Shut it Down – Obama Can Save the Country from Default

Shut it Down – Obama Can Save the Country from Default

– Christopher Carroll

President Obama and Senator Harry Reid can win the federal budget and debt limit debates. They can do it by letting Republicans walk into their own trap. By allowing the federal government to shut-down, they can save the country and economy from the much worse disaster of debt default.

After the Senate passed, in an expedited procedure,  a bill that would have temporarily funded the government and avoided an impending shutdown while preserving Obamacare, House Republicans again refused to comply with the President and Senate democrat’s refusal to involve Obamacare.

Saturday brought more drama to the political stage. Following a rare Saturday meeting, House Republicans passed a Continuing Resolution that will temporarily fund the government while delaying Obamacare for one year.

House Speaker Boehner had indicated a desire to direct House Republicans to pass the Senate’s version of the continuing resolution, thereby rallying strength for the approaching debt limit battle. He was, however, unable to muster support from within his party for his strategy. The unruly caucus proved too much for Boehner to handle, bucked his leadership and insisted on delaying the A.C.A in any agreement.

The House GOP, by not following Speaker Boehner’s advice, has given the Obama administration and Senate Democrats a get out of jail free card. Even after democrats vociferously and publicly refused to defund, delay or compromise the A.C.A in all budget or debt limit negotiations, the Republican’s stubborn insistence that they do just that will allow President Obama and Senator Reid to justify allowing the government to shut down. While a shutdown would be disruptive, a default would be catastrophic.

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President Obama and Harry Reid should let the government shutdown. It would give them political power in negotiations over the debt limit, due to be reached by October 15.

At this point, avoidance of a federal shutdown will likely only take place if Republicans concede to Democratic firmness and public disapproval. If this were to happen, Republican lawmakers would likely return to the debt limit debate with a vengeance, insisting that in return for raising the debt limit they receive any number of their priorities. Given Democratic unity on the federal budget, it is unlikely that they would succumb to Republican coercion and the country and economy would be thrown into turmoil.  This must not happen.

Senator Harry Reid, Senate Majority Leader (Photo credit: Wikipedia)

Instead, President Obama and Congressional Democrats should allow the Republicans to fall victim of a trap of their own making. By allowing the government to shut down, they would be allowing national distress on a relatively minor scale; the economy would falter due to uncertainty, federal employees would be furloughed and unprotected federal programs would be suspended. A debt default, on the other hand, would be catastrophic. The economy would stagger, the world markets would shiver and the countries credit rating would be slashed. The economic recovery will not sustain blows of that magnitude.

By allowing a federal shutdown, Obama may be able to avoid economic disaster by teaching the country, and Republicans, through the lens of experience. The country and economy will be forced to watch the effects of a government shutdown and not only hold them responsible, but fear the vastly more painful debt default.

Republicans have been rewarded for their recent spates over the federal budget and debt limit. It is becoming commonplace for the nation to watch budgetary conflicts every year in Washington D.C. The Republican party, who recently have had relatively little political leverage, are finding themselves able to control debates and manufacture influence through budgetary and debt negotiations. Only if the President and Democrats refuse to be coerced and blackmailed through CRs and debt limit increases will a seemingly perpetual cycle break.

If Obama doesn’t give in to discussions, he may be able to save the country the pain of default. By allowing Republicans to buck their own leadership, President Obama will allow the G.O.P to step into a trap that they themselves have set.

High Stakes Chicken

High Stakes Chicken – Republicans and Democrats are locked in a game of budgetary chicken whileAmericans and the economy can do nothing but watch

-Christopher Carroll

While Republicans are busy fighting an ideological grudge match against Obamacare, Americans and the economy are caught in the crossfire.

Friday marked a busy day for the House in Washington D.C. After passing a bill that could temporarily fund the Federal Government through December 15, Eric Cantor and House republicans held a closed door meeting to decide on strategy for negotiations over the impending debt limit. That vote has been scheduled for next week.

The Republican strategy is clear; they are linking their desire to defund the Affordable Care Act, also known as Obamacare, to both the major fiscal deadlines that rapidly approach. Even with the President and congressional Democrats repeatedly asserting their unwillingness to allow these fiscal deadlines to become bargaining chips, Republicans are pushing an ideological battle as far as it will go. In doing so, they are pushing the country to the brink of economic disaster.

