Stories by Steve Bell

Steve Bell is former Staff Director of the Senate Budget Committee, a former managing director at Salomon Brothers, and now Senior Director on Economic Policy at the Bipartisan Policy Center in Washington, D.C.

No Super Democrats On This Committee

August 10th, 2011 at 11:27 am 35 Comments

How can we explain the Democrats who have been appointed to serve on the Joint Select Committee? (Commonly known as the ‘Super Committee.’)

Let’s play political “Jeopardy.”


S&P Was Right to Downgrade

August 8th, 2011 at 4:34 pm 26 Comments

The dispute between the Treasury Department and Standard and Poor’s over America’s sovereign bond rating is a tempest in a teapot.  Worse, it overshadows the reality about America’s debt: Congress cannot handle it politically and Americans will have difficultly handling it personally.


A Recovery Menaced By Dysfunctional Politics

July 29th, 2011 at 11:28 am 79 Comments

In a time of fundamental uncertainty, case what do we know for certain?

No, order that’s not a Yogi Berra kind of question.

Timing of passage of an increase of some size in the national debt ceiling remains uncertain.

Which side will blink first remains uncertain.

Final form of the legislation remains uncertain.

Market reaction remains uncertain.

But we do know some things for certain.


Boehner is in Danger of Losing Caucus Control

July 27th, 2011 at 9:54 am 16 Comments

Reports from the Hill indicate that House Speaker John Boehner and his staff are “re-writing” the Speaker’s plan to pass an extension of the looming debt ceiling.  That announcement, coupled with the serious objections of many in the House GOP caucus when the plan was first announced, reveals that the Speaker is in danger of losing control of his own caucus.


Towards a Deal?

July 22nd, 2011 at 5:56 pm 13 Comments

Reading the New York Times column by David Brooks on why Republicans should vote for the “plan” that House Speaker John Boehner and President Obama reportedly have developed casts a pall of depression  over any thinking person.

Reading the New York Times column by Paul Krugman on the impending global economic collapse merely worsens confusion.

Can both be right?  Cut spending: Brooks. Increase spending: Krugman. Failure to do either could lead to “The Great Depression, cheap The Sequel.”

The juxtaposition of those columns reflects almost perfectly the confusion in Washington, buy cialis D.C.

And the weather is just right in the nation’s Capitol for productive negotiations—100 degrees in the shade, 115 heat index, code red air quality.  A perfect metaphor.


Time is Running Out

July 21st, 2011 at 10:32 am 26 Comments

Yesterday evening and last night something important in the debt ceiling discussion happened:  many members of both the House and Senate moved from “worried” to “scared.”

This is good news, sickness of a sort.

It further confirms our judgment that the United States will not default on its sovereign debt obligations in August.   It increases the odds to much better than 50-50 that some form of  short-term extension of the debt ceiling occurs before August 3. It accommodates the possibility that during the next several months, medical some comprehensive plan like that produced by the Senate Gang of Seven may gain critical mass in both Chambers.  It means that the “catastrophic” consequences of not raising the ceiling, ask to quote Fed Chairman Ben Bernanke, will have been put off for another day and another battle.

And, that’s the bad news.


Will Jim DeMint Filibuster Us into Default?

July 19th, 2011 at 2:49 pm 19 Comments

Wind your way past the debate on a  Balanced Budget Amendment to the Constitution, diagnosis paid protesters carrying “Protect our Social Security and Medicare” placards, and sound bites from almost all talking heads.

When you do, you will discover that some serious folks in Congress refuse to give up hopes of a significant budget deal.  Prominent among the debt shock troops is Sen. Tom Coburn (Dr. Coburn to most), who yesterday released his plan to reduce projected federal debt by $9 trillion during the next decade.


Deal Will Come, but May Disappoint

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

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.

GOP Losing Touch With
Economic Reality

July 12th, 2011 at 12:11 am 126 Comments

President Obama’s news conference this morning confirmed the age-old truth: a President has the bully pulpit.

More people saw, order or will see in some format, buy the President’s remarks today than will see all of the comments by all Republicans combined over the weekend.

As a public relations/political matter, ampoule the GOP is getting its clock cleaned.

Three major specifics struck us as the President spoke:

First, he made explicit the fact that no revenues being discussed among the negotiators would take effect until 2013 at the earliest.

Second, he intends to request formally an extension of the present 2 per cent FICA holiday for employees.

Third, the approximate ratio of spending restraint to new revenues in the “grand plan” he and Speaker John Boehner discussed would have been 4 to 1.

Beyond the new policies revealed, the tone of the President’s opening statement continued the White House effort to show Obama as the patient, calm parent dealing with a beleaguered John Boehner, who cannot control his own unruly brood.

Parent Obama acknowledged that the deal he wants to conclude with Boehner would cause pain to his fellow Democrats.  That is the price of dealing with the looming fiscal crisis, he said.  By implying that he is willing to deal with his own children, Obama implies that no one can control the GOP children.

