President Obama announces that an eleventh-hour debt deal has been reached

[Major]

Originally Posted by FV Santiago What's happening in Europe is obviously a sneak preview of what's in store for our country if we do not balance our budget. Spending other people's money works only as long as your lenders are willing to give you money. Greece found out the hard way what happens when Germany and France get sick of funding Greece's excesses.

Beyond what SF posted, the other problem with your theory is Europe's problems are caused not by overspending, but by the fact that Greece can't control its own currency. Germany and France have huge budget problems too - but through their power, they have the ability to get Europe to print money, so no one is worried about them, just as no one is worried about the US (as demonstrated by interest rates).

Originally Posted by FV Santiago What has sunk Europe? Liberal policies.

Spoken like someone who loves catchy phrases but actually knows nothing about Europe.

[Major]

Originally Posted by Major Beyond what SF posted, the other problem with your theory is Europe's problems are caused not by overspending

To be clear, overspending is not good and they were the instigator of Greece's downfall. But had Greece been able to control their own currency, they would never have gotten to this position. The currency would have fallen in value over time and they would have had a much more gradual and controlled slowdown that would not have been nearly as destructive. To compare the US to Greece is ridiculous. Especially seeing as how a country like Japan has a substantially bigger debt than we (or Greece) do.

[FranchiseBlade]

Originally Posted by FV Santiago What's happening in Europe is obviously a sneak preview of what's in store for our country if we do not balance our budget. Spending other people's money works only as long as your lenders are willing to give you money. Greece found out the hard way what happens when Germany and France get sick of funding Greece's excesses. You would think that the White House would observe what is happening in Europe and connect the dots -- unfortunately they have not. Politics and cowardice continues to win out over sound judgment and doing the right thing from a fiscal responsibility standpoint. What has sunk Europe? Liberal policies. Union labor + the folly of alternative energy + huge budget deficits + huge entitlement programs... all liberal priorities. Austerity is what is needed to bring things back to fiscal sanity (obviously you can't repay your debts when you continue to incur debt). When Tsipras and Hollande (two ultra liberals) were elected and rejected austerity is when the collapse accelerated and runs on the banks began. Even liberals should be able to recognize this pattern, although hilariously, some in this thread have gotten it backwards. The United States economy under Obama is charting the same course as the Costa Concordia. Obama's record deficits have put our economy in a vulnerable position. We are now incapable of having interest rates rise, because our interest payments would crowd out investment and cripple our budget. Europe's weakness has artificially strengthened the dollar in the short term and delayed the Administration's goal of debasing the dollar. Obama would rather inflate our way out of debt than take on the problem head on and actually balance the budget. He has proven incapable of even passing a budget -- he can't build consensus -- he only campaigns and politicks. He is assaulting the way of life for seniors and the lower class with these policies, driving up the cost of gasoline and food while punishing savers with no interest rates. We are handing over control over our economy to our creditors - a true national security threat. Obama has continuously dodged his chance to lead on economic issues, as he continues to prioritize partisan goals over fiscal responsibility. Despite $5+ trillion of deficit spending, a $3 trillion dollar assist from the Federal Reserve in the form of stimulus, and years of 0% interest rates, the economy is still horrible. That tells you just how much of a disaster Obama's policies have been for our economy. Our nation must do what's right and replace this Administration before the damage becomes irreparable. Obama's #1 goal during the debt ceiling talks last year was not to restore fiscal order, but rather to defer the problem until after the election. Hilariously, the government's estimates on deficit spending were understated, and it now appears as though we could breach the debt ceiling in October. This would be Obama's worst nightmare just days before the elections. It would serve him right.

Please pay attention to what Major, and Sam Fisher are saying here. It is a real opportunity for you to clear up your misconceptions about the economy and what's happening.

[FV Santiago]

Let me state this very clearly – Greece’s problems were brought about by budget deficits. When their borrowing costs went up, it was game over. They will likely leave the Euro so that they can devalue their currency, and the banking sector in Europe will be in an even deeper crisis. You don't even want to know what happens if Spain gets to a similar spot. Their 10 year bonds are currently yielding over 6% which is already in the danger zone.