The bill to fund the government through mid-December, comes in the form of a Continuing Resolution, or CR, which keeps the government funded while buying time for legislators to agree to new appropriations bills. Within the CR now on it’s way to the Senate for debate, House Speaker Boehner and Republican leadership included the defunding of Obamacare, long a priority of a faction of the Republican caucus. Meanwhile, Republican strategy to raise the debt limit “links a yearlong postponement of the health law’s implementation to a yearlong extension of the government’s borrowing authority.” Regardless of its passage through the Supreme Court, Republicans intend to follow through on passed rhetoric and attempt to gut the A.C.A.

The bill now before the Senate has no chance of passing and will, without a doubt, be amended. Majority Leader Harry Reid (D. – NV), has already said that a CR that defunds Obamacare is “dead” on arrival. Even if it were to find a way to the President’s desk, Obama has already promised to veto a budget bill that defunds the ACA.

While Democrats are painting the House CR and debt limit strategies as simply attempts to further ideological differences at the expense of the nation, Republicans believe they can get Democrats up for re-election in republican leaning districts and states to vote with them. Freshman senator Ted Cruz (R. – TX), the leader of republican efforts to scrap the A.C.A, has said he will use any means necessary, including filibuster, to stall Senate passage of a different funding bill.

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The Republican strategic calculus is incredibly flawed.

As explained by Republican strategist and policy advisor Karl Rove, the Republican’s defunding strategy represents political kryptonite, not the ace in the hole that many politicians seem to think. While it is true that polls show that Obamacare is unpopular, risking government shutdown is even more so. Less than one American in four supports efforts to repeal or defund the law and risking the shutdown so as to attack a political grudge is politically fool-hearty way to alienate voters and risk the loss of seats in the Senate and House.

Additionally, the stubbornness shown by the GOP, even after repeated warnings that the President and Senate Democrats would allow the defunding of Obamacare,

Official portrait of Federal Reserve Chairman Ben Bernanke. (Photo credit: Wikipedia)

has already done damage to the American economy. A shutdown or failure to raise the limit would do even more. We have already seen the repercussions of the Republican strategy. Just this past Wednesday, Ben Bernanke, Chairman of the Federal Reserve, announced that the Fed would not scale back the current economic stimulus, surprising many on Wall Street and across the country. The move indicated that the Fed does not think that the economy will continue the current pace of improvement and that unemployment will remain high for the foreseeable future. But it is naïve to think that Ben Bernanke was not also accounting for the uncertainty that surrounds the debt limit and government shutdown. Clearly, Mr. Bernanke feels that the likelihood, and the resultant repercussions, of a shutdown are too big to ignore. Instability and uncertainty are anchors on any economy and ours is already weighed down by a stimulus that robs it of economic momentum.

The only positive thing that can be said of the Republican strategy is that it has distracted the country from addressing the implementation of the A.C.A. While posturing, pontificating and politicking about shutting down the government and defunding the A.C.A., Americans have seemingly not realized that the A.C.A exchanges open October 1st. If the GOP strategy is merely one of diversion, it has succeeded, though at the cost of increasing voter fatigue over their strategy.

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The damage that would be inflicted upon the U.S economy by either a government shutdown or failure to raise the limit would be vast. It would be crippling for an economy trying to recover with the sequester already tied around it’s neck. While President Obama and congressional Democrats will not be blameless, default and shutdown are particularly dangerous for the G.O.P. Rather than standing up for what American want and need, they will appear willing to grind the economy and federal services to a halt, choosing instead to fight an ideological grudge match rather than govern the nation. As is so often the case in United States politics, the American people are the collateral damage.

Lights Are Out and Nobody’s Home

Lights Are Out and Nobody’s Home

-Christopher Carroll

Dark days are coming. The lights may be turned off in Washington. Easy to forget in the recent Syria conflict turmoil is that America is once again hurtling toward fiscal disaster. For most Americans, it’s the same old story; more Washington ineptitude, more partisan bickering, more selfish nonsense and more political puffery.

