Remember a couple weeks ago I said that it was purely for personal reasons that the President would not compromise by asking for a one-year budget deal in exchange for giving Republicans a one-year delay in Obamacare? Well the President only got a 90-day budget deal and it looks like it is his side that now needs an Obamacare delay.
If Republicans really want to destroy Obamacare, they would assure the Administration that there is no chance that Congress will obstruct the President’s signature plan.
I told you so:
“In the immediate weeks ahead, Democrats can’t cave for fear of losing votes. Meanwhile, because it would be a violation of principles that gains them no tactical, operational, or strategic advantage, Tea Party Republicans will not cave. If I had to guess, I would wager that Speaker Boehner will blink and negotiate a deal in order to preserve Republican-leaning big business groups under the GOP banner.”
It remains to be seen if the second half of my prediction comes true:
“But that in 2014 and 2016 Republicans will get crushed as the Tea Party goes rogue and that by 2020 the GOP will cease to exist.”
It’s 2,000 words, but read the whole thing.
The way the debt ceiling fight was so chronologically close to the Obamacare shutdown put the GOP at a disadvantage. Republicans got snookered by Treasury Secretary Jack Lew, who used “extraordinary measures” to extend the date of the debt ceiling debate to where it would be conflated with the Obamacare rollout. Republicans aren’t known as the “stupid party” for nothing.
Now Tea Partiers are super pissed at the GOP. GOP Elite are pissed at the Tea Party base of the party. And Obama Democrats got everything they wanted. If there was a scenario that gave Democrats any hope of taking over the House in 2014 in the face of a big Republican structural advantage, this was it.
“The political fallout from the confrontation is very real. Republicans got almost nothing out of the deal to re-open the government and raise the debt ceiling except, of course, that they lost another 10 percentage points in their favorable rating and looked less like an organized political party and more like a disorganized, confused rabble.
. . . Small donors will be disenchanted that Republican officeholders caved on both the shutdown and debt ceiling, while the larger donors, who tend to be more pragmatic, are likely to sit on their cash for fear that the GOP will do something else crazy to threaten the economy and the party’s electoral prospects.”
“Congressional Republicans will be very, very lucky if they manage to come out of the current government shutdown/debt ceiling fight with nothing. It’s more likely that, having gone to battle over the wrong issues with the wrong strategy, the Republicans will have actually lost ground, both politically and in terms of their policy objectives.”
The Nation offers an alternative view:
“Because the deal only includes minor concessions, the Beltway consensus is that it represents a resounding defeat for Republicans, who “surrendered” their original demands to defund or delay Obamacare. In the skirmish of opinion polls, that may be true, for now. But in the war of ideas, the Senate deal is but a stalemate, one made almost entirely on conservative terms. The GOP now goes into budget talks with sequestration as the new baseline, primed to demand longer-term cuts in Medicare, Medicaid and Social Security. And they still hold the gun of a US default to the nation’s head in the next debt ceiling showdown.
Surrender? Any more “victories” like this and Democrats will end up paying tribute into the GOP’s coffers.”
So too does Peter Beinart who complains that the deal locks in the sequestration cuts as the new baseline: ”If this is Republican surrender, I hope I never see Republican victory.”
If you’re not scared off by two-thousand word essays, read this to understand why Washington, DC Democratic Mayor Vincent Gray staged a photo-op stunt to beg Senate Democrats to end the standoff over Obamacare, while the usually Republican-leaning National Chamber of Commerce pleaded with Congress to add some more headroom to the debt ceiling.
Shorter than 2,000-word version:
DC Mayors represent government workers who are the major casualties of temporary government shutdowns, while business groups represent big business, which depends on government spending fueled by even deeper debt.
UPDATE: (Delegates representing DC too.)
ALSO: Establishment GOP lashes out at Tea Party
Economists like to talk about the multiplier effect of government spending. The theory is that if the government spends a dollar buying products, services, or even spending it on welfare, the money is transmitted through the economy many times over when the original recipient buys things which then put extra money in the pocket of another recipient, who then buys things, and so on.