Greece's budget deficits were brought about primarily by out-of-control entitlement spending, a union labor force that is not cost/productivity competitive globally, and a lack of political will to balance the budget. Sounds like the Democratic Party platform, huh? These problems plague the United States today (of course we are the global reserve currency, so we have more flexibility – for now at least…until our creditors decide otherwise… read Currency Wars?). Our current administration is dodging the problem. They are acting like cowardly politicians instead of responsible leaders. If this administration does not have the political courage to pass a budget, how can we trust them with the economy? We can’t, and the record deficits speak for themselves. It’s reckless disregard for the future health of our great nation. Obama took his eye of the ball and focused on pent-up liberal social priorities instead of the economy. And now he pays.

It’s not the job of politicians to create jobs – their job is to create a climate that will encourage job growth. High labor costs, high energy costs, regulations that have proven themselves to be failure (cough, Dodd-Frank/JPM), continued threats of higher taxes – all of these policies discourage job growth. Despite the most accommodating monetary policy IN HISTORY for the last three years by the Federal Reserve (0% interest rates and QE1, QE2 and Twist), the economy still is very bad. That is proof that this administration has created a hostile environment for businesses. Business executives are beyond fed up with Obama – they may not voice their concerns publicly, but in private it’s pure hatred for The Amateur (props to you Ed Klein). Pure hatred.

I’ll repeat what I said recently -- Obama's #1 goal during the debt ceiling talks last year was not to restore fiscal order, but rather to defer the problem until after the election. You had Axelrod on MTP leading with this point. Plouffe was doing the same. Now it appears that the government's estimates on deficit spending were understated, and we could breach the debt ceiling in October. (October) Surprise!

[Sweet Lou 4 2]

Originally Posted by FV Santiago Let me state this very clearly – Greece’s problems were brought about by budget deficits. When their borrowing costs went up, it was game over. They will likely leave the Euro so that they can devalue their currency, and the banking sector in Europe will be in an even deeper crisis. You don't even want to know what happens if Spain gets to a similar spot. Their 10 year bonds are currently yielding over 6% which is already in the danger zone. Greece's budget deficits were brought about primarily by out-of-control entitlement spending, a union labor force that is not cost/productivity competitive globally, and a lack of political will to balance the budget. Sounds like the Democratic Party platform, huh? These problems plague the United States today (of course we are the global reserve currency, so we have more flexibility – for now at least…until our creditors decide otherwise… read Currency Wars?). Our current administration is dodging the problem. They are acting like cowardly politicians instead of responsible leaders. If this administration does not have the political courage to pass a budget, how can we trust them with the economy? We can’t, and the record deficits speak for themselves. It’s reckless disregard for the future health of our great nation. Obama took his eye of the ball and focused on pent-up liberal social priorities instead of the economy. And now he pays. It’s not the job of politicians to create jobs – their job is to create a climate that will encourage job growth. High labor costs, high energy costs, regulations that have proven themselves to be failure (cough, Dodd-Frank/JPM), continued threats of higher taxes – all of these policies discourage job growth. Despite the most accommodating monetary policy IN HISTORY for the last three years by the Federal Reserve (0% interest rates and QE1, QE2 and Twist), the economy still is very bad. That is proof that this administration has created a hostile environment for businesses. Business executives are beyond fed up with Obama – they may not voice their concerns publicly, but in private it’s pure hatred for The Amateur (props to you Ed Klein). Pure hatred. I’ll repeat what I said recently -- Obama's #1 goal during the debt ceiling talks last year was not to restore fiscal order, but rather to defer the problem until after the election. You had Axelrod on MTP leading with this point. Plouffe was doing the same. Now it appears that the government's estimates on deficit spending were understated, and we could breach the debt ceiling in October. (October) Surprise!

And yet our economic collapse was not the result of entitlement nor discretionary spending...but tax cuts, financial deregulation, and an unnecessary war which cost a lot and drove up energy prices.

