Obama Threatens Veto – Of Any Debt Limit Deal Under $2 Trillion
Because we have a governing elite that doesn’t understand basic economic theory, the horrific jobs report will probably not change the mindset of the next 72 hours, which is to cement a deal to massively reduce the deficit, mostly through cutting spending. The White House has convinced themselves that this would increase confidence from the business community and lead to hiring. In fact, the President is so convinced this is a good idea that he, not the Republicans, is using the debt limit as a hostage. He threatened to veto any solution that didn’t equal at least $2 trillion-plus in deficit reduction.
And, it could be argued, that he is taking Democrats in Congress hostage too.
Congress is being pushed into a proposal nobody very much likes by the President, who is using the debt limit to get this done. That’s really the dynamic.
(Updated with information from LA Times article, more background on the meeting with members of Congress)
The LA Times article below describes what happened. The President made it clear that a short-term bargain would not be accepted, that he wanted to do something "big" and gave them three packages, the smallest of which contained $2 trillion in cuts.
Negotiators consider grand bargain on taxes and benefits
Reporting from Washington—
White House and congressional negotiators have dived into a three-day marathon of talks to determine whether Democrats and Republicans can strike a grand bargain on taxes and benefit programs to avert a default on the federal debt and curb the nation's huge deficit.
[ ... ]
In the meeting, Obama outlined options for short-, medium- and long-term packages of deficit cuts, according to a congressional aide familiar with the talks. The smallest package, $2 trillion, would be made up mostly of spending cuts already identified in talks led last month by Vice President Joe Biden. The maximum would be a $4.5-trillion deal. Obama also said he would veto any short-term fix that would require Congress to vote on the debt ceiling again this year or next. At the meeting, no one favored the smallest option, officials said.
"There are rare opportunities to do big things, and this is an opportunity to take a real step forward on reducing the deficit," one White House advisor said, explaining Obama's desire for a long-term, large-scale deal. "He is concerned that if we kick the can down the road and do this three months from now, we won't have the same opportunity."
What is he promising the Democrats in return? It looks like he is giving them, no I am not kidding, a promise, nothing concrete, but a promise to do tax reforms, at some point.
In other words, cut $3 trillion in spending now, including to cherished safety net programs, in exchange for… a promise of getting to tax reform later. And to let the committees sort that out.
I don’t know that you could try to come up with a worse deal from the liberal perspective.
Now I have a lot of respect for Dayen's writing and opinion but I think he is missing something big here. We've seen this show before and it is Disaster Capitalism. We saw it with TARP and with the government shutdown and even with the health care reform debacle. The White House decides what it wants, they use the Senate to craft their legislation, the Senate passes their bill. The House crafts their bills via committee and passes their bills. The House bills get thrown in the trash. The disaster situation approaches. The White House and the Senate threaten the House that if they don't pass their bill (maybe with some tiny concession and maybe a liberal shiny object thrown in with a dash of "it coulda been worse!") then all services in the U.S. will cease, the people will starve, millions will not get the health care, the terrorists will be on every street corner, the global economy will crash, everyone will lose every dime in savings, and the Vogons will hover over the earth and blow us to smithereens.
The Shock Doctrine
The book argues that the free market policies of Nobel Laureate Milton Friedman have risen to prominence in some countries because they were pushed through while the citizens were reacting to disasters or upheavals. It is implied that some man-made crises, such as the Falklands war, may have been created with the intention of being able to push through these unpopular reforms in their wake.
But in all seriousness, what will happen is what happened most recently with TARP and the health care bill and the infamous budget cuts with a side order of Bush tax cut extensions. The Senate will pass what the President and his neoliberal advisors want, and the House will be told that if they don't pass it, the U.S. will default on its debt and the global economy will crash.
Easy decision for the House Democrats, right? Maybe they'll throw in a little DOW index dive just to make it all very clear to those Dems about what the impending disaster will look like.
