Friday, December 21, 2012

Crazy House Republicans Save Obama From His Own Incompetence

Obama - what the hell is wrong with you, man?!?

Good God, it has been a ridiculous few days in DC. In general, rather bad for the country, though not terribly unexpected.

Let me explain.

Up until this week, the Obama Administration had been holding tough in its negotiations over the fiscal cliff curb and debt ceiling - as it should. It was looking like the U.S. would likely go over the fiscal cliff curb, which is probably the best long-term outcome possible, given the current state of crazy in the Republican Party, even though it would suck in the short- and medium-term.

Then, on Monday, Obama started to buckle, just like he did in the summer of 2011 over the debt ceiling. What the hell, Obama?

Anyway, on Monday, Obama started to give away the farm - raising the threshold at which higher taxes would apply, letting the payroll tax expire, $1.2 trillion in new spending cuts, and cutting Social Security - while in exchange he'd receive an extension of unemployment insurance and a two-year debt ceiling increase. Perhaps it's more important to Obama to get a deal period than what is in the substance of the deal - that would explain his seeming incompetence - but I sincerely hope that's not the case.

I'll turn to Paul Krugram for a detailed analysis of Obama's offer:
First things first: cutting Social Security benefits is a cruel, stupid policy — just not nearly as cruel and stupid as raising the Medicare eligibility age. But sometimes you have to accept bad things in pursuit of a larger goal: health reform should have included a public option — heck, it should have gone straight to single-payer — but a flawed route to universal coverage was better than none at all.
The question about this looming deal is whether the end justifies the means. Unfortunately, it’s not nearly as clear a case as the health care deal, and I’m agonizing, big time; as of last night I was marginally positive, right now marginally negative.
Let’s talk about what’s going on.
First of all, the comparison has to be with what we think Obama can get if he goes over the cliff; if that happens, all the Bush tax cuts expire, and he can propose and probably get accepted a new round of middle-class cuts — but nothing else: no extension of unemployment benefits (another cruel, stupid action), no infrastructure spending to boost the economy.
So how does the possible deal differ? It doesn’t raise rates on the second-highest bracket, which means that the tax hike on earned income only falls on those making $400,000 or more. As I understand it — the reporting is weirdly silent on this, but it’s what I got from my own conversation with an SAO* — is that taxes on unearned income are going back to pre-Bush levels: capital gains at 20 instead of 15 percent, dividends taxed as ordinary income. If I’m wrong about that, this is easy: no deal.
And there’s extra revenue too, notably from changing the treatment of itemized deductions: instead of being a deduction from taxable income, they offer a tax credit, not to exceed 28 percent — which means a further substantial tax rise for people in the top bracket. Overall, there’s more revenue in this deal than you get from letting the high-end tax cuts expire after the cliff.
So the revenue side isn’t that bad; we do make some headway on unstarving the beast. On the other hand, I really don’t think of revenue — as opposed to preserving the social safety net — as being the most important thing.
Also on the plus side, extended unemployment benefits and more infrastructure spending. But no payroll tax cut extension, which means a fairly big dose of austerity despite the deal.
But then there’s the Social Security cut.
Switching from the regular CPI to the chained CPI doesn’t affect benefits immediately after retirement, which are based on your past earnings.What it does mean is that after retirement your payments grow more slowly, about 0.3 percent each year. So if you retire at 65, your income at 75 would be 3 percent less under this proposal than under current law; at 85 it would be 6 percent less; there’s supposedly a bump-up in benefits for people who make it that far.
This is not good; there’s no good policy reason to be doing this, because the savings won’t have any significant impact on the underlying budget issues. And for many older people it would hurt. Also, the symbolism of a Democratic president cutting Social Security is pretty awful.
So is what Obama gets out of this — basically unemployment benefits and infrastructure — worth it? The hardship of the unemployed is important; on the other hand, the numbers here are only about half a percent of GDP. As I said, right now I’m not feeling positive.
I understand that Obama prefers not to go over the cliff and face the political and economic uncertainty that this opens up; maybe my assumption that he can still get the middle-class tax cuts is wrong. On the other hand, cutting Social Security, even modestly, is a very big concession, especially because, as I said, it’s cruel and stupid viewed purely as policy.
One thing is for sure: any further concession on Obama’s part would make this a total non-starter. And I’m waiting for clarification on capital gains and dividends. But even as it stands, it’s not a deal to be happy about.
Indeed, it looked like Christmas had come early for the Republicans, and for John Boehner, the Republican Speaker of the house.

