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Paul Krugman argues that the Battles of the Budget, are actually the tip of the iceberg of a "fierce struggle over the future shape of American society," that at its core is really a class struggle.

For the reality is that our two major political parties are engaged in a fierce struggle over the future shape of American society. Democrats want to preserve the legacy of the New Deal and the Great Society — Social Security, Medicare and Medicaid — and add to them what every other advanced country has: a more or less universal guarantee of essential health care. Republicans want to roll all of that back, making room for drastically lower taxes on the wealthy. Yes, it’s essentially a class war.

I'm encouraged by the power of this framing, along with the post Jed Lewison wrote this morning reporting Gingrich says Republicans will 'cave' on their 'dead loser' debt limit bluff. These posts have boosted my confident that President Obama may have much greater negotiating power than I first realized when it come to the debt-ceiling part of our remaining fiscal cliffs.

Krugman asks if the tactical victory Democrats won in the McConnell-Biden bill, might turn out to be a Pyrrhic victory that will set the stage for a larger defeat, if we give into Republican blackmail over the debt-limit and agree to more cuts. But here, he seems to lose his train of thought, and goes off an an odd tangent suggesting the problem with the compromise was the lack of benefit cuts, not the more important argument of lack of more progressive replacement revenues for the 2% of GDP of last 'total Bush tax cuts."

But, I'm less interested in rehashing the pro's and con's of the McConnell-Biden bill than in what we can to to move forward and get our most progressive outcome in the debt-ceiling, sequestration, and a new continuing budget resolution in the next 60 - 90 days.

In this regard, the last half of Krugman's post explains his primary concern for our futrure is that despite the fact Democrats control the Senate and White House so the GOP should be relatively powerless their control over the debt-ceiling remains a threat:

But the G.O.P. retains the power to destroy, in particular by refusing to raise the debt limit — which could cause a financial crisis. And Republicans have made it clear that they plan to use their destructive power to extract major policy concessions. ...

But will Mr. Obama stick to his anti-blackmail position as the moment of truth approaches? He blinked during the 2011 debt limit confrontation. And the last few days of the fiscal cliff negotiations were also marked by a clear unwillingness on his part to let the deadline expire. ... So, as I said, in a tactical sense the fiscal cliff ended in a modest victory for the White House. But that victory could all too easily turn into defeat in just a few weeks.

 

The key message comes out as support for President Obama's announced position not to negotiate over the payment of debt and spending that the House has already authorized. The 14th Amendment requires that we honor and pay this debt. This morning Newt Gingrich observed what a public relations disaster a debt ceiling hostage crisis would be for the GOP.

So, I'm increasingly confident that President Obama may have a winning hand with regard to the debt-ceiling part of our three crises -- the others being the sequestration, and continuing budget resolutions. We need to rally to support this resoluteness and make sure we do not snatch defeat from the jaws of victory with any last minute caving and major spending concessions in the debt-ceiling part of the negotiations. Any discussions of cuts need to be confined to more progressive and surgically precise replacements for the sequestration cuts, and the continuing budget resolution.

I didn't see this, at first, but  I believe the President is on the right course for the debt-ceiling show-down so I endorse this approach of refusing to negotiate on the debt-ceiling part of this challenge.

In worst case, if the Republicans persist we can continue to escalate the threat of the PCS $1 trillion coin maneuver, which is not mainstream, however, it is legal, and if the GOP chooses to abrogate their responsibility to fund debt and spending they have already authorized, extreme threats may justify out-of-the-box response. Building the credibility of alternative response options, in the background, may represent the best of a "carrot and stick" strategy on the debt-ceiling.

10:34 AM PT: I changed the title slightly at 1:30 p.m. to take out the duplicate use of the word struggle in "class struggle" and struggle over America's future.  This small rewording makes it snappier.

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Comment Preferences

  •  Tip Jar (14+ / 0-)

    The means is the ends in the process of becoming. - Mahatma Gandhi

    by HoundDog on Fri Jan 04, 2013 at 10:13:07 AM PST

  •  Bob Reich wrote something similar as well (6+ / 0-)

    http://www.huffingtonpost.com/...

    It's a battle of a vision of government as well as a class struggle.

    Chuck Hagel for Defense Secretary

    by Paleo on Fri Jan 04, 2013 at 10:20:33 AM PST

  •  Krugman should be nominated for Treasury Secretary (10+ / 0-)

    not because he'd get it - he'd be blocked en masse, but he'd get to set the conversation for the while while in the confirmation process.  Then he withdraws his name after the GOP obstructs his nomination for awhile and goes back to the paper, and Pres Obama's next pick would then sail through.  

    Imagine his confirmation hearings...