We wrote in this space some time ago that a deal would emerge.  It would be trivial.  It would be less than required to even start stabilizing the debt trends of the nation.  It would occur only after maximum expenditure of time, political capital, and citizens’ patience.  More than ever, events of the past two weeks confirm that forecast.

Much has been made of the miserable jobs report last Friday.  Professional economic forecasters have been so wrong, so often, on their predictions that past two years that we recommend group therapy to help them adjust to reality.  Very few analysts who have read how nations emerge from financial meltdowns have ever believed that the recovery would be anything other than , painful, jobless,  frustrating, and slow.  I don’t believe that the jobs data had as much impact on the debt negotiations as others contend.  It does give the President a chance to connect a “deal” with “job creation.”  In the short run, of course, the two things exist in parallel universes.  Getting the debt limit passed will, in and of itself, create no new jobs anytime soon.  But, the ability of the President to show that the “irresponsibility” of the Republican House will not only threaten the nation’s world standing, but will cost jobs, gives him double-barreled communications ammunition.

Here are the hard facts:  we will get a debt extension, maybe as short as six months, maybe as long as 18 months;  the savings from the debt ceiling deal will be small compared to the vast debt accumulation for the United States the next 10 years;  Republicans have embarked on perhaps the only political course that could impair their ability to win the Senate, expand their House majority, and win the Presidency in 2012.

As an aside, the uncertainties in the global economy (slowing China, moribund Japan, inscrutable Europe, fragile South America) virtually assure a continuing flight to relative safety by world investors.  With no growth in the United States to crowd out, I believe that “the best house in a terrible neighborhood” theme that has kept interest rates very low in America will continue.

Until it won’t.  That will happen and we will have little warning.

The GOP should hope for a debt deal as soon as possible, so it can change the subject to national defense, international economics, anything other than the present subject.  The longer the nonsense continues, the more Republicans risk looking out of touch with economic reality.

Obama Puts Congress on Notice

June 30th, 2011 at 10:45 am 44 Comments

In his statement and news conference yesterday, President Obama decided to take off the gloves in his fight with Congress over the debt ceiling increase.

His performance should stand as a reminder to Congress that, ultimately, only the President has the bully pulpit.

As we at the Bipartisan Policy Center have written before, when then-Speaker Newt Gingrich and his advisors decided to “close down the government” in the 1995-96 confrontation with President Clinton over appropriations and debt ceiling, most Republicans thought that Clinton would get the blame.  He didn’t.  The House, and more specifically the Speaker, got the blame.  This incident remains one of the main things most alert Americans remember about Newt.

We have heard the same contention by some Republicans over the last few months as the debt debate reached the front pages: ”Obama will get the blame if something bad happens because we didn’t increase the debt ceiling.”  History instructs us otherwise.

Take a practical step back.  When husband and wife discuss things over morning coffee, they most likely don’t think about debt ceilings, bond markets, or other esoterica.  They talk about kids, schools, work, chores around the house, money, maybe sports or even Oprah-type things.  If they read or hear that the Congress has failed to pass a debt extension (a strange concept in and of itself since this husband and wife pay their bills faithfully,) that financial markets are in turmoil, and that maybe a whole bunch of folks will lose their jobs, their response will most likely be, “Holy cow, what are those idiots doing up there!”

Why would this be the majority response?  Well, because Congress must pass the debt extension.  It is its duty.  The President doesn’t pass the debt ceiling increase.  On television, over the radio, in the newspapers, and throughout the blogosphere, it will be Congress, not the President, who has failed to pass the debt extension.

Clearly Obama realizes this.  He knows the ill-fated 1995-96 history. He knows that all he really has to do is declare Congress irresponsible, and say that it’s holding hostage the American economy and hurling the country into another Great Recession or worse.

Clearly, most Republican leaders in Congress know this fact of life.  They have tried to say that the President is to blame for this impasse, that they want no default on American sovereign debt, but that the President is making this happen because he insists that revenues (taxes) be part of the fiscal solution attached to the debt bill.  Wisely, but so far unsuccessfully, they have tried to change the subject from what they have to do (pass the debt extension) to what the President wants (raise taxes).

As poll after poll reveals this past several months, Congress continues its slide toward single digit popularity in the eyes of the public.  The “change the subject” manuever hasn’t worked.

What the President said yesterday was, “Hey, Republicans, listen up.  I am going to continue to compare you to my kids who don’t get their homework done on time, and continue to tell you that as adults you must get your work done before you go on your extended summer vacation.  Here’s just a taste of what is to come.”

Of course, the President has been playing the famous “lead from behind” game.  Of course, Republicans are frustrated because the President and other Democrats have demonized them on Medicare and Social Security, and very unfairly done so.  Yes, the President has failed to lead sufficiently and has shown little boldness.

But, the President has also retained the ability to make his voice heard throughout the country, on his terms and with a pliable media elite as an echo chamber.

Republicans cannot expect mercy.  They have painted themselves into a corner.  The President isn’t going to get paint all over his shoes by trying to  extract them from that corner.