Boehner Faces GOP Budget Revolt

March 29th, 2011 at 5:06 pm | 13 Comments |

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Today’s news that conservatives in the House Republican Study Committee will draft their own alternative Fiscal Year 2012 budget to challenge the GOP leadership highlights Speaker Boehner’s problems in keeping his caucus unified. But he’s not the only one. In the budget fight, cialis neither President Obama, capsule nor Speaker Boehner, nor Leader Reid can lead, because by and large their troops won’t follow.

So far in the spending fight, delay may have actually helped congressional leaders.  All the strum und drang has been about very tiny spending numbers and the CR.  The FY12 budget (and its five- and ten-year projections) will involve very big numbers and very basic fiscal policy.  And the debt ceiling will involve both.

Instead of trying to make a deal on FY 11, then another on the FY12 budget, and a third on the debt ceiling, the best strategy would be to make a “grand bargain” on all three at the same time.  If Ryan delays a couple of weeks, and Congress forges another CR until mid-April or so, then the debt ceiling may be nearly breached and a “global” discussion of all three could take place.

All of this complicated scenario-devising can’t hide the underlying problem.  Just ask yourself these three questions:

  • How can Chairman Ryan get the necessary votes either in committee or on the House floor when he will be asking his colleagues to vote for at least 2 years of trillion dollar deficits?
  • Who in either party will vote to radically change federal pensions, Medicare, Medicaid, and other entitlements with an aging voting population and no short term deficit reduction in the offing?
  • Why would the President begin public negotiations when it is clear that neither Boehner nor Reid have their own troops in line?

In short, none of the three principals can make a deal that they may be able to deliver on.

The revolution in the GOP ranks is dramatized by the announcement today that the Republican Study Committee within the House caucus will develop its own budget, countering what they perceive will be an insufficiently aggressive budget by Boehner and Ryan.  Since almost two-thirds of House Republicans belong to the RSC, their challenge cannot be ignored.

At the same time, House Democratic Minority Whip, Steny Hoyer, has repeated that once again it may be the House Democrats who come to Boehner’s aid and provide enough votes to pass the CR for FY11.  Recall that at the last vote, it was Democrats who voted in enough numbers to pass the CR, as 54 Republicans voted against it.  Whether Hoyer’s remarks help or hurt Boehner remains unclear.

One of the most famous verses in the Bible is 1 Corinthians 14:8.  It reads, “For if the trumpet give an uncertain sound, who shall prepare himself to the battle?”

The President has sounded the trumpet—we have unsustainable deficits and debt and we must take action.  Boehner and Reid agree resoundingly.  Every serious policymaker and economist concurs—America’s fiscal path will lead to fundamental damage to America’s economy and international standing in the future.

And yet, in his own way, each sounds an uncertain trumpet to the troops.  The president wants Congress to go first; Reid wants the House to act first; Boehner doesn’t know if he has the votes to go first.  The American people look on, confused and bemused, in a state of “buyer’s remorse” over the election of November 2010.

In such a melee, with no one blowing the trumpet and leading the charge, the troops haven’t even formed up yet.

The dust will clear one way or the other.  Congress will act in a convincing fashion to get projected deficits trending down or the bond traders in international markets will strike.  So we end with a final question:

“What happens when a 30-year-old bond trader in London all of a sudden wants 5.5 per cent on the American 10-year note, instead of the current 3.4 per cent?”

Stay tuned.


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13 Comments so far ↓

  • ottovbvs

    “What happens when a 30-year-old bond trader in London all of a sudden wants 5.5 per cent on the American 10-year note, instead of the current 3.4 per cent?”

    So when is this magical event going to occur Mr Bell? You keep making this particular wolf cry but the wolves never show up. So tell us when it’s going to be pray. In my judgement it will two years before 10 year bonds are back to 5.5%. If you disagree say so.

    Clearly Boehner and Cantor have lost control of their caucus, I’ve been saying this for weeks. Obama is holding most of the cards in this process and his negotiating team is headed by Bill Daley who is not by any stretch of the imagination a pushover. There’s going to be no grand bargain because it’s to Obama’s advantage to keep Boehner and co on the griddle and negotiate these issues separately. And it’s hardly on the American people’s radar. But it will be unless Boehner makes a deal within ten days. A deal he’ll have to pass with Democratic votes basically with unknown consequences in his caucus.

    • hisgirlfriday

      But Obama’s disadvantage is he actually gives a crap about the country and its people and will probably be willing to agree to almost anything to ensure the country doesn’t have to go through the pain and economic uncertainty of a shutdown just to try to score cheap political points.

