Month: October 2013

Republicans are weathering this shutdown better than they did the last one:

At left, the proportion of people who blame Democrats for the shutdown: It’s bigger now than it was then. At right, the number who blame Republicans: It’s smaller! With all the talk about how John Boehner’s blunderous perpetuation of the crisis might jeopardize the GOP’s congressional majority, these numbers add a few additional grains to the mound of salt Nate has already thrown on the idea of a congressional upheaval.

Nevertheless, Gross expects the current shutdown to do more damage than the one in 1996:

When you look back over the past 18 years, one of the unavoidable conclusions is that, for a variety of reasons, the federal government is much more involved in the economy than it was. What’s more, the economy is now more dependent on certain sectors that can’t operate at their fullest capacity without the government being entirely open.

As this chart shows, the federal government has become a larger part of the economy over time. In 1995, federal spending accounted for about 19 percent of GDP. Now, it accounts for about 22 percent of GDP. Entitlements like Medicare and Social Security, which have yet to be affected, account for a big chunk of this rise. But the fact remains that federal government spending accounts for a significantly larger chunk of GDP than it did 18 years ago. So if you slam the brakes on that spending, it will have a bigger direct impact than it did 18 years ago, for example in the effect the furloughs of defense contractors is having on the private sector.

Chait rips into Boehner’s recent debt-ceiling comments:

Boehner dismissed the notion of lifting the debt ceiling and then negotiating the budget as “unconditional surrender.” How it could be unconditional surrender when he publicly favors lifting the debt ceiling, Boehner did not say. Obama and Boehner disagree on a wide array of budget policies. They agree that the debt ceiling needs to be lifted. Doing the thing both parties agree upon is a bizarre definition of unconditional surrender. If Boehner was an actual debt-ceiling truther, who argued that lifting the debt ceiling somehow worsens the fiscal position of the U.S. government, then lifting the debt ceiling would be surrender. But he isn’t. He agrees with Obama on the merits of the debt ceiling. Unconditional surrender is when one party agrees to do something it opposes but the other party wants — say, delaying Obamacare, as Boehner is proposing.

Douthat partially blames Republican unreasonableness on sequester spin:

One of the underappreciated dynamics making the current mess worse is the fact that both left and right, for somewhat different reasons, have embraced the idea that the outcome of the last debt ceiling deal  — sequestration, with its butcher-knife cuts to domestic programs and defense — was a straightforward win for Republicans, and a huge concession by the Democrats.

For liberals, this idea has fed into the widespread “never again” attitude where debt ceiling negotiations are concerned. (“We can’t get blackmailed like that a second time!”) For conservatives, it’s encouraged deeply implausible ideas about what they can expect the White House to offer them this time. (“We basically won outright in 2011, so why not try to go for Obamacare repeal this time around?”)

The reality, though, is that sequestration really was a genuine, almost old-fashioned sort of compromise — one that bit deeply into a lot of Republican interests and constituencies, and left the liberal ringwall around entitlements unbreached.

At this point, Cassidy is hoping for a stock-market crash:

Once the markets started tanking, investors, the banks, and the media would besiege Congress for action. The political environment would change drastically. Refusing to acknowledge reality, including the reality that every country has to pay its creditors or face ruin, would no longer be an option. Within days, or even hours, the two sides would come up with some face-saving device to calm the markets. (Finding a more lasting solution would still be a big struggle.)

To sum up, Congress needs adult supervision. Since the President can’t provide it and the Republican leadership won’t, the market might well have to step in and do the job. Such a resolution wouldn’t be pretty, but history suggests it would be reasonably effective. And once the immediate crisis was resolved, the market would probably [recover] pretty sharply.

Sean Wilentz claimed yesterday that Obama has the power to unilaterally raise the debt ceiling and avoid default. Balkin pushes back:

Wilentz assumes that Obama could stabilize the crisis by acting on his own. But there is good reason to believe that the opposite would occur.  If Obama is impeached, then the issue will shift from the constitutionality of what the House has done (using the validity of the debt as hostage) to the legality of what Obama has done. He will lose the higher ground in the debate, and the country’s focus will be taken over by an impeachment trial for months, as the economy spirals ever downward.  In the meantime, the validity of debt issued by the President will be repeatedly attacked in the courts by allies of the Republicans–who could purchase the new bonds and then demand a refund in order to create standing for a lawsuit.