Of course, the Republicans didn't take this offer as the final, take-it-or-leave-it, "I'm not making a better offer" offer, but, rather they saw it as a sign of weakness to try to exploit.

Yup, the Republicans (specifically, Boehner) decided to reject Obama's offer - even though Obama offered them far more than he probably should have, and admitted as much later - and decided to abandon talks with Obama and push for even more by going it on his own with the House Republicans.

Thankfully, Boehner's plan to push for even more backfired on him spectacularly - Boehner couldn't get the House Republicans to back his "Plan B," which was so ridiculously biased in favor of the rich and against the poor and elderly that it had no chance of passing the Senate. For the second time in his career as House Speaker, Boehner took a completely symbolic bill that had no chance of becoming law and turned it into a referendum on his leadership - and for the second time, he failed.

Boehner couldn't even manage to get the Tea Partiers in the House to support a bill so obviously extreme that it had no chance of becoming law.

In all likelihood, Boehner never had the votes to cut a deal with President Obama - not ANY deal, whether a grand bargain on deficit reduction or a piecemeal something-or-other to offset some of the more extreme aspects of the fiscal cliff. Perhaps "Plan B" was just an attempt at a face-saving maneuver to try to escape this disaster without having to admit that, just like in 2011, he never had the votes to deliver a deal.

In a parliamentary system, Boehner would probably resign and his party would elect a new leader - but that's not the way we do things here. It's sort of hard to see how this plays out; there are two different scenarios, and as silly as it sounds, they depend entirely upon the feelings of John Boehner:
  1. Boehner wants to remain speaker, so he has to tow the line along with the lunatic wing of his party. We'll go over the fiscal cliff; we'll probably hit the debt ceiling and default for the first time ever; and we'll enter another prolonged financial crisis - all because John Boehner wants to remain Speaker of the House and doesn't have the balls to stand up to the lunatics in his own party.
  2. If it wasn't before (though it should have been), it is now clear to everyone that there's no way to bring the lunatic wing of the Republican Party in on a deal over the fiscal cliff and/or debt ceiling. Boehner wants to do what's best for the country, so he works out a deal with the White House and Senate that can garner the votes of the House Democrats and just enough moderate Republicans to pass the House. It's by far the best outcome for the country, but Boehner probably loses the Speakership to someone more aligned with the Republicans lunatics.
It's really silly how the short- and medium-term economy of the most powerful country in the world hinges upon the political desires of one man. I hope Boehner has the balls to choose #2 and take a nice, lucrative consulting job on K Street after he's kicked out of the Speakership.

And what should Obama do? Well, the lunatic wing of the Republican Party saved him from having to make good on the bad deal he offered Boehner - that's a good thing, both for Obama and the country - especially since it seemed like Obama might have been willing to give away even more. But thankfully, the Republican lunatic wing wasn't able to just say "yes" and accept a huge victory.

If I were Obama, I'd rescind all offers on the table and reach out to the few most moderate members of the Republican House and see what they would need to see in a deal to be able to vote for it, with the knowledge that the House Democrats and Senate Democrats would also have to agree to the bill.

That would be great, but don't get me wrong - I don't think it's going to happen. Unfortunately, I think it's more likely that Obama continues to capitulate (see below) and he and Boehner find something (even worse than Obama's final offer) that half the House Republicans and ~70 House Democrats can hold their noses to pass - at that point, I hope that the Senate Democrats have the balls to vote it down, even if Obama says he's OK with it.

Or we could go over the fiscal cliff. Honestly, I'd rather go over the cliff than agree to any more concessions. And to me, going over the fiscal cliff wouldn't be a big surprise.

All that aside - for me, the big questions is, WHY IS OBAMA SUCH A TERRIBLE NEGOTIATOR?


