BO and JB Close In On Deal To Cut Debt Nearly $3 Trillion

[Darksider]

So what will realistically happen if they fail to resolve the problem by the August deadline?

I'm also curious of this. I've got some U.S. treasury bonds that have matured. I don't really need the money right now, but I'm wondering if I should cash them in.

[Ritterin Sophia]

US GDP will see an immediate 10% drop was what I had heard.

[TimothyC]

I see you both ignored my first sentence.

My question is, if he raises the debt ceiling single-handedly on his own authority, why would he give the Teabaggers anything? Its not like he'd need to buy their support at that point.

Why did he give the republicans anything on health care when he started with majorities in the House and Senate?

[The Romulan Republic]

I see you both ignored my first sentence.

My question is, if he raises the debt ceiling single-handedly on his own authority, why would he give the Teabaggers anything? Its not like he'd need to buy their support at that point.

Why did he give the republicans anything on health care when he started with majorities in the House and Senate?

Well, there are these people called "Conservative Democrats". Plus the fucking filibuster.

[J]

Don't they need to get something sorted within the next day so it can actually be passed by the 2nd? I wasn't aware doing things by the skin of your teeth was an accepted policy motivator

Never fear, the day of reckoning is now August 10th.
I repeat, the world does not end until August 10th.

Plus I'm sure they can find more time if needed with the usual creative accounting tricks.

[Uraniun235]

The ratings agencies are saying they're going to downgrade America's AAA rating unless they come up with a plan to fix the structural issues in the budget & economy of the country. I don't think the plans being floated around meet that target. So even if they pass the current plan and raise the debt limit, the US gets its debt downgraded if the ratings agencies aren't bluffing. I bet the markets will just love that one.

Aren't those the same ratings agencies that are utterly crooked and untrustworthy anyway?

[Mr Bean]

I held off on responding to the Romulan Republics post because I knew that within a few days my point would be made for me in the upcoming news. IE the Democrats would give the Republicans everything they asked for in exchange for nothing. The instant the last budget deal was past when the Republicans started at 30 billion and the Dem's started at 0$ in cuts but ended up at 37 billion in cuts I knew the Democrats were either the worlds worst negotiators or implicit.

So here's TRR's original post.

Why would he? If he did end up with "the Constitution route" (which as I understand it is unilaterally raising the debt cealing), why would he have to give them anything?

You know, its one thing to complain about Obama compromising. Its another to argue that he will fold completely when their is no real reason for doing so. What, you think he likes surrendering to Teabaggers just for fun?

Now, maybe there's some nuance of American politics I'm missing here, so please explain your reasoning beyond "I don't like Obama".

And here's the Huffpo's reporting from Reid's office

WASHINGTON -- After another round of failed negotiations with Republicans over the weekend, Senate Majority Leader Harry Reid (D-Nev.) on Sunday night laid out Democratic leaders' latest — and likely final — proposal for a deficit reduction deal: $2.7 trillion in cuts, a debt ceiling hike through the end of 2012 and no revenues.

The proposal "meets Republicans' two major criteria," Reid said in a statement. It includes enough spending cuts to meet or exceed the amount of a debt ceiling raise through the end of 2012, and it doesn't includes any of the new revenues Democrats have been pushing for.

"We hope Speaker Boehner will abandon his 'my way or the highway' approach, and join us in forging a bipartisan compromise along these lines," Reid said.

There's more at the link but I've quoted the relevant first section, I'm going to say right now that Obama will say yes to this deal (A deal with zero revenues and a debt ceiling increase that only lasts until 2012)

I included the last line as it's incredibly ironic because as I'll remind those following along the Debt Ceiling negotiations started at the 1 trillion over ten year mark and we are at 2.4 trillion to 2.7 trillion and we might go over 3 trillion if major cuts are made in medicare or social security. The only thing this bill does not do at the moment is give out free handjobs to everyone making over 250k a year by the member of Congress of your choice so painful are it's cuts and the areas they are focused in, not to mention the fact the Reid plan since Friday including a Republican provision to bring back off shore profits by declaring a tax holiday where profits brought back from overseas would be taxed at a rate of 5% or less rather than the 35% or higher rates one should be taxed had those profits been made in America (Which thanks to shell company hijinks it's quite possible a percentage of those profits were made in America)

[The Romulan Republic]

While that sounds like an absolutely horrific deal (though in the short term at least better than a default), it doesn't address my point. I was referring to a scenario where Obama basically raises the debt ceiling by Presidential decree, rather than a Congressional deal. So again, if he went that route, why would he then give the Teabaggers anything?