You are spewing conservative talking points that are at best nonsensical. I suggest you take an Econ 102 class (basic macroeconomics) before you post again. Ignorance is really painful to have to read...you wasted a good 30 secs of my life. Thanks for nothing.

[FV Santiago]

Barney Frank and Alan Greenspan are the two actors most responsible for the financial collapse of 2008. Democrats used the crisis, in a typically dishonest fashion, to blame it on "8 years of Bush" but the fact of the matter is that Barney's defense of Fannie and Freddie, and bad regulation -- the democrats' expansion of subprime lending and their imposition of social policy onto banks' lending practices laid the foundation for credit failures. There is no disputing this. Greenspan's inflationary monetary policy led to the real assets bubble that popped in 2008 (about a year after the credit markets flopped, just took equities longer -- we're seeing this play out again now btw). Remember, American voters are stupid, particularly Obama voters, when it comes to the economy and its drivers. The Democratic spinmeisters prey on this ignorance and win the uninformed votes of the lower classes and non-business 'elites' by misdirecting blame. Barney's recklessness and incompetence were rewarded in '09 by naming him chair of the Financial Services Committee -- where he passed the job killing, entrepreneurship killing, liquidity destroying Dodd-Frank bill.

Remember that Obama extended the "Bush" tax cuts (which stimulated the economy and brought us back after 9-11) and Obama took credit for reforming Wall Street. Despite these actions, our economy is stuck in the mud and Wall Street is as wild and reckless as ever. Bad regulation, like the failed Dodd-Frank, is not the answer. Obama had an amazing chance to take on our nation's extraordinary financial problems. Instead of doing what was responsible, he took his eye off the ball and pursued partisan social policies and meaningless gimmicks (Buffett rule).

[Northside Storm]

Originally Posted by FV Santiago Barney Frank and Alan Greenspan are the two actors most responsible for the financial collapse of 2008.

Oh, dear lord.

Well, it's useful that I posted this before.