      • ottovbvs

        I think this is true but he’s surrounded by hardasses, notably Daley who a)knows how the sausage is made and b) is not a patsy.

  • jcm433

    “The American people look on, confused and bemused, in a state of “buyer’s remorse” over the election of November 2010.”

    Let’s hope so. I intensely dislike the direction in which the Republican Party is leaning these days. They are a gang of noisy demagogues and culture warriors who long ago abandoned the responsible and principled positions of fiscal restraint and small, accountable government which made them a great conservative party. And sorry folks, but Ronald Reagan was not the last great Republican, but the first of this base new breed of GOP’er. It’s sad to say, but we’re better off with Democrats running things. At least they make no pretenses of being something they’re not.

  • Non-Contributor

    “What happens when a 30-year-old bond trader in London all of a sudden wants 5.5 per cent on the American 10-year note, instead of the current 3.4 per cent?”

    He won’t buy them then what? Exactly, nothing.

    • ottovbvs

      Well if he wouldn’t buy them something would happen (the price would go down and the yield up and at the next bond auction they’d have to raise the coupon on new issues) but it’s not going to happen …at least not for the foreseeable future and all this budget maneuvering is having zero impact on bond prices. Obviously the debt ceiling vote is not irrelevant but does anyone really think they’re not going to raise the debt ceiling?

      • indy

        It’s kind of funny watching the GOP going through all the cat-wrangling procedures that have haunted Dems for, well, for ever.

        • ottovbvs

          Winning the house is turning into a poisoned chalice for the Republicans. Politically they were much better placed when they were in a minority in both houses and could just carp from the sidelines. Now they have to participate in the governing process. There’s also been a complete switch of attention from the senate to the house (in the last congress all the focus was on the senate) so they are constantly in the Klieg lights. April 8 is going to be a firework show as is the publishing of the 2012 budget and the debt ceiling debate.

  • armstp

    “What happens when a 30-year-old bond trader in London all of a sudden wants 5.5 per cent on the American 10-year note, instead of the current 3.4 per cent?”

    If only it was that simple.

    Bond yields are all a relative game primarily driven by global financial markets. The U.S. government bond market continues to remain the safest bond market on the planet. Debt levels and deficits are not really a concern and likely never will be. Total debt is +90% of GDP (only marginally higher than were Bush left it), is historically high, but we have been here before and there are many countries in this range. However, one of the biggest reasons the debt per GDP is high is because of the historic low GDP (denominator) over the last few years. Therefore, as the economy returns the U.S. will simply grow out of a lot of this debt. The CBO is predicting that the deficit and debt per GDP will dramatically fall over the next five years.

    However, more importantly interest on the debt remains very manageable and would remain so even if interest rates went higher.

    “As can be seen from the chart, CBO expects that interest costs for the budget year (fiscal year 2010) will be the lowest as a share of the debt outstanding than in any year since 1962.[2] Net interest costs are expected to be 2.4 percent of debt outstanding for fiscal year 2010, 30 basis points below the expected 2009 level of 2.7 percent.”

    Financial markets are telling us that no one is particularly concerned about the debt and deficit of the U.S. The credit ratings agencies are also not particularly concerned. The U.S. still has its AAA credit ratings.

    Alot of this supersonic concern about the deficit and debt is just politics.

    That trader in London really does not have much to say or influence in moving rates up to 5% and even if they moved to 5%, who cares. It is manageable.

    • ottovbvs

      US long and short bond yields are on the floor. In constant dollars they are close to zero and as of now there is little chance they are going to move dramatically over the next year.

  • indy

    Politico is reporting that the administration and the house GOP are within 6B on a deal.

    http://www.politico.com/news/stories/0311/52164.html

  • sdspringy

    Incredibly after 5 years of Democratic control of the budget process JCM433 dislikes the 3 month of the new Republicans.

    Five continuous budgetary failures with a final complete inability to even create a 2011 budget and Otto states the Dems have completely out maneuvered the Republicans.

    Every piece of legislation signed by Obama has completely failed to meet the stated goal, ie.. Stimulus or was completely fraudulent in stating it would lead to a balance budget, ie.. ObamaCare.
    Now with the budgetary genius of Harry Reid at the helm a 20 Billion cut in a 1.5 TRILLION deficit and the Libs here at FF are back slapping themselves silly.

    QE2 ends in June, actual inflation is running above 6%, and when the Fed ends it’s buying spree the house of cards falls. And not even a new Greek Parthenon backdrop for the next Obama speech will prevent the market collapse

    • indy

      Careful, Scarlett, so many hypertensive, hyperbolic, hyper-partisan statements in so few words has been known to cause fainting spells. I hope you were sitting down when you penned this.