Obama and I both went to Harvard - he apparently didn't take Negotiation classes there, like I did. Why does he negotiate against himself, offering concessions to the Republicans without getting anything in return? Why does he propose the politically unpopular cuts, instead of making the Republicans own them?

And why has he decided to start compromising over the debt ceiling, which is a terrible move for both him and the country? If the Republicans are intent on making the U.S. default for the first time ever, it would be better to do it now, while Obama is near the peak of his post-reelection popularity and can pressure Congress for a permanent debt ceiling solution, even if it does push the U.S. back into recession - what does Obama gain by putting this fight off for another year or two? Nothing! So grow some balls and have the fight now, Mr. President!

Thursday, December 13, 2012

Why We Should (and Probably Will) Go Over the Fiscal Cliff

We can only hope. Source.

As I said more than a year ago (and continue to believe), going over the fiscal cliff isn't such a bad thing, especially when compared with the likely "compromises" offered by Republicans.

As I said a few days ago, the much bigger threat is the economic terrorism that the Republicans are currently threatening the country with - i.e. refusing to raise the debt ceiling.

Obviously, all of this has been on my mind a good deal in the past couple of weeks, so I figured I'd gather a few of my thoughts together to explain why I think we should (and probably will) go over the fiscal cliff:
  1. Most importantly, the Republicans haven't offered anything that is even a remotely better option than going over the fiscal cliff, from my (and, I hope, Obama's) perspective. The most I've heard them grumble about is giving a couple of percentage points on tax rates for the wealthy, and in return demanding ridiculous cuts to Medicare, Social Security, etc. etc. Why in God's name would Obama agree to any of that, when he can just wait until Jan. 1 and get higher tax rates on the wealthy without giving up anything in return? And on Jan. 1, he can immediately turn around and demand tax cuts for the middle class, which the Republicans will be in absolutely no position to resist.
  2. I don't see the Republicans being willing to offer enough to make a deal better for the Democrats than going over the fiscal cliff. I think the spending cuts in the fiscal cliff - to defense, to Medicare providers, and across the government - are actually spending cuts that many Democrats aren't terribly sad to make. Anything the Republicans offer is probably likely to be even more distasteful than the cuts in the fiscal cliff.
  3. In fact, the only thing I can think of that might possibly make me willing to agree to a deal before Jan 1 (if I were Obama) would be to permanently repeal the debt ceiling, which I doubt the Republicans will agree too, since they are intent to use the debt ceiling as a weapon of economic terrorism to push through their unpopular policies against the will of the American people. It's a powerful weapon (even if it does show that they're not fit to govern), and they'll be loathe to give up such a powerful weapon.
  4. If Obama strikes any kind of fiscal cliff deal that DOESN'T include a permanent solution to the debt ceiling, he's a terrible negotiator, and I'd question his fitness to conduct foreign policy, as such a terrible negotiator.
  5. Not only are we going to go over the fiscal cliff, but we may also have the mother of all government shutdowns in February or March, if we don't have a resolution to the debt ceiling and if the Obama Administration proves too chicken to ignore the debt ceiling altogether (which would be my approach, but thankfully, I'm not the President).
  6. If we reach the debt ceiling without the Republicans giving in and without Obama being willing to ignore the debt ceiling, the stock market will crash, the financial system will melt down, and it will be September 2008 all over again.
I'm seriously debating moving my retirement account into an all cash position until this blows over in the spring - what do you all think?

For more thoughts on why Obama must go over the fiscal cliff to save his second term, check out this rather insightful article from TNR.

I've also been having some fun thinking about what 30-40% of the federal government Obama would/should shut down, if Obama decides to shut down large parts of the federal government when we reach the debt ceiling. There are two tracks Obama could take - (1) try to minimize the disruption to U.S. citizens' lives, at least the short term, or (2) maximize the disruption to U.S. citizens' lives, to put as much pressure as possible on Congress. Since the former is rather boring, I've mainly been thinking about the latter:
  • Shut down the entire U.S. military!
  • Stop sending out Social Security checks!
Actually, those two would get us past the 30-40% of the U.S. budget, and everyone would FREAK OUT at Congress and tell them to fix the situation.