I just want to discredit that whole notion that the Community Reinvestment Act and GSEs like Fannie Mae and Freddie Mac were somehow significantly responsible for 2008. It seems to be a popular conservative talking point. First of all, CRA was really principally targeted at race-based redlining, which had to be one of the most f**ked up scenarios this side of the Civil Rights Act. Quote: Redlining is the practice of denying, or increasing the cost of services such as banking, in certain, often racially determined areas. During the heyday of redlining, the areas most frequently discriminated against were black inner city neighborhoods. For example, in Atlanta, through at least the 1980s, this practice meant that banks would often lend to lower-income whites but not to middle- or upper-income blacks. Second of all, CRA-mandated loans were such a small part of the subprime mortgage pool. Most subprime mortgages were driven by pure profit by unregulated shadow banks. CRA has been shown to have no empirical relationship with 2008--- Quote: Some economists, politicians and other commentators have charged that the CRA contributed in part to the 2008 financial crisis by encouraging banks to make unsafe loans. However, every empirical study that has looked at CRA loans has concluded that they were safer than subprime mortgages that were purely profit driven, and CRA loans accounted for a tiny fraction of total subprime mortgages. Quote: The Federal Reserve, having examined the evidence, holds that empirical research has not validated any relationship between the CRA and the 2008 financial crisis. At the FDIC, Chair Sheila Bair delivered remarks noting that the majority of subprime loans originated from lenders not regulated by the CRA, calling it a "scapegoat" and declaring it "NOT guilty." Quote: Nobel laureate Paul Krugman noted in November 2009 that 55% of commercial real estate loans were currently underwater, despite being completely unaffected by the CRA. According to Federal Reserve Governor Randall Kroszner, the claim that "the law pushed banking institutions to undertake high-risk mortgage lending" was contrary to their experience, and that no empirical evidence had been presented to support the claim. In a Bank for International Settlements (BIS) working paper, economist Luci Ellis concluded that "there is no evidence that the Community Reinvestment Act was responsible for encouraging the subprime lending boom and subsequent housing bust", relying partly on evidence that the housing bust has been a largely exurban event. Third of all, even if banks had been "forced to lend to poorer lenders" (Which the evidence clearly shows they weren't, with market-driven demand that was purely unassociated with CRA regulations being the driving force behind most subprime loans (Issuances of private-label mortgage-backed securities increased dramatically from 2001 to 2007), and the peak periods of explosive subprime growth being more correlated with Greenspan violating the Taylor rule in unspeakable ways, and cheap credit, than any change in CRA regulations), nothing excuses the fact that the banking system was filled with moral hazard and fraud as these crappy products were passed along. Nothing excuses the fact that banks were so deregulated in their handling of financial products and counter-party risk, that they almost sank the system on stupid bets. Nothing excuses the insane leverage ratios that allowed subprime to take such a dent out of the shadow banks in the first place. Finally, as to the role of GSEs in 2008--- Quote: "Unfortunately, Fannie Mae-quality, safe loans in the subprime market did not become the standard, and the lending market moved away from us. Borrowers were offered a range of loans that layered teaser rates, interest-only, negative amortization and payment options and low-documentation requirements on top of floating-rate loans. In early 2005 we began sounding our concerns about this "layered-risk" lending. For example, Tom Lund, the head of our single-family mortgage business, publicly stated, "One of the things we don't feel good about right now as we look into this marketplace is more homebuyers being put into programs that have more risk. Those products are for more sophisticated buyers. Does it make sense for borrowers to take on risk they may not be aware of? Are we setting them up for failure? As a result, we gave up significant market share to our competitors." Quote: Following their mission to meet federal Housing and Urban Development (HUD) housing goals, GSEs such as Fannie Mae, Freddie Mac and the Federal Home Loan Banks (FHLBanks) have striven to improve home ownership of low and middle income families, underserved areas, and generally through special affordable methods such as "the ability to obtain a 30-year fixed-rate mortgage with a low down payment... and the continuous availability of mortgage credit under a wide range of economic conditions." (HUD 2002 Annual Housing Activities Report) Then in 2003-2004, the subprime mortgage crisis began. The market shifted away from regulated GSEs and radically toward Mortgage Backed Securities (MBS) issued by unregulated private-label securitization conduits, typically operated by investment banks. As mortgage originators began to distribute more and more of their loans through private label MBS, GSEs lost the ability to monitor and control mortgage originators. Competition between the GSEs and private securitizers for loans further undermined GSEs power and strengthened mortgage originators. This contributed to a decline in underwriting standards and was a major cause of the financial crisis. I realize it is an incredibly popular position (especially among conservatives) to demonize and scapegoat the poor for every failure that occurs, but if you're still doing it for 2008, then it occurs to me that perhaps the fantasy world is yours---where the poor, unconstrained by asymmetric information, somehow once again caused the failure of America by causing unregulated shadow banks to take on more risk than they ever could. You seem to posit, as many of your thinking do, that by merely existing, the poor are incentives to madness, counter-party risk, 30:1 leverage ratios, and shoddy loans. I guess that fits well into your narrative of the poor as parasites, but you should be keenly aware that empirically speaking, that thread of thought is at best a misrepresentation of the facts, at worst a delusion that will make worse the problems revealed by 2008, rather than cure them.

[pgabriel]

Originally Posted by Major To be clear, overspending is not good and they were the instigator of Greece's downfall. But had Greece been able to control their own currency, they would never have gotten to this position. The currency would have fallen in value over time and they would have had a much more gradual and controlled slowdown that would not have been nearly as destructive. To compare the US to Greece is ridiculous. Especially seeing as how a country like Japan has a substantially bigger debt than we (or Greece) do.

but they would have been in a position of 25% unemployment because half the country works for the government. it has nothing to do with currency and all to do with simple economics. when your country doesn't produce anything you can't have modern social nets. eventually you have to produce something of value.


germans make machines. we make machines and refine oil. china makes computer chips. what does greece prodcue. its a simple concept. you incur debt, you produce, you pay off debt. at least their citizens are educated but they have to move out of the country.

