United Liberty

Most of the weekend went by without word of anything resembling a deal on raising the debt ceiling. House Republicans kicked around a short-term hike, but Senate Democrats and the Obama Administration threw cold water on the idea.

The desire to come to an agreement has been expressed on both sides. Speaker John Boehner, who has earned kudos for his performance during these tense last few weeks, was very straight-forward with his caucus yesterday on the need for something that can pass both chambers, especially as markets begin to react to the stalemate. According to The Hill, Boehner wants an agreement today.

News broke not too long ago that talks between the White House and Speaker John Boehner have apparently collapsed:

House Speaker John Boehner abruptly broke off talks with President Barack Obama Friday night on a deal to make major cuts in federal spending and avert a threatened government default, sending already uncertain compromise efforts into instant crisis.

Within minutes, an obviously peeved Obama virtually ordered congressional leaders to the White House Saturday morning for fresh negotiations on raising the nation’s debt limit. “We’ve got to get it done. It is not an option not to do it,” he declared.

For the first time since talks began, he declined to offer assurances, when asked, that default would be avoided. Moments later, however, he said he was confident of that outcome.

My wife and I were out to dinner while the press conferences were going on (obviously, I didn’t watch them), so I’m still catching up on what exactly happened. As noted above, Obama came across angry and chastized Republicans, asking if they could agree on anything. Here is the video (you can read his comments here):

Once upon a time, the United States of America could almost say it owned South America.  After all, many South American nations relied heavily on US foreign aid.  Of course, things have shifted and some down south are openly mocking the United States as they debate on painful budget cuts.

From Reuters:

“When did the American dream become a nightmare?” gloated Argentina’s President Cristina Fernandez, whose own country defaulted on about $100 billion in debt a decade ago.

In a speech at the Buenos Aires Stock Exchange on Monday, she contended that Argentina had prospered since then by focusing on exports and controlling financial speculation — a lesson that Washington has yet to learn, she said.

The Americans “thought that money just reproduces by itself, and only in the financial sector, without having to produce any goods or services,” Fernandez said.

Oh this ain’t good.

Memories are still fresh of the self-righteous tone that U.S. officials sometimes seemed to take when the shoe was on the other foot. One infamous example: As Argentina spiraled into crisis in 2001, then-U.S. Treasury Secretary Paul O’Neill mocked the country for its debt struggles and said: “They like it that way. Nobody forced them to be what they are.”

These days, Latin America’s economy as a whole is expected to expand about 4.7 percent in 2011 — almost twice the expected rate in the United States — thanks to strong demand for the region’s commodities and a decade of mostly prudent fiscal management, itself the product of many hard-learned lessons of the past.

There were signs of movement yesterday a deal that would raise the nation’s debt ceiling. According to a report from The New York Times on Thursday afternoon, President Barack Obama and Speaker John Boehner were close to a $3 trillion deficit reduction deal:

Congressional and administration officials said that the two men, who had abandoned their earlier talks toward a deal when leaks provoked Republicans’ protests at Mr. Boehner, were now closing in on a significant package calling for as much as $3 trillion in savings that would be obtained through substantial spending cuts and future revenues produced through an overhaul of the tax code. If it could be sold to Congress, the plan could clear the way for a vote to increase the federal debt ceiling before an Aug. 2 deadline.

What does each side want? Here is an idea:

[T]he president and Mr. Boehner were moving ahead with their plan, aides said, trying to agree on matters like how much new revenue would be raised, how much would go to deficit reduction, how much to lower tax rates and, perhaps most critical, how to enforce the requirement for new tax revenue through painful consequences for both parties should they be unable to overhaul the tax code in 2012.

The White House wants a trigger that would raise taxes on the wealthy; Mr. Boehner wants the potential penalty for inaction to include repeal of the Obama health care law’s mandate that all individuals purchase health insurance after 2014.

The debt limit will be raised, if it’s not already up by the time this piece hits the net.  It seems like the pieces are aligning and the debt limit will increase, avoiding the alleged apocalypse that we’ve been hearing about for some time.  Lost is that someone once called the need to raise the debt limit a “leadership failure.”  That person argued that raising the debt limit put the burden for today’s choices on “backs of our children and grandchildren.  America has a debt problem and a failure of leadership. Americans deserve better”  I couldn’t agree more.

What’s so humorous is that those words come from then Senator Barack Obama.

In 2006, Obama argued quite eloquently against raising the debt ceiling.  He wasn’t wrong about what he said, there is a serious problem at work.  The fact that we need to keep raising the debt ceiling is a sign of a leadership failure.  It’s a sign that the national leadership won’t make the hard choices and recognize that if we can’t pay for more programs, then we need to start saying no to some thing that may sound like a good idea but we just can’t afford.

Throughout this country, there are families looking at their checkbooks, trying to figure out how to pay for electricity, rent, and food while still putting gas in their car.  They juggle money to make sure nothing gets cut off.  In many cases, they’ve already cut off their cable bill, and possibly toned back their phone bills as much as possible.  They’ve looked at what comes in and cut what goes out to match it as best they can.  It sucks.  I’ve lived like that more than once, so I know exactly how it goes.  But they do it.

