a default.

    Talking about McConnell’s interview with Laura Ingraham, where McConnell makes his best pitch for why the GOP should make a deal, Cole says:

    Note that the only thing forcing McConnell is the potential political price, not the damage to the country.

    Obama is out there talking about the economic repercussions of a default, and how it may have a real world impact on Americans still struggling due to the recession and continuing high unemployment rate.

    The “responsible” members of the GOP are talking about how a default might make them look bad.

  • dugfromthearth

    The decades old republican platform of borrow and spend has been a clear indication that they do not care about the economy, the country, or the deficit. They only want to siphon as much wealth for the rich as they can. Their only fear is that they will lose power and stop controlling the siphoning of wealth to their own pockets.

    The republican problem is that they have lied for years about their platform, pretending that their goal was to help the country by their policies. Now they have true believers in power who think that what they propose is actually going to help people. The “responsible” republicans are not those who want to help the country – they are the ones who want to keep lying about their goals while stealing the country’s wealth.

  • Watusie

    Today is some kind of record bad day for Republicans. Craven cave-in in DC. Murdoch in very deep shit. Beaten in CA special election. Ridiculous strategy defeated in WI. Issa humiliated by his own stupidity and incompetence. And now, total demolishment of their “beaten by union thugs” bullshit story:
    http://mediamatters.org/blog/201107130014

    For the records, Kenneth Gladney’s staunchest supporters on this board included JimBob and Chris Balsz, who are simply wrong about everything, all the time.

    • Chris Balsz

      Say that to me again and I’ll slap your hands and the hands of the man next to you.

      • Watusie

        WTF is that supposed to mean? Here is a bit of your nonsensical support for Gladney’s preposterous story, which was obviously a lie to anyone who actually bothered to look at the video, not just rely on the right wing noise machine’s description of it:
        http://www.frumforum.com/right-left-whose-talk-is-worse/comment-page-2#comments

        • Chris Balsz

          “WTF is that supposed to mean?”

          Oh didn’t you read the defendant testimony? That’s what that wildman Gladney allegedly did to launch the violence. We teabaggers are on that red devil, man, we just up and start slapping the hands of multiple people.

          ” Here is a bit of your nonsensical support for Gladney’s preposterous story, which was obviously a lie to anyone who actually bothered to look at the video, not just rely on the right wing noise machine’s description of it:
          http://www.frumforum.com/right-left-whose-talk-is-worse/comment-page-2#comments

          Where I said:

          “I don’t see anything about the outcome. Maybe it was continued? Because I also don’t see anything about charges being dropped.
          An ER attendant put it on record that Gladney had injuries; other witnesses camed forward to police to support Gladney; the police filed charges and arrested people; they had an arraignment; the judge at the arraignment did not throw out the charges, and set a trial date.”

          All of which is perfectly true. Those witnesses did come forward; there was an arrest; the judge did not throw out the charges; the trial was eventually held.

          I don’t know what’s “preposterous” about a claim that Gladney was shoved to the ground by two other men, when, those two men testified that’s what they did to Gladney. They said he started it, and the jury didn’t convict them.

          If you choose to believe that Kevin Gladney started a fistfight with two larger men by slapping them on the hands, like the defendants testified, then go ahead. Maybe you can come to Los Angeles and help OJ find the real killers.

  • sinz54

    Steve Bell claims: “when the face of the Republican Party on debt negotiations is Rep. Michele Bachmann, Rep. Eric Cantor, Sen. Pat Toomey or Sen. Jim DeMint, the party loses ground in the public relations battle. “Hell no, we won’t go” over time becomes a losing message.”

    Not right now.

    Check the latest Gallup Poll:

    “PRINCETON, NJ — Despite agreement among leaders of both sides of the political aisle in Washington that raising the U.S. debt ceiling is necessary, more Americans want their member of Congress to vote against such a bill than for it, 42% vs. 22%, while one-third are unsure. This 20-percentage-point edge in opposition to raising the debt ceiling in Gallup’s July 7-10 poll is slightly less than the 28-point lead (47% vs. 19%) seen in May.”

    http://tinyurl.com/65fgwuy

    Only 1 American adult out of 5 wants to see the debt limit raised. The poll goes on to show that Democrats are the only group for whom a plurality (39%) wants to see the debt limit raised. Among Independents, only 18% are in favor of raising the debt limit.