The funniest thing (not funny at all, actually) is that along with the looming disaster, there is usually a Congressional recess looming too. Oh no! We might have to delay our vacation! Harry Reid threatens to bring out the cots and debate all night (as if they are even in the chamber anyway). The Senate passes something and leaves town so the House would have to call them back to make any changes. Or maybe they just eliminate the conference procedure altogether! That was a good one.
The August recess is the worst. I have come to dread them.
The dirty details never come out until the eleventh hour with the disaster on the horizon. You can see this part beginning to unfold in Sen. Whitehouse's statement here from this New York Times article:
"Depending on what they decide to recommend, they may not have Democrats," Senator Sheldon Whitehouse, a Rhode Island Democrat, said in an interview. "I think it is a risky thing for the White House to basically take the bet that we can be presented with something at the last minute and we will go for it."
And of course, we know that despite what Whitehouse says, they will do just that. They will go for it (or else... they will be the sole cause of crash of the global economy!) Republicans, honey badgers that they are, know this game, and will not go for it. Lots of them won't vote for it. Then they'll pin it all on the Democrats in thousands, millions of campaign ads.
Meanwhile, President Obama does not have to do this at all. If he demands a clean debt ceiling bill, he can get it. Congress is already working on the budget. Spending is a budget issue. It should be done in the budget. But it is harder to attach a disaster to the budget negotiations.
This debt ceiling attachment and veto threat (ransom note) that he has created was entirely unnecessary. And it is not the Republicans are taking him hostage this time. He holds himself hostage. And by doing so, he places the blame for undermining the New Deal programs and for austerity squarely on the Democratic party and all of its elected representatives.
Somehow, this President believes that this will help him get elected.
What's particularly revealing in the Social Security/Medicare assault is the political calculation. The President obviously believes that being able to run by having made his own party angry -- I cut entitlement programs long cherished by liberals -- will increase his appeal to independents and restore his image of trans-partisan conciliator that he so covets. But how could it possibly be politically advantageous for a Democratic President to lead the way in slashing programs that have long been the crown jewels of his party, defense of which is the central litmus test for whether someone is even a Democrat?
So while Obama runs along with his "I hate liberals!" strategy, his campaign manager thinks that unemployment won't affect the way people vote.
Plouffe, who ran Obama’s 2008 presidential campaign, previewed the arguments the president and his team will sound 16 months before an election that could be a referendum on Obama’s handling of the economy. While history has shown the unemployment rate to be a leading indicator of an incumbent’s success, Plouffe said Americans won’t base their votes on it.
[ ... ]
“Their decision next year will be based upon two things,” Plouffe said. “How do I feel about things right now and then, ultimately, campaigns are always much more about the future and who do I think has got the best idea, the best vision for where to take the country?”
He needs to get out more. The feeling of angst and fear across the land is directly tied to the fact that unemployemnt is high. People know it and except for the political class, heriesses, CEOs and Wall Street traders, even if they are currently employed they are personally experiencing it in their inability to get a raise, change jobs, move up, sell their houses,start a business or get a loan. People are stuck,unable to make a change, seeing the future they had planned just fade away as they adjust to a flat economy with no dynamism and no end in sight. Happy talk isn't going to do it.
We can only hope that things will play out differently this time. And we can push as hard as we can to try to influence the people who we elected to represent us. Whitehouse and Sanders are signalling that something is very wrong here:
Via David Dayen:
“There’s been very little conversation between the Senate and the White House on this,” said Whitehouse, who acknowledged that most of his information about the proposal came from reading the papers. “They are making a grievous mistake if they assume that, because we’re Democrats, we’ll go along with what they’ve capitulated to.”
Sanders agreed. “I have heard, including from people that you might not expect, that if they bring a deal that comes down hard on the most vulnerable members of society, and they expect us to pass it, they have another thing coming.” He added, “The Democratic caucus will not willy-nilly follow the President.”