[cml750]

Originally Posted by FV Santiago Barney Frank and Alan Greenspan are the two actors most responsible for the financial collapse of 2008. Democrats used the crisis, in a typically dishonest fashion, to blame it on "8 years of Bush" but the fact of the matter is that Barney's defense of Fannie and Freddie, and bad regulation -- the democrats' expansion of subprime lending and their imposition of social policy onto banks' lending practices laid the foundation for credit failures. There is no disputing this. Greenspan's inflationary monetary policy led to the real assets bubble that popped in 2008 (about a year after the credit markets flopped, just took equities longer -- we're seeing this play out again now btw). Remember, American voters are stupid, particularly Obama voters, when it comes to the economy and its drivers. The Democratic spinmeisters prey on this ignorance and win the uninformed votes of the lower classes and non-business 'elites' by misdirecting blame. Barney's recklessness and incompetence were rewarded in '09 by naming him chair of the Financial Services Committee -- where he passed the job killing, entrepreneurship killing, liquidity destroying Dodd-Frank bill. Remember that Obama extended the "Bush" tax cuts (which stimulated the economy and brought us back after 9-11) and Obama took credit for reforming Wall Street. Despite these actions, our economy is stuck in the mud and Wall Street is as wild and reckless as ever. Bad regulation, like the failed Dodd-Frank, is not the answer. Obama had an amazing chance to take on our nation's extraordinary financial problems. Instead of doing what was responsible, he took his eye off the ball and pursued partisan social policies and meaningless gimmicks (Buffett rule).

FV Santiago common sense is lost on these people. Heck any kind of sense is lost on these people. Just look at some of the responses like (paraphrasing) "Greece is in trouble because they can't print money like us". They actually see no problem at all with going deeper and deeper in debt. They actually believe if we could just tax the rich more everything would be alright. It is truly amazing how ridiculous their thinking is. When not "if" this nation comes crashing down because of crazy spending and debt, the dependency class that the Democratic party created to buy votes, the ones that depends on government for everything, are the ones who will be hurt the most.

[Northside Storm]

Originally Posted by cml750 FV Santiago common sense is lost on these people. Heck any kind of sense is lost on these people. Just look at some of the responses like (paraphrasing) "Greece is in trouble because they can't print money like us". They actually see no problem at all with going deeper and deeper in debt. They actually believe if we could just tax the rich more everything would be alright. It is truly amazing how ridiculous their thinking is. When not "if" this nation comes crashing down because of crazy spending and debt, the dependency class that the Democratic party created to buy votes, the ones that depends on government for everything, are the ones who will be hurt the most.

There normally would be more of a focus on reining in debt. It is not the government's fault however that private markets failed so spectacularily, to the point where reining in the debt will actually make it larger if not done right (i.e the Republican cut and burn strategy that is an ostrich in the sand when it comes to simple economic concepts like peak oil, speculative euphoria, imperfect markets, sticky wages, etc.)

[cml750]

Originally Posted by Northside Storm There normally would be more of a focus on reining in debt. It is not the government's fault however that private markets failed so spectacularily, to the point where reining in the debt will actually make it larger if not done right (i.e the Republican cut and burn strategy that is an ostrich in the sand when it comes to simple economic concepts like peak oil, speculative euphoria, imperfect markets, sticky wages, etc.)

When "private" markets fail then they fail. The government should not "bail" them out. The government should also not push private banks to give out subprime loans which when they failed was the major catalyst for the mess we are in. This mountain of debt will cripple this country. At the rate we are going the interest on the debt will eventually end up surpassing GDP. I guess we can just print more money to cover the interest. Eventually this will become another Weimar Republic.

[Kyrodis]

Originally Posted by FV Santiago Let me state this very clearly – Greece’s problems were brought about by budget deficits. When their borrowing costs went up, it was game over.

Let me ask you this question then. How much risk is there in our "borrowing" costs going up when 100% of our debt is denominated in a currency we control, the interest rate is 100% under our control, and the primary dealers by law have to make an offer on 100% of the Treasuries auctioned?

Originally Posted by FV Santiago These problems plague the United States today (of course we are the global reserve currency, so we have more flexibility – for now at least…until our creditors decide otherwise… read Currency Wars?).