    President Obama would have been a Republican in the 1980's.

    by Jacoby Jonze on Fri Jan 04, 2013 at 10:26:33 AM PST

  •  Republicans have to get that (6+ / 0-)

    hostage-taking is not going to work. Not this year, not the next, not the next. Until that's made clear as day, they'll keep threatening to destroy the US.

    These people are not moderates, and moderate measures based on compromise aren't going to stop the insanity. It will just reinforce them in using the tactic over and over.

    I would hope that the President would either (should Republicans not back down) use the Platinum Coin option, or (perhaps better) simply enforce the Constitution, as is his Job Description. "The debt shall not be questioned." So order Treasury to issue US Treasury Notes and/or coins (not sure if he can order paper) to pay already legislated debt.

    I'm not sure if he can be "outside the Conventional Political Wisdom coffin" enough to take the necessary remedies, but simply, this crap has to be stopped once and for all, whatever it takes.

    And heavens! Please don't let any fraction of the safety net even been mooted for a moment, so as to reach a bipartisan-shit type of compromise. The Republicans are practically begging "Please help us become as electable as Charles Manson!" Now is not the time for intervention to stop them from political suicide.


    The Internet is just the tail of the Corporate Media dog.

    by Jim P on Fri Jan 04, 2013 at 10:38:26 AM PST

    •  Well said Jim P. With regard to continuing to (1+ / 0-)
      Recommended by:
      Jim P

      fund government past the debt ceiling, my understanding is that the President can not merely order Treasury to print "Treasury notes" but rather the way money supply is expanded is that the independent Federal Reserve decides how many Treasury bonds to sell based on its assessment of inflation and economic growth.  So when investors buy these bonds debt is expanded and the the proceeds are deposited in the Treasury accounts.

      This is the process terminated by the debt ceiling. The unique thing about the Platinum Coin option is that the President can issue such coins in any denomination, and in any amount and deposit them directly in a Treasury account that directly increases the balance sheet of the government.  The coins do not have a real value of platinum in them.

      This law was not meant to enable this purpose, however, proponents note that if it is only used in this special emergency basis to prevent the irresponsible and perhaps even unconstitutional shut down of the government by Congress violating the 14th amendment by preventing the government for paying for debt and spending already authorized by Congress it could work.

      Last night I raised the possibility that President Obama issue one such $1.2 trillion coin effectively extended the debt limit for one year, with the stipulation that as soon as Congress regains its responsibility and wits it would be paid for with standard funds.

      This morning another author added an idea that the President trade giving up this power in exchange for the Congress giving up the right to hold the Executive branch hostage of spending the Congress has already authorized.

      So I see it as a hardball negotiating tactic that empowers President Obama stand firm on his no negotiating over the debt-limit line-in-the-sand.

      But, this would have to been done simultaneously with actual negotiations over sequestration and continuing budget resolutions -- one reason to get this off as quickly as possible.

      So the appearance and reality would not be that the Executive branch was trying to defy the House Constitutional mandate to initiate budget spending, but merely fulfill its 14th Amendment obligation to honor and pay U.S. Government debt.

      But, your point may still be valid as President Obama did issues Greenbacks to fund the civil war, and I believe Roosevelt sold War Bonds.

      I'm not sure if these were done via the Federal Resere, or as you suggest directly through the Treasury Department, so you may be correct that the President can issues bonds outside of the purview of the Federal Reserve.

      But, in this case such issuance would defy the debt-ceiling which I do not believe was in place in these previous precedents. But, I will have to check later as I need to run some errands.

      Thanks for commenting. It's been a lonely morning for some reason.

      The means is the ends in the process of becoming. - Mahatma Gandhi

      by HoundDog on Fri Jan 04, 2013 at 11:17:04 AM PST

      [ Parent ]

      •  Don't like this bit. (2+ / 0-)
        Recommended by:
        isabelle hayes, HoundDog
        This morning another author added an idea that the President trade giving up this power in exchange for the Congress giving up the right to hold the Executive branch hostage of spending the Congress has already authorized.
        There's no reason to give up the one defense against a ruthless lunatic fringe. Just stick a thumb in their eye, and let 'em know they try this crap again, they'll get the same result. Next year, 30 years from now. It's a good defense.

        There was no Fed during the Civil War, and Banks wanted Big Interest for loans. So Lincoln said "Screw you" and had Greenbacks printed.

        I'm not sure who would have standing to challenge it in court, but the Federal Reserve Act has been used to trump the Constitution for a Century now. But actually we have full authority to issue and set value for currency, banks be damned.

        Did you know, btw, that inflation between 1800 and 1912 was 6%. Since the Fed, it's been over 1900% (2400% by some calculations.)


