Oops...

July 23rd, 2011
by F. Grey Parker

Well. Yesterday sure was an interesting day. First, we were all subjected to the worst speaker of the U.S. House in living memory refusing to take the President's phone calls. Debt limit crisis? "Phooey," said commander booze-tan. Second, we endured the spectacle of Mr. Waterworks holding a damage control press conference. It was a train wreck in which he utterly failed to explain himself.

Mr. Boehner was grasping, to put it very politely. For the best analysis I've seen, I direct you to Jonanthan Chait over at The New Republic:

"It seems hard to square Boehner's claim that Obama walked away from his agreement and that no agreement ever existed. It's possible that Obama altered his offer, asking for more revenue in return for higher entitlement cuts. But if they didn't have a deal, then Obama couldn't have walked away from it.

Indeed, Boehner's spin seems like an attempt to walk the awkward line between portraying himself to the general public as willing to compromise, and convincing conservatives that he never compromised. Boehner released a letter making his case, published by Jennifer Rubin. It's pretty transparent:

The White House agreed to a revenue total that would set a ceiling of about $800 billion in new revenue over ten years that could be generated through economic growth and efficiencies in our tax system (not tax hikes).•After the ‘Gang of Six’ plan was released, and in the wake the reaction from Hill Democrats, they moved the goal posts and insisted on $400 billion more in higher taxes – a 50% increase – and wanted that to the floor instead of the ceiling.

The first paragraph says that higher revenue came from "economic growth and efficiencies," which implies that the revenue was produced through dynamic scoring voodoo. (I doubt the administration would agree to that, and I know the Congressional Budget Office wouldn't score that.) The next paragraph refers to Obama's demand for "$400 billion more in higher taxes." So, the agreed to revenue was just "efficiencies and economic growth," while the revenue Boehner rejected was "higher taxes"? Really? I think pretty obviously it was all higher revenue from eliminating or reducing tax expenditures.

But Obama insisted on $1.2 trillion, which is still a bad deal -- $800 billion less than the Gang of Six agreed to -- though somewhat less so. After moving further and further, and further right, Obama finally stopped."

At some point today, reality back got in touch with Mr. Boehner.

Headline from Political Wire 7/23/2011

My first reaction to this was, "I am glad some country's markets matter to you, Mr. Boehner." Clearly, our own is not an issue of very much importance. If Boehner was as concerned about our domestic markets as he now seems to be over those in Asia, he might have considered spending more time consulting with actual conservative economists over the last few months.

Economists such as...

Lawrence White and Neil Buchanan, both of whom have repeatedly shot holes through the "prioritized payments" fantasy that fringe Republicans keep spouting in order to call a defaut "not a default."

White- "The mistaken view that interest payments to US Treasury-holders could easily be prioritized, avoiding default indefinitely. This view requires that investors willingly roll over their holdings of Treasury debt and does not take into account the sharp increase in interest rates that may result."

Buchanan - "…if the federal government delays payment to anyone, then certainly in a common-sense sense, the government has defaulted on its obligations….I believe that the financial markets would not be copacetic [if bondholders were repaid but other creditors weren’t]….They would realize that the government was stiffing one set of claimants who are creditors, and the markets would worry that they might be next."

Bruce Bartlett (who foresaw this whole disaster last year and reiterated his alarm this January) - "If the debt limit is not raised, the president will have to break the law by defaulting on the debt or not paying bills he is obligated by law to pay." EMPHASIS OURS

And why, perchance, might the radicals who have co-opted the "Party of Reagan" not see such obvious outcomes?

Bartlett - "I still consider myself to be a conservative in the tradition of Edmund Burke, Russell Kirk and William F. Buckley. I don't think most of today's conservatives have any idea who those people were."

Bohener might have listened to Gary Becker, who simply tells it like it is - "That Congress will have to raise the debt limit this summer is a no-brainer since revenues are not anywhere near large enough to cover government spending. Without a boost in the ceiling, the federal government will be unable to pay its bills, including pay to federal employees."

Keith Hennessy - "Congress must raise the debt limit. Not doing so would eventually lead to defaulting on Treasury bonds, a potentially catastrophic event."

Glenn Hubbard managed to get a dig in using the Republican Party's own nauseating rhetorical analogies between the federal budget and "ordinary households." - "It’s not useful for me and my wife to argue over whether we’re going to pay our bills. What’s useful for us is to discuss whether we should work more or spend less. But not whether we’ll pay."

Even Douglas Holtz-Eakin says just do it - "Yes, Congress should raise the debt limit. Being a good steward of the U.S. credit rating means that it has to pay Obama’s credit-card bill. And it should do so as quickly as possible."

I find this last gem from Holtz-Eakin particularly interesting; He illustrates an argument Republicans could use for doing the right thing and still making it Obama's fault... Regrettably, the current foam-mouthed house majority is simply too stupid to build on even that politically.

But, Boehner clearly doesn't follow the work of legitimate conservative economists. He can't have and still argue in the manner that he does. No one knows who suddenly got to him this morning, but Boehner himself tipped us off to whom was actually catering just 2 days ago. "Boehner called into Rush Limbaugh's radio show to assure the right-wing radio host and his "dittoheads" that there is no deal in place and that he will not agree to any compromise that would be considered a "cave."

The Speaker of the U.S. House of Representatives was more concerned with placating talk radio this week than he was with the fiscal stability of the United States. He demonstrated an allegiance not to our country, but instead to those paragons of complex philosophical and intellectual thought that believe the heat index is a liberal conspiracy.

Fast forward to today and he has suddenly started promoting reality-based globalism. Truth be told, this gives me even less confidence that a deal will be struck. 

Here is the roundup from Political Wire:

"House Speaker John Boehner (R-OH) told House Republican lawmakers that he " wanted movement on the negotiations within the next 24 hours, before Asian markets open Sunday night U.S. time," the Wall Street Journal reports."

"Boehner also said that he has not ruled out reaching an agreement that would reduce the deficit by between $3 trillion to $4 trillion over 10 years, the aide said, despite that he walked away Friday night from negotiations with Mr. Obama on an agreement of that size."

Politico: "He acknowledged that he might not be able to get the details of a plan to all members by the time he makes an announcement tomorrow, but warned colleagues that they risk losing leverage in the negotiations if something isn't enacted by Aug. 2."

Ezra Klein: "Boehner is hoping to present a plan by then, but a plan is very different from a deal. A plan is something politicians can come up with. A deal, we're increasingly finding, is something that we need the markets to force."

With all due respect to Ezra, the markets continue to try to move Washington towards a rational conclusion to the debt limit crisis. But, the markets and their leaders just don't trade in "crazy." And that is the only commodity elected Republicans seem to back anymore.