    For the GOP to oppose raising the debt limit is not an unpopular position. (Though it’s questionable from an economics point of view.)

    • sweatyb

      Sinz believes that 42% of the American public wants the United States to default, collapsing the global economy and causing the 2nd Great Depression.

      In other words, polls like this show why a representative democracy is (slightly) better than direct democracy.

      • Chris Balsz

        You’re assuming a fixed debt limit automatically results in default, which has hasn’t been the case. Or as folks like to say around here, you have no empirical evidence for such a view.

        • sweatyb

          which has[sic?] hasn’t been the case

          what are you talking about? was there some other time in the history of the United States where we hit the debt ceiling?

    • ottovbvs

      The WSJ oped page (not exactly the Dems greatest fans) on what Sinz’s polls are worth

      The polls that now find that voters oppose a debt-limit increase will turn on a dime when Americans start learning that they won’t get Social Security checks. Republicans will then run like they’re fleeing the Pamplona bulls, and chaotic retreats are the ugliest kind. By then they might end up having to vote for a debt-limit increase and a tax increase.

  • armstp

    Why don’t the fucking Republicans stop playing games and just vote to raise the debt ceiling period? Why doesn’t the GOP take some fucking responsibility for once!!!? The GOP is the party that takes no responsibility for anything ever. Why do they continue to play games? McConnell’s plan is bullshit. He continues to play games. He wants to structure a deal so that the President can raise the debt ceiling on his own, but has structured it in such a way so the the GOP can then blame Obama for increasing the debt in this country. It is Congress’ responsibility to raise the debt ceiling. Why can’ they take some responsibility and just raise it? Raise it so there is enough headroom to get through the 2012 election and then the two parties can battle it out in the 2012 election to see who’s deficit reduction plan the voters favor? That is called fucking democracy!

  • valkayec

    Red Banner on Bloomberg now: Moody’s places US AAA Bond rating on review for possible downgrade. Also on review are Fannie, Freddie, and a couple of other agencies.

    The market is getting skittish. It’s showing up in volatility, particularly after Boehner said today he didn’t know if a deal would be cut.

    Bond traders are still relatively calm, believing that a deal will be made at the last minute provided the GOP leadership can round up the freshman House.

  • PracticalGirl

    The two worst truisms about this entire sordid episode echoed by posters:

    Sinz says:
    Only 1 American adult out of 5 wants to see the debt limit raised.

    Most Americans have no idea of the consequences of their “wants”, but the GOP would abdicate ALL their responsibility and run the country according to popularity polls if they could. Which brings us to

    balconesfault, who says

    The “responsible” members of the GOP are talking about how a default might make them look bad.

    That, frankly, is the only thing the entire GOP is concerned about. Ever.

  • Diomedes

    If I was the President, I would walk away from any further discussions and leave it entirely in the hands of Congress. You don’t want to raise the debt ceiling? Fine. Don’t. That way, you will be on the hook for what comes afterwards. And once the social security checks stop come, veterans payments stop and our credit rating is reduced to junk, thereby driving up interest rates on our bonds (which will end up costing is MORE), then the American people can exercise their right to kick themselves in the nuts for being stupid.

    This canard has gotten SO tiresome that its literally like watching a bad Michael Bay movie. No plot. No good acting. Just a couple of hotties (Palin/Bachmann) and some special effects.

    • pnumi2

      Diomedes

      “and some special effects”

      You must be referring to Bernanke spinning pixels into gold.

      Today I brew, tomorrow I bake;
      And then the Prince child I will take
      For no one knows my little game
      That Rumplestiltskin is my name!

      We know now, Frump.