Keynesian estimators of the multiplier effect often focus on the spending and thus only predict a positive multiplier. This, however, analyzes only one half of the equation: ”that which is seen,” in the words of Frederic Bastiat. That which is unseen is where the money came from. In the case of government spending, it can only come from higher taxes, meaning that someone else is unable to spend himself that which the government spent, or from higher borrowing, meaning that someone else in the future is unable to spend the amount of money borrowed plus interest. The multiplier effect, therefore, can only be positive when viewed through the double entry accounting method, if the government spending today has a higher multiplier than the multiplier effect of private spending, whether today or in the future. Depending on their political stripes, economists latch onto data that buttress their belief that government spending is more or less efficient than private spending.
Today comes data that point substantially in the direction of anti-Keynesians who argue that government spending is a bigger drag on the economy than if the spending decisions were to be left in private hands.
The ranking member of the Senate Budget Committee produced this chart showing that over the last two years, the government added $2.4 trillion in debt and saw GDP increase by only $1.2 trillion. Keep in mind that government spending is part of the equation used to calculate GDP. So this chart implies a negative multiplier of 50%–meaning that for every government dollar spent through debt, the economy shrank 50 cents. Even if we were to use the pre-2009 deficit of $400 billion a year as a baseline, this would mean that the extra government deficit spending of $1.6 trillion over the last two years resulted in a GDP increase of only $1.2 trillion and a negative multiplier effect of 25%.
No company in the world would borrow money if they expected a negative return on investment as this chart implies. And yet we are told again and again that the economy will collapse if we don’t extend what is clearly counterproductive deficit spending.
MORE: This chart dovetails nicely with John Tamny’s column from yesterday:
“First off, there’s no such thing as fiscal stimulus of the spending kind. Though it’s well known at this point, governments can only spend money they’ve first taken from the private sector. In short, governments can at best merely steal demand from certain economic sectors in order to fund generalized waste and a bigger state. There’s no economic growth to speak of, rather there’s decline.”
Read the whole thing.
UPDATE: Thanks to John Tamny’s RealClearMarkets for the link. While you’re here, take a look around.
To be “sovereign” means that there is no higher legal authority. This is why, historically, sovereign debt is a bad risk: if the sovereign doesn’t want to pay back the debt, there is no authority that can order the debt repaid.
Francis Menton briefly describes Argentina’s journeys through the United States court system as the South American company attempts to evade debt issued in New York. The end game is near and Argentina’s lawyer told the judge what it will be: ”We would not voluntarily obey such an order [to repay the debt].” The Argentinians are essentially echoing Andrew Jackson’s rebuke of the Supreme Court: “They have made their decision, now let them enforce it.”
I suppose that the courts could seize whatever meager assets the broke country might have in American banks, but American courts have no real means to force Argentina to repay the debt. What the court can do is to deny Argentina access to future New York credit markets, which causes Menton to remark:
” . . . getting cut off from credit would probably be the best thing that could ever happen to Argentina, finally forcing a reduction in its wildly bloated state sector and out-of-control crony capitalism.”
The same would be true for the United States, but I fear that we’re going to have to get a lot closer to Argentina’s miserable state of affairs before we accept it.
Republicans want a delay in Obamacare. Because of the many significant problems with the rollout of Obamacare, and because he has delayed parts of the law himself some 19 times, President Obama should want a delay in Obamacare too. One year gives Democrats an opportunity to fix systemic errors in the software, the regulations, and the law. One year gives nothing at all to the Republicans–nothing–except the opportunity to crow a little bit.
That the President can’t compromise in a way that gives him everything he wants, plus the extra time he needs, is not about business. It’s strictly personal.
UPDATE: Thanks to Glenn for the link. While you’re here, take a look around.
MORE: Allahpundit and Evan McMurray dissect Wolf Blitzer’s wonderment that it isn’t the Democrats who are the ones begging for a year’s delay.
Exit question: Do national Democrats hate the Tea Party so much that they would take all the (well-deserved) negative reaction over the Obamacare Follies rather than to give in on just the delay even while it benefits them more than Republicans in the long run?
ALSO: Thanks to Ed and Moe.