Correct me if I'm wrong, but I was under the impression goal-post shifting was not an acceptable debate tactic here.

In any case, the deal sounds utterly terrible, but I can actually empathize with Obama to some extent if he does accept it. Sad to say, but the GOP are essentially threatening to destroy the country if they don't get what they want, so they kind of have a metaphorical tight grip on Obama's balls. Though if there is a way he can reasonably (and legally) avoid this, he should take it, and fuck the Teabaggers.

Moreover, until he has actually accepted and signed it, your condemnation is rather premature.

[Simon_Jester]

Does anyone have any numbers on how perceptions of this are operating among the left and middle? Are Social Security cuts for the deficit that popular among the American center, or are the Dems just auto-hypnotizing themselves into doing it whether there's anyone willing to vote for them after they do it or not?

[Mr Bean]

While that sounds like an absolutely horrific deal (though in the short term at least better than a default), it doesn't address my point. I was referring to a scenario where Obama basically raises the debt ceiling by Presidential decree, rather than a Congressional deal. So again, if he went that route, why would he then give the Teabaggers anything?

He still belives he has to reduce the deficit, the debt cealing is a hostage in that negotation but the negoitation is still ongoing President Obama wants to reduce the Deficit by his own word and this is the deal(Or one like it) that Congress will send him

Correct me if I'm wrong, but I was under the impression goal-post shifting was not an acceptable debate tactic here.

It's not a shifting of the goal posts I'm going back into my original point which you've missed twice now. The Republicans want to cut spending, President Obama wants to increase taxes (And cut spending) at the end of the day Republican victory is a plan that only cuts spending and raises no taxes (Not even removing tax loopholes or subsidies which are special sweet-heart deals that let some industries/companies avoid the 35% rate)

In any case, the deal sounds utterly terrible, but I can actually empathize with Obama to some extent if he does accept it. Sad to say, but the GOP are essentially threatening to destroy the country if they don't get what they want, so they kind of have a metaphorical tight grip on Obama's balls. Though if there is a way he can reasonably (and legally) avoid this, he should take it, and fuck the Teabaggers.

I've heard the legal arguments but the problem is that taking the Constitutional option requires real and decisive strength and a gamble, because if Obama does take that Route and the Supreme's over-turn him (A possibility which I can't give odds on either way) the entire American Economy will go into instant freefall as all those extra loans between the time the Supremes tell him the Debt ceiling is constitutional and the case comes before them will become illegal and the number of issues that will raise will lead to incredibly negative consequences as the US Goverment will be forced to either go the route of a Banana Republic and declare those loans now null and void or instantly come up with a trillion dollars from funding sources other than loans to repay the illegible loans.

In the long and short term if the Constitution option goes south on him, the effects from that default will be worse than simply letting the government hit the debt limit and default. Imagine if you will the difference between maxing all your credit cards and being forced to only spend what your making week to week and thus force to let dozens of things in your personal finances end, VS getting a new credit card that you charge everything onto including payments to your other credit cards only six months later the card turns out to be fake so you now have six months worth of transactions you need to come up with the money from somewhere tomorrow oh and here's six months in late charges on top of that.

Taking the Constitutional option takes real personal courage because the results of that sort of default are a magnitude worse than simple default.

Moreover, until he has actually accepted and signed it, your condemnation is rather premature.

A valid point but I can bet you good money if the Republicans say yes (The only factor that matters here IMHO) and it passes both House and Senate as it Obama will sign it without insisting on any changes. Well let me restate that, he will sign it... without getting any changes.