With the Ames Straw Poll just a few weeks away, Minnesota Rep. Michele Bachmann has dropped her second ad in Iowa. In it Bachmann, who is facing inquiries as to whether her health would be a problem if she became president, explains that she voted against “Cut, Cap and Balance,” the deficit reduction plan offered by House Republicans, because it didn’t go far enough and reiterated her opposition to an increase in the debt ceiling:

Apparently, the GOP is trying to take spending back to 1966 levels.  That’s kind of cool for a small government guy like me.  I don’t see it happening, but folks on the left sure are geared up for that fight. For example, an The Center for American Progress calls an effort to return the United States to 1966 spending levels “untenable”.

What the progressive think tank is missing is that Republicans know this is radical.  They also know it’s bound to be unpopular.  Oh, we most definitely could take spending back 45 years.  Contrary to what some folks think, this isn’t exactly the end of the world scenario they like to envision.  However, there’s no need to really worry.

There’s a concept called the Overton Window.  This concept basically is that you start from an extremely radical position, knowing that it’s politically impossible.  You do this because what you really want isn’t nearly as radical, but still more radical  than currently accepted.  Take this as an example:

You believe that medical marijuana should be legal, but you’re not sure the people will accept it yet.  You decide to propose legislation legalizing all drugs outright.  Obviously, this causes an uproar.  In the midst of negotiating, you whittle it down to only legalizing marijuana with a doctor’s prescription.  This passes easily as the other side claims they stopped you from legalizing everything, but you got what you really wanted in the first place.

The trick is to use a position that your constituents already support unless you don’t care about reelection.  Right now, the GOP base is loving the idea of deep budget cuts that progressives describe as “draconian”.  By proposing a budget that cuts much farther than the left is prepared to accept, but that your base absolutely loves, you have some room to maneuver.

While House Republicans fell short of the votes needed to pass the Balanced Budget Amendment (the Constitution requires 2/3 to pass an amendment), they did manage to pass the core of the plan by a vote of 234 to 190:

House Republicans on Tuesday approved an ambitious but legislatively ill-fated plan to enact deep spending restraints that could clear the decks for a compromise over the debt limit.

The so-called “cut, cap and balance” measure passed on a party-line vote, 234-190, as nine Republicans and five Democrats defected. Democrats excoriated the GOP for advancing the bill, which the White House has threatened to veto.
[…]
House Republicans reacted hesitantly to the “Gang of Six” plan, saying they had yet to see the details and were focused on their own proposal, which conditions a $2.4 trillion increase in the debt ceiling on $111 billion in immediate cuts, an annual cap on spending, and congressional passage of a balanced-budget amendment.

Even as the GOP brought the “cut, cap and balance” legislation to the floor, House Speaker John Boehner (R-Ohio) said party leaders in the lower chamber had begun discussions over a “Plan B” to increase the debt ceiling by the Treasury Department’s Aug. 2 deadline if a broad agreement wasn’t possible.

You can view the roll call vote here.

“Cut, Cap and Balance” had become a rallying point for conservatives during the stalemate over the debt ceiling. And while it may have been better than other alternatives, it still didn’t deal with the very real issues that are causing the problem, as noted by Peter Suderman over at Reason:

This debate about the debt ceiling is really getting annoying.  Yes, I do think a lot more spending cuts need to be made than most anyone is really trying to make.  Yes, I understand why Republicans are hesitant to raise taxes.  That’s all kind of irrelevant though.  You see, the reason it’s irrelevant is that the pretty much everyone agrees that the debt ceiling will be raised.  It’s going to go up, because almost every politician in Congress is terrified of what will happen if it doesn’t.

With that in mind, I ask once again, why even bother having the blasted thing?  Oh, I understand the original reasons for it, but I also know that it really doesn’t serve a purpose.

The debt ceiling has been raised I don’t know how many times in the last ten years.  It’s usually pretty routine, and most folks seem to feel that it simply has to be increased.  So I say we just do away with the damned thing.  Frankly, I’m sick of the posturing by both sides.  We know it’s going to be raised, and we know that most spending cuts promised will really be illusionary as they will extent well beyond the current terms for all parties making the agreement.  It’s just kind of silly.

Don’t get me wrong, I’m not a fan of public debt.  I can’t help but think that with $4.46 trillion dollars in current revenue, we should be able to pay for what we need to pay for without borrowing money.  I really do think it’s entirely possible to function without raising the debt ceiling.  I just know that the American people wouldn’t be real crazy about what all would have to be cut…despite my feelings that those things really need to be cut.

The folks over at Reason TV put together this short video back in March. It shows a family (the United States) that has nearly reached their credit limit because they have spent too much by money buying homes and bailing out banks. Instead of fixing the problem, the husband’s solution is to just “get more credit cards.”

Given the stalemate between the White House and Republicans, it’s looking like a real deal to address these problems won’t be reached and we’ll just see a capitulation to increase the debt ceiling and enable Washington to spend more.