If we reach the debt ceiling, the Obama Administration will have lots of latitude as to WHICH parts of government they shut down - even though they won't, it's fun to think about the possibility of the Obama Administration doing something as extreme as shutting down the whole U.S. military and stopping Social Security and telling people to call Congress if they have a problem with that.

Perhaps the Republicans should be a little more careful with the debt ceiling - they are definitely playing with fire, gasoline, and a bazooka.

Tuesday, December 11, 2012

Republican Congressmen Forget That They Control the U.S. Budget and Deficit

I do not believe that the Republicans in Congress are thoroughly stupid men,
but they surely can play stupid men on TV, in public, and everywhere else.

Good God, will Republicans in Congress just not stop saying stupid things this December? I hate it when this blog becomes just another outlet for pointing out stupid things that Republicans say or do, but I just can't abide by this level of nonsense.

Mitch McConnell, now famous for being the first Senator ever to filibuster his own bill, has once again earned this blog's attention by apparently forgetting that Congress sets the U.S. federal budget (and thereby also sets the U.S. federal deficit and debt).

Now, I know (or hope, anyway) that McConnell isn't actually this dumb and is just playing politics, but it makes me question the man's intelligence when he says thing like:
“By demanding the power to raise the debt limit whenever he wants by as much as he wants, [President Obama] showed what he’s really after is assuming unprecedented power to spend taxpayer dollars without any limit,” McConnell argued on the Senate floor.
I'll let TPM explain the falseness and stupidity of this statement:
This sounds awfully sinister. But it’s a knowing misreading of the Constitution, which provides Congress and only Congress the power to spend money.
The debt limit is a nearly century old historical artifact. It’s a statute, not a Constitutional requirement. By contrast, the Constitution explicitly grants Congress, not the Executive Branch, the power to raise and spend money. When Congress orders the Executive Branch to spend more money than it collects in revenue, the Executive must finance the difference by borrowing — with debt.
But the Executive Branch can only spend as much money as Congress tells it to, even if there were no limits on the amount of debt it could issue. The country’s debt, in other words, has nothing to do with the debt limit, but with the tax and spending decisions Congress has made over the past two-plus centuries.
Refusing to raise the debt limit only cuts spending inasmuch as it forces the Executive Branch to renege on commitments to creditors, or to people and projects to whom Congress has pledged funds.
But Republicans are using the debt limit, and Obama’s request to remove it from the realm of partisan legislative politics, to characterize it as a de facto presidential power to spend money that doesn’t exist.
At a Capitol press availability on Wednesday, Reps. Jon Fleming (R-LA) and Cynthia Lummis (R-WY) introduced a non-binding resolution to express the sense of the House that “Congress should retain its authority vested in Article 1, Section 8 of the Constitution to ‘borrow money on the credit of the United States.’”
But the Obama plan wouldn’t give him the power to borrow or spend a single penny more than required by Congress and existing commitments to creditors.
A reporter pressed them on this point — too much deficit spending has required the Congress to raise the debt ceiling fairly regularly, but “that wouldn’t be the president’s fault. It would be the Congress’ fault.”
“That’s exactly right,” Lummis said. “It’s also a check on Congress.”
Conservatives certainly want it to serve that purpose, particularly as a tool to gut social programs they deplore. But that’s not what they’re telling the public, and what they’re telling the public is false.

When the Republicans rail against "Obama's spending," they seem to be conveniently forgetting that Congress decides how much to spend, not the President. I can explain the federal budget with a simple equation:

Spending - Revenue/Taxes/Etc. = Deficit (if spending is greater) or Surplus (if revenue is greater)

Congress has sole control over all parts of this equation - it sets both spending and revenue, and therefore sets the deficit/surplus as well.

The debt ceiling is a stupid artifact created at the beginning of the 20th century so that Congress could pass budgets with deficits and then pontificate against the deficit spending by voting against the debt ceiling.

If that sounds stupid, it's because it is - it's sort of akin to buying things with your credit card and then refusing to pay your credit card bill when it comes due, and blaming your bill on the credit card company for giving you the credit card in the first place.

Obama is pressuring Congress to repeal this stupidity once and for all; we'll hope he succeeds. If he doesn't, I hope he has the balls to take his case before the Supreme Court or otherwise run around the debt ceiling, because it's a stupid (and I would say patently unconstitutional) law.