  • Frumplestiltskin

    Into the shadow of default rode the 242
    Half a government half a government,
    Half a government onward,
    All in the valley of Default
    Rode the 242:
    ‘Forward, the Tea Brigade!
    Charge for the Dems. he said:
    Into the valley of Default
    Rode the 242
    Tax cuts to right of them,
    Tax cuts to left of them,
    Tax cuts in front of them
    Cantor’d & Boehner’d;
    Limbaugh’d at with snot and smell,
    Crazy they rode, not well,
    Into the jaws of Default,
    Into the mouth of Hell
    Rode the 242.
    Apologies to Lord Tennyson and the poster here who came up with the idea in the first place (I just fleshed it out)

    • JimBob

      The quicker you lose your government job the better off society will be. You’re a wart on the ass of society.

  • valkayec

    Unfortunately, the Americans that don’t want the debt ceiling raised have been brainwashed into believing that raising the debt ceiling automatically equals greater spending rather than just paying the current bills. Why do the people believe this idea? GOP false rhetoric which sounded completely reasonable. The GOP has turned Orwellian language into an art form.

    How would the public react if they really understood that a default would reduce GDP by 10% as some Wall St. analysts predict? That’s not a recession drop; it’s depression. Unfortunately, as with TARP, it may take a huge drop in the Dow to scare people enough to take responsible action. By that time, Wall St. donors may be just a pissed off with the GOP.

    • kuri3460

      How would the public react if they really understood that a default would reduce GDP by 10% as some Wall St. analysts predict?

      I think this is a pretty important point that gets overlooked, because as unpopular as it may be, every dollar the government spends winds up in somebody’s bank account or on somebody’s balance sheet, sometimes multiple times. It’s real income to real individuals and businesses.

      My question is this: while raising taxes on the rich certainly puts them on a lesser economic footing, doesn’t cutting benefits on the rest of us (a.k.a the customer base) leave us with less disposable income, and doesn’t that hurt the rich job creators too?

  • Hunter01

    A solid 35 percent of the American public — our base Republicans — believe anything their leaders tell them. Anything. Why? Because (1) they haven’t the skills to think for themselves, and (2) it’s fun (a squirt of serotonin) to belittle the other guys.

  • ottovbvs

    Apparently tonights meeting came to an abrupt end when Cantor (as Obama was winding up) cut in suggesting for the third time an extension of a week or two and Obama just cut him off, said see you tomorrow and left. Cantor immediately went crying to Fox News in what’s being called his back seat moment. Meanwhile while this idiot is on Fox New Moody’s are threatening a downgrade which is probably worth 50 bips so everyone’s interest rates go up.

    • JimBob

      I’m sure that’s the way it really went down. The quicker we cut your social security check off the better off we’ll all be.

    • Watusie

      Eric Cantor proved what an attention-seeking liar he is with his “my campaign office was fired on!” story a few months ago. Him going whining to the Fox news cameras in person this evening when there is a huge crisis brewing is just further proof of how worthless he is as a political leader. He is very much in the mold of Newt Grinch – a walking gasbag who would shut down the government because (a) he didn’t like his seat on the plane and (b) it meant more time for him in front of the microphones.

    • valkayec

      JimBob is as ignorant as usual.

      I read the complete Jake Tapper (CBS reporter) story in the middle column here on FF. It’s obvious Cantor was again playing the spoiled rich boy “who wants what he wants when he wants it” again. Obama got fed up. He frustrastingly said both parties had a chance here and now to make an historic deal to put the nation on a sound fiscal footing and anything less was playing partisan politics. Moreover, he’d veto any short term deal. He ended by saying they’d meet tomorrow and left the room.

      If Cantor went crying to Fox News, it’s because Obama handed him his head on a platter…and Cantor is such a spoiled rich brat that he thinks he should have whatever he wants and will lie or deceive to get it. He’s a disgusting, weaseley twit that should be sent permanently back to his mansion in Virginia.

      The GOP forgot, or did not know, that conservative Obama’s colleagues from the Harvard’s Law Review described Obama as having an “iron fist in a velvet glove.” Today he showed that iron fist.

  • pnumi2

    Is there anything more pathetic than when your opponent won’t admit that he has lost the battle?

    The Republicans hardly resemble the honorable Marcus Brutus, in the HBO series ‘Rome’, when he removed his armor and threw himself into the front line of Octavian’s legions.

    Soon we will see Obama give Eric Cantor the therapeutic ‘long form’ enema , but it won’t be as exciting as Philippi.