Does anyone have any numbers on how perceptions of this are operating among the left and middle? Are Social Security cuts for the deficit that popular among the American center, or are the Dems just auto-hypnotizing themselves into doing it whether there's anyone willing to vote for them after they do it or not?

Depending on how you ask the question you get different results but from RealClearPolitics when asking the question strait up it's unpopular with 70% of the American Public with Republicans in the 65% range, Democrats in the 80% range and Independents between with support of those in the 60+ group jumping into the 90% mark even for Republicans.

[Block]

Does anyone have any numbers on how perceptions of this are operating among the left and middle? Are Social Security cuts for the deficit that popular among the American center, or are the Dems just auto-hypnotizing themselves into doing it whether there's anyone willing to vote for them after they do it or not?

There's no support for it at all, anywhere except the fringe right. The fact that the Republicans may get their way in this is mystifying, because they would very clearly be the ones that the US public holds responsible.

[The Romulan Republic]

He still belives he has to reduce the deficit, the debt cealing is a hostage in that negotation but the negoitation is still ongoing President Obama wants to reduce the Deficit by his own word and this is the deal(Or one like it) that Congress will send him

Likely enough, I suppose.

It's not a shifting of the goal posts I'm going back into my original point which you've missed twice now. The Republicans want to cut spending, President Obama wants to increase taxes (And cut spending) at the end of the day Republican victory is a plan that only cuts spending and raises no taxes (Not even removing tax loopholes or subsidies which are special sweet-heart deals that let some industries/companies avoid the 35% rate)

I'm quite aware.

I've heard the legal arguments but the problem is that taking the Constitutional option requires real and decisive strength and a gamble, because if Obama does take that Route and the Supreme's over-turn him (A possibility which I can't give odds on either way) the entire American Economy will go into instant freefall as all those extra loans between the time the Supremes tell him the Debt ceiling is constitutional and the case comes before them will become illegal and the number of issues that will raise will lead to incredibly negative consequences as the US Goverment will be forced to either go the route of a Banana Republic and declare those loans now null and void or instantly come up with a trillion dollars from funding sources other than loans to repay the illegible loans.

In the long and short term if the Constitution option goes south on him, the effects from that default will be worse than simply letting the government hit the debt limit and default. Imagine if you will the difference between maxing all your credit cards and being forced to only spend what your making week to week and thus force to let dozens of things in your personal finances end, VS getting a new credit card that you charge everything onto including payments to your other credit cards only six months later the card turns out to be fake so you now have six months worth of transactions you need to come up with the money from somewhere tomorrow oh and here's six months in late charges on top of that.

Taking the Constitutional option takes real personal courage because the results of that sort of default are a magnitude worse than simple default.

Given that, then, I honestly don't see what he should do. If the Republicans are truly willing to let the US default, then he has only two choices: cave completely or refuse and let the US default, possibly causing a full-blown depression (and be labeled the President who destroyed the US economy because he refused to compromise).

Like I said before, fucked if you do, fucked if you don't.

Out of curiosity, what do you think he should do?

A valid point but I can bet you good money if the Republicans say yes (The only factor that matters here IMHO) and it passes both House and Senate as it Obama will sign it without insisting on any changes. Well let me restate that, he will sign it... without getting any changes.

Perhaps. Honestly, I'm not sure what he should do.

[mr friendly guy]

US GDP will see an immediate 10% drop was what I had heard.

Is that because the US dollar would drop? Or is it because of some other factor?

[Simon_Jester]

I don't want the US to face a disaster, but the sheer long term rot imposed by repeatedly allowing the Republicans to 'compromise' their way to decisive victories isn't necessarily a lot better. The recession we have now was created in large part by Republican policies on Wall Street; the massive debt we have now was created by Republican tax cuts. I see no reason to expect the downward trend of America's fortunes to stop as long as the Republican Party in its present form is permitted to rule the country. Especially not as long as they're permitted to retain much of their power through parliamentary maneuver and intimidation even when the electorate has rejected them at the polls (as in 2008).

The long-term best, if not the smartest careerist, move Obama could make might be to say "no, I am going to be just as obstreperous on this issue as the Tea Party, and if that means I get flung out of office along with them in 2012, well, so be it. My party can survive without me better than the Republicans can without Tea."