Reaching a New Low, Senate Republicans Filibuster Their Own Bill

Oh, I have no respect for you whatsoever, Mr. McConnell.

It's no secret that I have little respect for Congress as an institution anymore, and I'm not sure that I have any respect for any Republican in Congress anymore.

In spite of my already rock-bottom opinion of the Republicans in Congress as a whole, Senate Minority Leader Mitch McConnell did something so stupid last week that it lowered my opinion of Congressional Republicans even more, if that were possible.

The old fart filibustered his own bill last week.

Yup, you heard that right - for the first time in the history of the United States Senate, as far as anyone knows - a Senator filibustered his own bill. And it was the Republican leader in the Senate.

I'll turn it over to the NYTimes for the details:
Here’s how it happened: In the morning, Mr. McConnell went to Harry Reid, the Senate Majority Leader, and asked him to take a vote on a bill that would allow the president to raise the debt ceiling. That’s the artificial limit imposed by Congress on how much money the government may borrow to make good on past debt. (Please note here: “imposed by Congress” and “past debt.”)
Mr. McConnell’s clever plan was that the Democrats would not be able to muster a regular majority to pass the bill, thus proving to the world (or at least the 18 people who still have the patience to pay attention to Congress) that the Democrats don’t really want to end the pointless fight over the debt ceiling Mr. McConnell cooked up in 2011.
But Mr. Reid consulted with his caucus and found support for the bill, so he went to the floor, offered it and scheduled 20 minutes of debate before an up or down vote.
And that’s when Mr. McConnell may have made Senate history. He rose in objection to his own bill. “Matters of this level of controversy always require 60 votes,” he said. Using the Senate’s phony politesse, he added that he wanted “my friend, the majority leader, to make it 60 votes.”
Mr. Reid said no. “The republican leader objects to his own idea,” he said. “We have a filibuster of his own bill.”
Senator Dick Durbin, the Illinois Democrat who is the Majority Whip, was incredulous. “This may be a moment in Senate history, when a Senator made a proposal and when giving an opportunity for a vote on that proposal, filibustered his own proposal,” he said.
In a classic understatement, he added: “It really calls into question whether or not this was the kind of offer that would be considered to be good faith.”
Yes, gee, it calls into question whether the Republicans do anything in good faith anymore. As far as I can tell, the answer is no.

And here's the video proof - it's rather incredible:

A new low indeed.

Monday, December 3, 2012

After Losing Election, Republicans Turn to Economic Terrorism

I oppose economic terrorism in all its forms - especially economic terrorism
from the Republican Party.

I will admit that this blog occasionally veers into hyperbole for dramatic effect or to illustrate a particular point.

This is not one of those times, however. I am not exaggerating when I say that, having lost the 2012 elections entirely, the Republicans have decided to turn to economic terrorism to try to force their policies through the American political system, against the will of the American people.

John Boehner, Republican Speaker of the House (and presumed future speaker of the House, since state-level corruption allowed the Republicans to retain control of the House even though Republicans received fewer votes than Democrats in House races), admitted as much just this past Sunday. From TPM:
House Speaker John Boehner (R-OH) said that Congress will not give up control over the nation's debt limit and that each time the limit is raised, Congress will demand cuts and reforms, during an interview on "Fox News Sunday."
Congress is never going to give up this power. I've made it clear to the president that every time we get to the debt limit, we need cuts and reforms that are greater than the increase in the debt limit. It's the only way to leverage the political process to produce more change than what it would if left alone.

Let me rephrase that last sentence of his: "It's the only way to force through our extremely unpopular policies completely against the will of the electorate, who utterly rejected our policies in the 2012 election."

Good God.

Everyone in Washington, DC and in the news media right now is flipping out about the fiscal cliff - but in reality, the fiscal cliff isn't a huge deal. In fact, one year ago, I already predicted that going over the fiscal cliff (it wasn't called the fiscal cliff back then) wouldn't be such a bad thing and would almost certainly be better than whatever Congress came up with as an alternative. I think what I said a year ago still stands - going over the fiscal cliff will likely be a better medium- and long-term outcome than any proposed alternative that will be acceptable to the Republicans.