Congress, due to return to Washington D.C shortly, is facing two major fiscal debates, reaching the debt limit and an impending government shutdown. The velocity with which these deadlines approach is going to put a great deal of pressure on Congress to act quickly, something they have not been known to do frequently.

Last week, the Obama administration announced that the Department of the Treasury will run out of money sooner than expected. Treasury Secretary Jack Lew has said that the Department expects to exhaust methods to postpone arriving at the limit in mid-October, putting it on schedule to immediately follow the other major fiscal fight, the funding of the federal government. Both of these fights are expected to be bloody, but having them back-to-back could make them fatal.

The fiscal debate will be a major battle. The Obama administration has said that the President will not entertain negotiation over the debt limit, insisting instead that the debt limit be raised to prevent default on previously accrued debts. “Such a scenario could undermine financial markets,” explained Lew, and could “result in significant disruptions to our economy.” Meanwhile, House Speaker John Boehner (R. – OH), expects a “whale of a fight” over the debt limit, hoping to leverage raising the borrowing limit so as to attain further budget cuts beyond what is known as the sequester.

Even before the debt limit is reached, September 30th will bring the end of the current government’s funding. Unless a budget or continuing resolution is reached before the September 30th deadline, the government will no longer have the authority to remain operational.

Similarly to their stance on the debt limit, House Republicans believe that the threat of a government shutdown provides political ammunition. Many plan to insist upon further budget cuts, to accompany those already in place by sequestration, or the gutting of the Affordable Care Act, in any budgetary deal. Many democrats want to replace sequestration in a new budget agreement, but Speaker Boehner and his caucus don’t seem to be remotely interested.

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It is difficult to envision a way in which the Obama administration and House GOP come to an agreement on either of these issues. The administration insists that it will not negotiate with Congress on the debt limit while Speaker Boehner and Majority Leader Cantor plan on reaping concessions on taxes and healthcare. Meanwhile, it is just as hard to see the two sides agreeing on a comprehensive budget while Democrats want to replace the sequester, thereby easing the noose strangling the economy, while Republicans push for keeping the sequester and repeal of the ACA. Dark days seem to be fast approaching.

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The dual fiscal threat facing Washington and the country presents danger for all parties concerned; Republicans, Democrats and Americans alike. Republicans must be careful not to overplay their hand. The 1995 government shutdown was far more damaging to Newt Gingrich than it was to President Clinton, and if Speaker Boehner and the GOP want to win a Senate majority in midterm elections, they cannot afford to disenchant swing voters. President Obama, meanwhile, cannot afford to be so stubborn during budget discussions that he risks tainting negotiation over the debt limit, a debate that presents more danger to the national economy than does a government shutdown.

However, the dual threat, while potentially a deadly cocktail, may actually make negotiations easier for Republicans and Democrats on Capitol Hill. The issues presented in both debates will provide more flexibility for lawmakers to trade, compromise and accommodate each other. With more assets on the negotiating table, it may be easier for Congress to resolve and avoid both fiscal disasters.

Sadly, the dual cocktail that could provide benefits to lawmakers will likely prove poisonous for the public. If the government shuts down, the country risks default on payments and damage to our international credit rating. If Obama plays the budget negotiations on the conservatively safe side, preserving Obamacare while simultaneously getting the debt limit raised, the economy will not only continue to struggle against the sequester but will be forced to burden additional tax-breaks and budget cuts. If the opposite takes place and the Obama administration is able to reach a budget plan but in doing so gives into Republican demands on taxes and Obamacare, or angers Republicans enough to prevent a debt limit increase, the nation will once again experience the economic turmoil of two years ago. None of this is even to speak of the possibility that no agreement, on either debate, is reached.

While many people chalk the latest economic distress and debate to Republican obstructionism, Democratic spending and Congressional puffery, deeming the recent trend a new phenomena is blatantly untrue.  Not since George Washington was able to hold the young nation together by himself have we seen an American nation not plagued by partisan posturing and perilous rhetoric.  Most recently, the Hastart Rule and gerrymandering have made it worse. It is now up to Speaker Boehner, Majority Leader Cantor, Minority Leader Pelosi and President Obama to manage their caucus. Otherwise, the American people will be left in the dark.

A Government Shutdown is Bad Politics and Bad for the Country – Will the Lights Be Turned Off in D.C.?

