Why should the GOP be nailed to the wall on the shutdown?
Its been said by many, but remains true: they are engaged in hostage taking.
Not just ordinary political hard elbows bargaining, but taking the Global Economy hostage, while starting to tell themselves its "OK":
Nearly every Republican in the House of Representatives voted for a bill in May that would direct the Treasury Department to prioritize bond payments and Social Security retiree benefits over other obligations if Congress failed to extend its borrowing authority. In the Senate, 29 of the chamber's 44 Republicans have signed on to the idea.This is not ideological disagreement. This is believing that whatever cock and bull story you spin up is somehow turned into reality.
In order to make sure bond payments and Social Security checks went out on time, the government would have to delay other payments by days or weeks. That would send a massive economic shockwave through military contractors, hospitals, and other entities farther down the priority list.
The plan also may not be workable in a practical sense. The U.S. Treasury handles 4 million transactions a day, and separating some of them out would be practically impossible.
This is beyond a policy dispute, and enters into the territory of a dispute whether Legislators should act like they are sane, or act like they are insane.
These radical Republicans (about 180° apart from the Radical Republicans of the 1870's, who supported the right of the Freedmen to vote) need to be nailed to the wall.
And, further to the point, they can be.
As irresponsible as it would be for our elected officials to talk about who is "winning" or "losing" the shutdown, I aint no elected official, and the Republicans are losing the shutdown, badly:
And this is not uncommon, as Ezra Klein explains:
I wrote about this in 2011. Asger Lau Andersen, David Dreyer Lassen and Lasse Holbøll Westh Nielsen tallied up 167 state shutdowns since 1988. But then they went a step further and tried to isolate the fiscal mismanagement they had on the next election. They succeeded. Voters respond to budgetary chaos, and they do so angrily and predictably.And while people will generally blame both sides, Democratic challengers can run ads against Republican incumbents who "voted for the shutdown", while Democratic incumbents can run ads that they "voted to keep the government open" ... and quite often, that their Republican challenger "supported the shutdown", if they are facing a Tea Party challenger.
The big takeaway is that blame is not shared equally: “Governors are subjected to an electoral penalty only under unified government, while legislatures are always held accountable.”
That is to say, if the budget process falls apart amidst divided government, the executive — in this case, President Obama — not only gets a pass from the voters, but may get a bit of a boost. It’s Congress that gets blamed. And not just one party or the other. Everyone in Congress. Which is what you see in the latest Post poll.
So ... why aren't the House Republicans caving yet?
Because they have one last card to play: the debt ceiling. Take the debt ceiling off the table, and they have nothing to hang onto, as their poll numbers continue to plummet.
But ... What About the Debt Ceiling
I explained this yesterday evening in Economic Populist: How Fixed Interest Payment Consol Bonds Avoid A Default.
The debt ceiling is not just asking accountants what the national debt is under Generally Accepted Accounting Practice. Its a law, and is says precisely how to count things. Two classes of bonds are counted by their face value, and the third class is counted by what members of the public pay to buy the bonds on issue.
The key is that the third class is narrowly defined: bonds sold on a discount basis, and not redeemable until maturity.
So-called "Consol bonds" are bonds that never mature, but theoretically pay their interest perpetually. When a government wishes to retire a Consol bond, they simply buy them back at the current market price.
The only purpose of the face value of a Consol Bond is to calculate the interest payment. So if instead of an interest rate, a Consol Bond is issued with a Fixed dollar amount Interest Payment, it does not require a face value. It can, for example, be sold as "$500 paid on both Oct 1 and April 1 of each year".
With no face value, there is nothing to count against the debt ceiling, and so the debt ceiling limit does not prevent their sale.
So the Treasury switches from selling 10yr Treasury Bonds to selling FIP Consol Bonds ... and there is no default.
The big bomb that the Radical Republicans are starting to talk themselves into exploding ... is turned into a dud.
Indeed, "decisive action" by the President, which prevents the reckless decision of the Congress from leading to Economic Collapse, is almost certain to strengthen the President's hand in the shutdown fight.
What About Jumbo Coins and the 14th Amendment
If it was up to me, then better safe than sorry. The House will surely challenge the sale of Consol bonds in court, and therefore it is only prudent to have backups. The first backup is the minting of jumbo Platinum coins, and the second backup is directing the Treasury to sell regular bonds in defiance of the debt ceiling, if both the Consol bonds and jumbo coins are ruled against by the radical reactionaries in our Supreme Court.
Indeed, if those are in place, it may make the Supreme Court more likely to rule with the plain reading of the law, as the back up options in place would be more controversial than reviving an old fashioned financial instrument like the Consol bond.