Yes, it would lead to a disaster on his watch. So will sitting around and praying the Republicans don't mangle the economy as badly this time around as last time.

[The Romulan Republic]

I don't want the US to face a disaster, but the sheer long term rot imposed by repeatedly allowing the Republicans to 'compromise' their way to decisive victories isn't necessarily a lot better. The recession we have now was created in large part by Republican policies on Wall Street; the massive debt we have now was created by Republican tax cuts. I see no reason to expect the downward trend of America's fortunes to stop as long as the Republican Party in its present form is permitted to rule the country. Especially not as long as they're permitted to retain much of their power through parliamentary maneuver and intimidation even when the electorate has rejected them at the polls (as in 2008).

The long-term best, if not the smartest careerist, move Obama could make might be to say "no, I am going to be just as obstreperous on this issue as the Tea Party, and if that means I get flung out of office along with them in 2012, well, so be it. My party can survive without me better than the Republicans can without Tea."

Yes, it would lead to a disaster on his watch. So will sitting around and praying the Republicans don't mangle the economy as badly this time around as last time.

Or he takes all the blame and the GOP sweeps into victory in 2012.

Even in your scenario, you're talking about allowing massive devastation to economy for the political equivalent of mutually assured destruction. I don't blame Obama for not taking that option.

[Simon_Jester]

You know, you're right.

The more I think about the human toll it would take... fuck, I'd rather Obama fold. But I hope the blame for this lands squarely where it deserves- on the people who will fiddle while Washington burns rather than stop giving kickbacks to rich assholes.

[Zaune]

You know, you're right.

The more I think about the human toll it would take... fuck, I'd rather Obama fold. But I hope the blame for this lands squarely where it deserves- on the people who will fiddle while Washington burns rather than stop giving kickbacks to rich assholes.

Will the human toll of letting the Republicans have their way be any lower in the long run? If they fold now, the message to everyone in the left and most of the centre is that voting Democrat is about as much use as burnt offerings to the Flying Spaghetti Monster. That leaves whatever independent candidates step up to fill the void, and a few small-fry parties like the Greens. Is that likely to produce an effective opposition, much less a stable majority in either house?

[Simon_Jester]

In the White House, a head of lettuce could win against most of the likely Tea Party Republican candidates. A moderate Republican wouldn't actually be so big a problem- as during the Bush years, the mere fact of a Republican in the White House would shut up a lot of the crazies and reduce the political pressure to do batshit insane things like refuse to raise the debt ceiling.

Even independent challengers would have a pretty good shot against someone whose political platform boils down to "yeah, abolish social security and don't raise the debt ceiling any more!"

A political party whose reputation is damaged can rebuild and reinvent itself, especially if the opposition has shot themselves in the foot by engaging in tactics that are transparently designed to prevent the nation from being governed. A debt default, on the other hand, causes immediate concrete "facts on the ground" disasters to huge numbers of real people.

[J]

US GDP will see an immediate 10% drop was what I had heard.

Is that because the US dollar would drop? Or is it because of some other factor?

By definition, GDP = Consumption + Investment + Government spending + Net exports.

As of right now the portion of government spending which is financed by deficit spending (taking on further debts) is about 12% of GDP, if the debt ceiling is reached then no further debts may be taken on and all deficit spending is halted. That takes an instant 12% off the GDP plus the resulting knock-on and multiplier effects.

[aerius]

Aren't those the same ratings agencies that are utterly crooked and untrustworthy anyway?

I'd say they're incompetent, slow, and bought off, so yeah, more or less. But eventually they get things right, it just takes them a few years.
Thing is they're the final word on debt ratings so if 2 or more of them downgrade then it's officially official and bad things happen.

[Alerik the Fortunate]

There's no support for it at all, anywhere except the fringe right. The fact that the Republicans may get their way in this is mystifying, because they would very clearly be the ones that the US public holds responsible.