A Government Shutdown is Bad Politics and Bad for the Country – Will the Lights Be Turned Off in D.C.?

-Christopher Carroll

It is that time of year. We are once again wondering if the debt ceiling will be raised and if a budget for the 2014 fiscal year (starting in October 2013) will be passed. Once again, we wonder if the government will be shut down. The question this time is, if it happens who will have turned out the lights?

It seems like every summer, Congress and the White House begin posturing and flexing their muscle, staring down one another in an attempt to intimidate the other into fiscal submission. This year, House Republicans seem especially eager to engage in the yearly schoolyard fight over the budget and debt ceiling. Meanwhile, President Obama and the White House seem eager to avoid a Washington brawl, yet are ready to strike back if the House throws the first punch.

As many readers will know, the debt ceiling debate is a misnomer. Having nothing to do with the amount of debt that Congress can accrue in the future, the ceiling simply gives the Treasury Department the ability to pay the debts already incurred. Yet prominent Republicans, including potential 2016 presidential candidates Sen. Marco Rubio (R – Fl.) Sen. Ted Cruz (R – Tx.), and Sen. Rand Paul (R – Ky.), want to link raising the debt ceiling to defunding Obamacare, a proposal that has drawn the ire of Democrats and even some Republicans. This perennial threat is frequently the strongest tool in the Republican fiscal tool-belt, providing them with the most leverage of any common threat to lower taxes and decrease government expenditure.

A full-fledged government shutdown is a less common and much more extreme threat. The damage that a shutdown would do to the economy would be drastic.  By failing to come to an agreement on a new budget or even a Continuing Resolution, the federal government would be forced to shut down on October 1st, something that has not happened since the Clinton-Gingrich standoff in 1995.

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Republicans seem to feel that because they control a majority in Congress, they can hold President Obama, the White House, and the Senate hostage in all fiscal matters. While this is partially true (Congress constitutionally has the power of the purse), the strategy is dangerous.

Much to the displeasure of GOP leadership and Republican strategists, most Republican Representatives are not following their lead and are willing to push hardline fiscal policies in an attempt to prevent primary challenges in their home districts from the right. These Representatives are using the debt ceiling and the government budget to prove their disdain for Obamacare and boost their fiscal conservative credentials. As was discussed in a July 20th post, this strategy joins those of many recent House Republican policies that may be good for individual Representatives but bad for the Grand Old Party and for the entire country.

House Republicans must realize that the risks aren’t worth the rewards. A government shutdown and fight over the debt ceiling would add uncertainty to both the economy and to the election year. As it stands now, very few Republican seats in the House are at risk from democratic challengers and the chances that the GOP loses the House are zero. Maintaining that majority must be of the utmost priority for the GOP. However, letting the country default on debt or letting the Government fully or even partially shut down, would add a variable to the upcoming mid-term elections that could lead to disaster for Republicans. The only way Republicans will lose the House,” said Rep. Tom Cole (R – Ok.), former National Republican Congressional Committee chairman, “is to shut down the government or default on the debt.”

Democrats and the Obama Administration would surely be able to use such political battle against the Republicans in the public, showing that their obstructionism and failure to come to a workable agreement on the budget is hurting the economy and country. The President will not allow Congress to use the Affordable Care Act, the hallmark of his presidency, as a trading chip for a budget or ceiling agreement. It will be too easy for Democrats to say that Republicans shut down the government because they wanted to take health care coverage away from millions of Americans.

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In the end, a shut-down is bad politics for everyone. The economy would suffer. Republicans would risk their large majority in the House. Democrats would benefit the most from a shutdown, but it would be at the expense of devoting time and energy to pressing debates over immigration, the farm bill and Obamacare’s implementation.

Worst of all, it would give the public even more reason to distrust their leaders. In a perfect world where cooler heads prevail, this discussion wouldn’t be an issue. Of course the debt limit would be raised, we must pay our bills or risk defaulting. Of course a budget or continuing resolution will be reached, the government must serve the country. But alas, this world is not perfect. Cooler heads don’t prevail. The lights could be turned off and the public and economy could be left to suffer. Republicans should be more afraid of the dark then they are letting on.