Obama made similar points in his presser yesterday. Balkin’s argument makes me queasier, even as default, which is the likeliest alternative, remains unthinkable. The key section from the transcript:

 I know there’s been some discussion, for example, about my powers under the 14th Amendment to go ahead and ignore the debt ceiling law. Setting aside the legal analysis, what matters is — is that if you start having a situation in which there — there’s legal controversy about the U.S. Treasury’s authority to issue debt, the damage will have been done even if that were constitutional, because people wouldn’t be sure. It’d be tied up in litigation for a long time. That’s going to make people nervous.

So — so a lot of the strategies that people have talked about — well, the president can roll out a big coin and — or, you know, he can — he can resort to some other constitutional measure — what people ignore is that ultimately what matters is, what do the people who are buying Treasury bills think? And again, I’ll — I’ll just boil it down in very personal terms.

If you’re buying a house, and you’re not sure whether the seller has title to the house, you’re going to be pretty nervous about buying it. And at minimum, you’d want a much cheaper price to buy that house because you wouldn’t be sure whether or not you’re going to own it at the end. Most of us would just walk away because no matter how much we like the house, we’d say to ourselves the last thing I want is to find out after I’ve bought it that I don’t actually own it.

Well, the same thing is true if I’m buying Treasury bills from the U.S. government, and here I am sitting here — you know, what if there’s a Supreme Court case deciding that these aren’t valid, that these aren’t, you know, valid legal instruments obligating the U.S. government to pay me? I’m going to be stressed, which means I may not purchase. And if I do purchase them, I’m going to ask for a big premium.

So there are no magic bullets here.

Barro looks at the best estimates we have:

People have been talking a lot about Oct. 17. That’s the day the Treasury Department expects to exhaust ”extraordinary measures” that allow the government to finance itself without issuing Treasury bonds, such as borrowing from various government trust funds. But even when that happens, the federal government will have about $30 billion in cash left on hand, and every day it will collect more revenue. That means it will be able to go a few more days, or possibly as long as two weeks, without missing payments. The Bipartisan Policy Center has projected daily cash inflows and outflows and has narrowed the possible range for the “X date” — the first day the government can’t make all its payments due — as Oct. 22 to Nov. 1.

Matthew O’Brien also examines the government’s balance sheet and uses it to argue that debt prioritization won’t work:

[E]ven if the government is completely competent, the Treasury could still miss a debt payment. Why? Well, payments and revenues are lumpy. We owe more on some days, and we have more cash come in on some days. More importantly, we owe bondholders more on some days. So the question is whether there could ever be a particular day when we owe more in interest than we have in cash on hand. And there is.

Larison adds:

So the Republican members of Congress telling the public that they don’t need to worry about the danger of default if the debt ceiling isn’t raised are simply wrong. They are misinformed, and they are misinforming the public. They need to stop, but unfortunately many of the sources that they rely on for their news and analysis are recycling the same bad information.

Bernstein blames laziness for the current Republican madness:

The truth is that Republicans can pretty much say whatever they want, no matter what the bizarre logic and no matter what connection it has to what they were saying five minutes ago, and Fox News will totally accept it and blast it for hours or days. The result? Republicans have become incredibly lazy. After all, why bother constructing a coherent argument if you don’t need one.

So why is it a problem? Well, for one thing, it means that it’s easy for Republican politicians to fall deep within an information feedback loop, not even realizing that what everyone within that loop is excited about is unpopular, or perhaps just irrelevant, to the other 80 percent or so of the nation. Or to put it another way: Benghazi!

That’s potentially bad for Republicans if they lose a bit of popularity that way, but it’s worse for the system as a whole, because the system depends on parties and their politicians trying to do things that appeal to voters. The problem here is that Republican politicians deep enough in the loop might not even realize that they are espousing unpopular or irrelevant ideas.

Frum lists other factors that have crippled the party. Republicans’ rage at Obama is a big one of course:

Barack Obama was never likely to be popular with the Republican base. It’s not just that he’s black. He’s first president in 76 years with a foreign parent—and unlike Hulda Hoover, Barack Obama Sr. never even naturalized. While Obama is not the first president to hold two degrees from elite universities—Bill Clinton and George W. Bush did as well—his Ivy predecessors at least disguised their education with a down-home style of speech. Join this cultural inheritance to liberal politics, and of course you have a formula for conflict. But effective parties make conflict work for them. Hate leads to rage, and rage makes you stupid. Republicans have convinced themselves both that President Obama is a revolutionary radical hell-bent upon destroying America as we know it and that he’s so feckless and weak-willed that he’ll always yield to pressure. It’s that contradictory, angry assessment that has brought the GOP to a place where it must either abjectly surrender or force a national default. Calmer analysis would have achieved better results.

(Photo from Getty Images)