  • nuser

    Do you think Boehner is crying for a smoke in that photo? Wonder if his feet are braided as well.

  • Bunker555

    Cantor will pay for his stupidity:

    http://www.theatlantic.com/politics/archive/2011/07/more-on-rep-cantor-as-least-valuable-player/241912/
    “The prospects for an agreement now are worse because of Rep. Cantor’s presence in them. That’s not because he’s a conservative — so, obviously, are Boehner and McConnell. It’s because he’s acting like a weasel.”

    • sweatyb

      [blockquote]Cantor’s push for a short-term extension, a GOP aide said, was completely warranted because the White House had been “walking back” the savings on the number discussed during the earlier negotiations with Vice President Biden all week.

      “Thursday it was $2 trillion, Monday it was $1.7-1.8 trillion, Tuesday it was $1.6-1.7-1.8 trillion,” the staffer said. “This morning our staff met with White House folks and the wrap-up from that meeting said that the White House is now at $1.5 trillion.”[/blockquote]

      Yeah, that’s called turning the screws. The President can do that because he has all the leverage and the Republicans have none. By Friday it should be about $800B-$1T or so in cuts and a matching amount in revenue increases. (Although Obama has let the Republicans off the hook before, so they might still salvage a better political deal.)

  • jg bennet

    here are some words from a republican who knows how to lead and his opinion of the incompetent republicans.

    GRETA VAN SUSTEREN, FOX NEWS HOST: All right, I need a definition. I watched your YouTube video today in research for tonight’s interview. And the term “El Foldo.”

    DONALD TRUMP: Right. Well, the Republicans are doing another el foldo. They did one during the lame duck session, where they brought Obama, like a phoenix he rose again. He was gone. It was over. And all of a sudden, they just allowed him back into the game.

    And now they’re doing another one but at a much higher level. This is incredible. They had all of the cards. Now, they haven’t made this deal yet, but from all indications, it looks like they’re frightened. It looks like they’re scared. And it looks like they’re just folding.

    VAN SUSTEREN: Why?

    TRUMP: I have no idea! And they are making Obama look so great. It’s just incredible. The fact is the Republicans are terrible negotiators.

    One of the things that most bothered me when I was thinking about running and when I was leading in the polls, I would look at some of the decisions these people were making, and I couldn’t believe it. You look at what Paul Ryan has done with Medicare, where he wants to knock out and destroy Medicare, whether he is or not, certainly the perception is that he is.

    And you see what going on and you say, maybe the Democrats are going to take over the House. It is unbelievable what is going on. And Nancy Pelosi is laughing all the way to the bank. And you notice she is the only one saying I won’t touch Medicare. The Republicans could end up, instead of getting more seats in the House they could end up losing the House. They are horrible negotiators.

    Paul Ryan, how he got involved, after being in office for 15 seconds after getting his new position, and just the first thing he does is come out with this plan that is absolutely — he should have waited for Obama to come out.

    VAN SUSTEREN: Let me get back to the debt ceiling.

    TRUMP: The fact is, Greta, they are terrible, terrible, frightened negotiators. And I just can’t believe they are doing this.

    here is the whole 17 minute video http://nation.foxnews.com/debt-ceiling/2011/07/14/trump-republicans-are-terrible-frightened-negotiators

    • ottovbvs

      Here speaks a man who started at the bottom with a billion dollars his father left him and is generally regarded as a carnival barker. Reality the Republicans miscalculated. They didn’t have any cards other than a threat to shoot the hostage. And if you issue those kind of threats you’d better be ready to follow through. When it comes down to it they aren’t. Why. It would be a homicide/suicide pact.

      • sweatyb

        They didn’t have any cards other than a threat to shoot the hostage. And if you issue those kind of threats you’d better be ready to follow through. When it comes down to it they aren’t.

        Cantor would do it in a heartbeat.

      • pnumi2

        “They didn’t have any cards other than a threat to shoot the hostage.”

        Then they found out that the hostage was none other than their voters and most of their relatives.

        And the only way out was by giving Obama what he wanted (which they would die before doing) or taking down the nation, which was more doable than letting Obama win.