The White House let it be know that the “cut, cap and balance” scheme would be vetoed if passed. Sam Youngman, The Hill: “In a statement of administration policy, the White House Office of Management and Budget labeled the GOP bill as an ’empty political statement.’ … The president’s veto threat was followed by a full-on assault from administration officials who blasted the GOP proposal as ‘extreme, radical [and] unprecedented.'” Well, yes.
See also “Poll: 71% shun GOP handling of debt crisis.”
Update: Dean Baker writes that there’s no way Wall Street would let the Republicans pull the debt ceiling trigger.
As many have noted, including me, a default on the debt would be an absolute disaster for the financial system. We would see the same sort of freeze-up of lending as we did after the collapse of Lehman in September of 2008, although this time would almost certainly be much worse.
With US government debt no longer the rock-solid pillar of the world financial system, banks would instantly lose much of their capital. They would not only have to write-down the value of government debt, but also all the assets backed by the government, like mortgage-backed securities issued by Fannie Mae and Freddie Mac.
This would almost certainly push the major banks into insolvency. JP Morgan, Citigroup, Goldman Sachs and the rest would suddenly be back in the welfare line. And any rescue would almost certainly not restore them to their former strength and profitability like the last one did. If the government defaulted on its debt, Wall Street would take a shellacking and it would never again be the centre of world finance.
For this reason, Baker says, no one believes Republicans in Congress will allow the U.S. to default. They may be willing to kick poor and working people in the teeth and let seniors rot, but they aren’t about to displease the people who finance their election campaigns.
This makes sense, but it’s congressional Republicans we’re talking about. Baker assumes a majority of them are sane enough to understand the consequences of default. I’m not sure that many of them do.
They’re determined to waste time on this “‘Cut’ benefits, ‘cap’ taxes, and ‘balance’ the economy on the backs of the poor, the old, the sick the disabled, women and children,” even if it has 0, zero, chance of passing.
And so, as the American economy is about to hit the iceberg, and the ship of state sink, the band droned on. And on. And on…
I hope Obama doesn’t buckle.. I still say Obama should re-extend his offer for the grand bargain to give the repugs a way to save face, and as a way to break the back of the “free market” corporate giveaways. My assumption is that Obama knows where he wants to take our economy and any spending cuts he agrees to wont tip over the apple cart. It’ll be rough for some…Like Bachmann who might have to give up her farm subsidy or her husbands medicare payments for his fine work in curing homosexuality. But we’ll get through it, and be a stronger country for it.
Barbara – The Balanced Budget Amendment is the Holy Grail, the Ring of Power, and Harry Potter’s Wand…. all wrapped up in one short document. IMO, it’s the objective of decades of financing and preparation. Why? It cripples the federal government, guarantees low taxes, & will be damn near irrevocable as written.
The ‘man behind the curtain’ wants low taxes and weak government. Low levels of federal oversight, and let the state- level filmmakers squash any serious attempt at financial, labor or environmental interference. Expect that in the next election, President Obama will be running against a single issue, not the GOP nominee. The current rules allow special-interest groups to flood the airwaves with lies and nothing that will require the dummy groups who buy the adds account for the source of funds.
The good news is that President Jello did NOT fight the fight the Tea Party expected. He agreed to all their demands for cuts with the stipulation that loopholes must be closed and some nasty subsidies ended. So the argument from Obama next year will be, “I begged you to take the big deal and YOU walked away.”
The GOP wanted and expected a measly half-trillion offer so that the GOP could declare government can’t close the deficit gap… and thats WHY they had to walk from a deal that would have refuted the argument BEHIND the BBA. And the BBA is the goal. So the GOP refused what would have been a conservative’s favorite wet dream because it would have ended the BBA as an issue.
I have no idea how much of what has transpired is seventh dimensional chess and how much is dumb luck. But it’s obvious to anyone that the GOP is in chaos trying to deal with a situation that’s undermined the aspired presentation of the BBA, which was supposed to be the way forward from the impasse that wasn’t an impasse until the GOP walked.
Ok, we know congressional R’s would crash the economy on principle. Does the president then become the adult in the room and cave on his raising taxes demand? Or does he hold onto his conviction and watch the economy go off a cliff? Kind of along the same lines, does he in collusion with the senate put together some kind of a nuclear ‘constitutional’ solution?? I would never want Obama to cave on anything to this band of terrorists but is it more important than putting the economy in the tank??
BB – My read of Obama is that he is VERY slow to declare a final position, but when he does, it’s really FINAL! That means the Bush tax cuts won’t be extended for those 250K and above. A tax cut deal WILL include new revenue. That said, my guess is that before August, if the Teabaggers in the House won’t budge, the president will invoke Section 4 of the 14th amendment and raise the debt ceiling by executive authority. Watch for administration spokescritters leaking the argument that the failure of the House to do anything is unconstitutional. That means the executive order has been written.
According to ThinkProgress: Republican ‘Cut, Cap, And Balance’ Plan Would Require A 25 Percent Cut In Every Government Program
This would only be meaningful to me if it also included a 25 percent cut of the salaries of all Senators and Representatives.
Sorry to post so soon; but, I just came up with a rewrite of “cut, cap and balanceâ€.
My version is “cut crap and balance a ball on your nose all you trained seals of Grover Norquist”.
Is there any truth to the rumor that the members of the GOP all chipped in an bought Cantor a spiked collar?
Eric’s a bad boy now!…” Yo, Biden, You talkin’ to me direct? You keep it up greaseball and you gunna get whacked. Don’t make have to talk to crazy Paulie about you!”
My version is “cut crap and balance a ball on your nose all you trained seals of Grover Norquistâ€.
Oh Bonnie, thank you.
(Or, as my eighth-grade Spanish teacher would’ve said to them, dripping sarcasm, “Well, flip you a fish.”)
My hope here is that the R’s are trying to find a way to save political face … some way of saying “We tried to bi-partisanly extend a bi-partisan deal that would have bi-partisanly allowed the D’s to have their precious debt ceiling raise while bi-partisanly giving us R’s absolutely everything else we wanted. Sadly, the viciously partisan D’s wouldn’t budge, and by the time we realized just how stubborn they were willing to be, it was too late to do anything but just pass the debt ceiling raise by itself, and start planning for next year! Bi-partisan.”
-me
“If the government defaulted on its debt, Wall Street would take a shellacking and it would never again be the centre of world finance.”
Give the devil his due; these righties are much more effective revolutionaries than the Sixties left ever was. The hippies and the yippies just talked about sticking it to the Man; these guys are the Man sticking it to himself.
So yes, I think they’re going to default – or go down trying to.
“these guys are the Man sticking it to himself”
Kinda like that scene from “Blazing Saddles”.