A MUCH BIGGER short-, medium-, and long-term problem is the Republicans' willingness to invoke economic terrorism (i.e. threatening not to raise the debt ceiling) to push through their policy agenda against the will of the American people as obviously expressed in the 2012 election.

As I've written before:
This is such a SELF-EVIDENTLY AND PROFOUNDLY STUPID IDEA that I barely have the ability to contain myself to type out a semi-intelligent response, as I'm pretty sure that even hearing an idea that stupid has lowered my intelligence - though only temporarily, I hope.

Let's see ... how many ways is this idea stupid ...
So, the Republican Congress is yet again proving that it is full of crazy people and it's led by someone who's willing to act like a crazy person, even though I'm pretty Boehner isn't as dumb as he's currently acting. 

I hope Obama has the good sense not to try to negotiate with the Republicans this time. Instead, Obama should invoke one of the many options available to him to abolish the debt ceiling entirely, either by law or in practice:
No matter what happens, this episode confirms the fact that one of the two major parties has been taken over by ideological extremists bent on imposing their policy agenda regardless of the harm they cause to the poor, the middle class, the elderly, the sick, the environment, and the American economy in general. And those aren't my words - they're the words of a conservative American Enterprise Institute scholar.
Perhaps it was naïveté on my part, but I was hoping that the 2012 elections might have shown the Republicans that the American people don't want their policies, thereby making the Republicans less crazy and more willing to compromise.

But no, if anything, the 2012 elections seem to have made the Republicans even more resolute to resort to economic terrorism to fulfill their policy agenda, because the American people are obviously too stupid to know what's good for them and they should just shut the hell up and let the Republicans do whatever they want even though they don't control very much of the government.

Here's where things get even crazier - even if Obama wanted to agree to Republican demands, he can't - because the Republicans steadfastly refuse to say what they actually want. They really seem to expect for Obama to sit back and keep proposing things until he finally comes up with something they'll agree to, even though they won't say exactly what they want.

Thus far, it seems like Obama has refused to play this game (thank God - perhaps this time will be different than past budget negotiations with the Republicans). Instead, Obama has taken a more traditional negotiating strategy, laying out his proposal (which pretty much matches exactly what he promised in his campaign, so it shouldn't come as a surprise to anyone) and waiting for the Republicans to make some kind of counter-offer. Instead, the Republicans are howling with indignation over ... I'm not sure what - Obama doing what he told everyone he'd do during the presidential campaign?

The reality is that most of the long-term budget problems of the United States are the result of ever-rising health care costs. Perhaps rather paradoxically, this is a problem that we (humans) know how to solve, we just lack the political will to solve it:
To control costs, you have to, you know, control costs.
And the truth is that we know a lot about how to do that — after all, every other advanced country has much lower health costs than we do, and even within the US, the VHA and even Medicaid are much better at controlling costs than Medicare, and even more so relative to private insurance.
The key is having a health insurance system that can say no — no, we won’t pay premium prices for drugs that are little if any better, we won’t pay for medical procedures that yield little or no benefit.
But even as Republicans demand “entitlement reform”, they are dead set against anything like that. Bargaining over drug prices? Horrors! The Independent Payment Advisory Board? Death panels! They refuse to contemplate using approaches that have worked around the world; the only solution they will countenance is the solution that has never worked anywhere, namely, converting Medicare into an underfunded voucher system.
So pay no attention when they talk about how much they hate deficits. If they were serious about deficits, they’d be willing to consider policies that might actually work; instead, they cling to free-market fantasies that have failed repeatedly in practice.
But instead of talking about what really matters short-term (the debt ceiling) or long-term (health care costs), everyone is flipping out over the fiscal cliff.

Well, I for one hope that if the Republicans again turn to economic terrorism when we next reach the debt ceiling, Obama this time has the balls to tell them, "You've passed two contradictory laws - the federal budget and the debt ceiling. Since I as the Executive have the Constitutional power and responsibility to implement the laws passed by Congress, I'm ignoring the debt ceiling law and obeying the federal budget law." And that will be that, I bet - though it will probably cost the U.S. more credit downgrades, which we will be able to firmly place at the feet of the Republicans.