        The Internet is just the tail of the Corporate Media dog.

        by Jim P on Fri Jan 04, 2013 at 11:46:55 AM PST

        [ Parent ]

      •  did you mean Lincoln, not Obama? n/t (1+ / 0-)
        Recommended by:
        HoundDog

        in any case, i support whatever shenanigans our side has to go through to get where we want to be

        i'm tired of only those who say "neep" getting their way

        •  Yikes, yes, I did isabelie hayes. That's quite an (0+ / 0-)

          error isn't it?  It would have been Abraham Lincoln not President Obama who issues Greenbacks to fund the civil war.

          The means is the ends in the process of becoming. - Mahatma Gandhi

          by HoundDog on Fri Jan 04, 2013 at 04:18:25 PM PST

          [ Parent ]

  •  Obama has the advantage (3+ / 0-)

    and I hope he doesn't blink.  Surely he realizes what Krugman points out as obvious - the budget battles are about class struggle and power.

    As much as the wealthy and powerful want to tilt the playing field in their favor and against the 99%, they don't realize their greed will eventually be their own undoing.

    Democratic Leaders must be very clear they stand with the working class of our country. Democrats must hold the line in demanding that deficit reduction is done fairly -- not on the backs of the elderly, the sick, children and the poor.

    by Betty Pinson on Fri Jan 04, 2013 at 11:00:03 AM PST

    •  If he blinks and makes big concessions on social (0+ / 0-)

      spending it would seem to portent a disaster for his reputation.

      Conversely, if he remains firm it will be a great victory similar to what Reagan won against air traffic controllers.

      President Obama's moment of greatness that will set the tone for the remainder of his term. Is it too melodramatic to contrast the two scenarios  Obama -The Powerful verus Obama - The Lame Duck?

      Perhaps, but he should not capitulate now that he has drawn the line and he can finesse the idea that he never said he wouldn't negotiate over sequestration and the budget resolution.

      Which are later, bringing up the possibility that he try to get the debt ceiling extension passed first changing the dynamics of the others.

      If not and they are all tied together it then just looks like rhetorical grandstanding. All the negotiating compromises can be put on page two in the sequestration section, while page one of the debt ceiling extension looks clean.  

      The means is the ends in the process of becoming. - Mahatma Gandhi

      by HoundDog on Fri Jan 04, 2013 at 11:24:17 AM PST

      [ Parent ]

      •  and a disaster for the Democratic Party (1+ / 0-)
        Recommended by:
        HoundDog

        If he cuts SS and doesn't fix the economy, our party is toast for a very long time.

        Democratic Leaders must be very clear they stand with the working class of our country. Democrats must hold the line in demanding that deficit reduction is done fairly -- not on the backs of the elderly, the sick, children and the poor.

        by Betty Pinson on Fri Jan 04, 2013 at 12:20:06 PM PST

        [ Parent ]

        •  IMHO there's about an 80% probability he'll cut SS (1+ / 0-)
          Recommended by:
          recontext

          He has a disappointing tendency to believe his own good PR and feels he can spin  his way out of these kinds of stupid decisions.

          It's kind of like the way he was in the first debate w/ Romney - a guy who has too much confidence in his own abilities and can't produce when he's called upon to do something difficult.  His staff reads too many ObamaRox diaries here.

          IMO, he really thinks he can riff any bad PR from agreeing to SS cuts.  He's not really concerned about the negative impact on seniors, his campaign staff hates seniors,  and he's completely bought into the voodoo Social Security economics from his "centrist experts".

          We are screwed on this one.

          Democratic Leaders must be very clear they stand with the working class of our country. Democrats must hold the line in demanding that deficit reduction is done fairly -- not on the backs of the elderly, the sick, children and the poor.

          by Betty Pinson on Fri Jan 04, 2013 at 12:27:25 PM PST

          [ Parent ]

  •  To heck with his reputation (3+ / 0-)
    Recommended by:
    isabelle hayes, recontext, HoundDog

    it would be a disaster for the Democratic Party.  The Democratic Party has no reason to exist without the core social programs which defend the middle class.  I mean it's not like they are going to the mat for labor either.  

    •  The people most onboard with Obama at this point (0+ / 0-)

      don't care about the "Democratic Party" or "core social programs" anymore than the Obama people do.  

      It seems he wants to be remembered more as the president who DIDN'T make decisions based on partisan ideals, but rather one that consistently split the baby.

      Of course, we'll end up with a bloody dead baby in the end.  But lots of "deals" will have been "done," to prove he was a "deal maker."  

      I don't think we'll have an Democratic idealist back in the WH until Clinton, the other half, moves in, in four years.

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