No, right leaning elderly people are already holding Obama responsible, from what I've heard, which is ironic. The Republican PR machine is so good that they can basically tell the Democrats, "do this really unpopular thing or we will make the country fall into ruin on your watch," and then blame the Democrats for it and their base will think the Democrats instigated it. I have to admit to wondering what informed and committed Republicans are really thinking, though. I'm afraid I can't see them being sincere and informed, at least not without very ugly implications.

[Irbis]

I've heard the legal arguments but the problem is that taking the Constitutional option requires real and decisive strength and a gamble, because if Obama does take that Route and the Supreme's over-turn him (A possibility which I can't give odds on either way) the entire American Economy will go into instant freefall as all those extra loans between the time the Supremes tell him the Debt ceiling is constitutional and the case comes before them will become illegal and the number of issues that will raise will lead to incredibly negative consequences as the US Goverment will be forced to either go the route of a Banana Republic and declare those loans now null and void or instantly come up with a trillion dollars from funding sources other than loans to repay the illegible loans.

What, Obama can't do what they do in most European countries I'm aware of and send the question to SCotUS beforehand, marked 'urgent!'? Had he received reply that yes, he can, Republicans lose all arguments, reply he cannot, he at least knows where he stands and doesn't have big dilemma?

Also, would SCotUS rule in a way that would harm USA so badly? And even if so, in Europe, Supreme Court would then give the government year or two 'repair time' for rolling back the law, giving plenty of time to raise the debt and announce the raise will cover these problematic papers, too?

[phongn]

What, Obama can't do what they do in most European countries I'm aware of and send the question to SCotUS beforehand, marked 'urgent!'? Had he received reply that yes, he can, Republicans lose all arguments, reply he cannot, he at least knows where he stands and doesn't have big dilemma?

Such an issue would involve a large amount of research for the justices in examining prior case law (remember, the US has a common-law system) and a fast response is very unlikely. It is also very unlikely that they would issue such an opinion and it would not be legally binding.

Also, would SCotUS rule in a way that would harm USA so badly? And even if so, in Europe, Supreme Court would then give the government year or two 'repair time' for rolling back the law, giving plenty of time to raise the debt and announce the raise will cover these problematic papers, too?

SCOTUS is interested in the legality of a case; should they find such an act unconstitutional they will rule so (even if it could cause such a calamity). I don't think they could handle any sort of "repair time" - that would be outside the authority of SCOTUS.

[Irbis]

What, Obama can't do what they do in most European countries I'm aware of and send the question to SCotUS beforehand, marked 'urgent!'? Had he received reply that yes, he can, Republicans lose all arguments, reply he cannot, he at least knows where he stands and doesn't have big dilemma?

Such an issue would involve a large amount of research for the justices in examining prior case law (remember, the US has a common-law system) and a fast response is very unlikely. It is also very unlikely that they would issue such an opinion and it would not be legally binding.

Also, would SCotUS rule in a way that would harm USA so badly? And even if so, in Europe, Supreme Court would then give the government year or two 'repair time' for rolling back the law, giving plenty of time to raise the debt and announce the raise will cover these problematic papers, too?

SCOTUS is interested in the legality of a case; should they find such an act unconstitutional they will rule so (even if it could cause such a calamity). I don't think they could handle any sort of "repair time" - that would be outside the authority of SCOTUS.

Ah. It's just a matter of different legal systems, then, where I live Constitution Tribunal can in fact be asked beforehand, and even if the law is unfit to be passed, they can give 'repair time', that is, a period in which it's not considered illegal, so that suitable replacement can be voted into its place.

EDIT: Prior law? Upon considering, I can understand it being the case in normal law, but how many times the President challenged debt ceiling? Are there so many precedents? I can't believe this number is so large a response couldn't be given in reasonable amount of time.

[phongn]

EDIT: Prior law? Upon considering, I can understand it being the case in normal law, but how many times the President challenged debt ceiling? Are there so many precedents? I can't believe this number is so large a response couldn't be given in reasonable amount of time.

It would be subject to prior interpretation of the constitution (likely regarding the 14th Amendment) and recall that they would be making precedent for future cases. One treads carefully, particularly in cases of executive power.