‘Gestapo’ tactics meet senior citizens at Yellowstone.
How is it possible that both President Obama and the “Tea Party” hold an advantage in the budget standoff? It isn’t a contradiction if you understand that one side has a tactical and operational advantage, while the other side has the long-term strategic advantage.
For the next two weeks President Obama is at a tactical disadvantage as he is sacrificing the interests of his own forces in order to secure a greater goal. So far those most hurt by the government shutdown are government workers who are denied a paycheck. They are, in effect, on strike. But unlike an ordinary strike, where a union’s rank and file walk off the job and accept a temporary loss of income in exchange for a negotiating advantage to secure a bigger benefit, in this strike the workers out of work don’t want the benefit that their union’s leadership (national Democrats) want to secure. That’s because the benefit in question is Obamacare, which no government worker wants and many actual unions have exhaustively tried to avoid. (more…)
Every time the United States gets ready to bump up against another debt ceiling limit, the old 14th Amendment canard seems to make an appearance.
I’ve previously devastated that argument. So too have others. But let me sum up why usurping powers supposedly granted by Section 4 of the 14th Amendment is not just unconstitutional, but counter-productive:
1. Section 8 of Article I exclusively grants to Congress the power “to borrow money on the credit of the United States.”
2. The obligation to repay all debt supposedly set by Section 4 of the 14th Amendment only exists if you leave out three significant words in that very amendment: ”The validity of the public debt of the United State, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.” The debt ceiling is the authorization that allows the Treasury to issue more debt. Without it, there is no “authorized by law.”
3. Even if that isn’t clear enough, Section 5 of the 14th Amendment re-emphasizes that point: ”The Congress shall have power to enforce, by appropriate legislation, the provisions of this Article.”
4. The whole reason purportedly given for arguing that the President should use this non-existent power is so that the world’s bond markets won’t be spooked and call into question whether or not debt issued by the Treasury is valid. However, the Constitutional uncertainty of debt issued under such circumstances induces the very market spookiness that those making the argument supposedly wish to avoid.
5. In a contest between violating a law and violating the Constitution, the Constitution wins. The Constitution demands that only Congress can authorize debt. The Constitution also demands that the President must repay debt. It is a mere law (and a relatively recent one) that requires the President to spend every dime that Congress authorizes. The Constitution, therefore simply demands that the President simply prioritize debt repayment over other spending. Sure, that means that he has to violate the 1974 Anti-impoundment act, but it would now be unconstitutional to follow that law without an increase in the debt ceiling. (Plus, it was a stupid law in the first place.)
There’s more from the way-back-machine here and here. Plus this three-year-old anti-anti-impoundment piece from Daniel Henninger.
MORE: From John Hinderaker: “The Federal Government Can’t and Won’t Default on its Debt Obligations.” My five points above tell you why the federal government can’t. To understand why the President won’t default, read this long piece to understand how operationally dependent the Democratic Party is upon debt.
The nearly four-year-long stalemate of the Great War ended only because fresh American troops arrived on the front lines in the summer of 1918 at the rate of 10,000 a day. Twenty-one years later the Allies envisioned another lengthy trench-style war when they relied upon a line of interconnected, powerfully-fortified concrete bunkers named after French Minister of War, Andre Maginot. A generation after the First World War, and only six weeks after the second war began in earnest, the whole of France was under German rule.
A mere 100 hours after the American-led offensive to liberate Kuwait began, the war was over. A dozen years later a similar ground offensive was nearly as quickly concluded . . . but that war was only beginning.
It is human nature to extrapolate linearly from the past. Investment advisers in the 1920s and the 1990s, as well as real estate professionals in the oughts, forecasted incredible and continuous increases in value. Climatologists 30 years ago observed sharply colder winters of the late-seventies and forecasted a new ice age; a generation later many of those same scientists watched temperatures climb and extrapolated that to a future of rising seas and scorched lands.
Here we are today, eighteen years after the last government shutdown and Democrats blithely predict a certain public relations victory while many Old Guard Republicans, still snakebit by the past, fear for their electoral futures.
Life has a way of not staying on script.