The USD's status as the global reserve currency helps us maintain a trade deficit, not a budget deficit. Even if we ignored the fact that primary dealers must make an offer on every single bond auctioned, what in the world makes you think the loss of reserve currency status would stop people from buying bonds?

Contrary to popular opinion, even if the USD lost reserve currency status, folks around the world wouldn't just suddenly reject the USD outright. We might produce less because fewer people would be willing to accept USDs as payment for raw materials, goods, and services...but don't you think this country will still continue to produce anyway? And the kicker: what does any of this have to do with government debt?

[Northside Storm]

Originally Posted by cml750 When "private" markets fail then they fail. The government should not "bail" them out. The government should also not push private banks to give out subprime loans which when they failed was the major catalyst for the mess we are in. This mountain of debt will cripple this country. At the rate we are going the interest on the debt will eventually end up surpassing GDP. I guess we can just print more money to cover the interest. Eventually this will become another Weimar Republic.

when private markets fail like they did, there was a good chance a lot of well-functioning industries would fail through no fault of their own. You cut off credit to the real economy and everything fails.

It becomes not even just a question of economic efficiency given ill-coordinated outcomes, but also a moral one. Should companies have to close just because the banks f**ked up?

A lot of the debt in the United States is private btw. If you count private debt, America's debt-to-GDP is something like 460%. That's the problem; we have massive deleveraging of private debt that if the government feeds into as well, will lead to a massive sell-off, dampened growth, and then a terrible low optimum. If anything, inflation is a terribly good thing considering how much of the nation is in debt. You can argue that the American government encouraged this through rampant propagation of the "American Dream", or improper regulation of credit cards/personal debt etc., but that's not really something the government in of itself can stop directly. I mean, American consumers can't even be stopped by monthly interest rates of 10%+, I just don't think many people understand finance...at all tbh. That's what always gets me with the Austrians and their pseudo-psychological "human imperatives"...somehow along the way, they miss the knowledge that people don't respond to interest rate incentives because some are straight up ignorant.

Anyways, for my response to your point of "governments pushing subprime mortgages", read my CRA post above. That is blatantly false. Sub-prime pushed itself thanks to massive private demand due to a global search for yield.

[Dubious]

Originally Posted by cml750 When "private" markets fail then they fail.

Private Enterprise and The Public Welfare are not universes unto themselves; they are intertwined. If/when private enterprises fail they effect society as a whole, i.e. loss of taxes collected, increased public assistance to unemployed workers, blows to market confidence, influence on loan risks etc. When the conservative side says let private enterprise fail, they underestimate the systemic effect and discount the personal tragedy. For workers many times these things are way beyond their control. The greed and risks taken at the board level may produce a smaller golden parachute for the perpetrators but can mean hunger, loss of homes and loss of pensions for the workers who fall to the public dole and effect all of us; privatizing profit and socializing loss.

[SamFisher]

Originally Posted by FV Santiago High labor costs, high energy costs, regulations that have proven themselves to be failure (cough, Dodd-Frank/JPM),

Bad regulation, like the failed Dodd-Frank, is not the answer.

You showcase your own ignorance when you blame a law for prop trading losses, when those restrictions haven't even been implemented yet, due to GOP water carrying and delaying tactics, for problems that you clearly don't understand.

Ergo, your theory - like many a right wing theory these days - requires a wormhole or other such device that would bend space-time for it to be true.

Do you posess such a device? May I borrow it in order to go back in time to your formative years and hide all the stupid sticks that those in loco parentis must have beaten you with repeatedly.

[rocketsjudoka]

One thing I noticed in FV Santiago's analysis was that he failed to mention that Greece failed to adequately collect taxes which is a big part of the reason they are in such a big hole.

[rocketsjudoka]

Originally Posted by cml750 When "private" markets fail then they fail. The government should not "bail" them out. The government should also not push private banks to give out subprime loans which when they failed was the major catalyst for the mess we are in. This mountain of debt will cripple this country. At the rate we are going the interest on the debt will eventually end up surpassing GDP. I guess we can just print more money to cover the interest. Eventually this will become another Weimar Republic.

I've heard this meme from conservatives for years of blaming the subprime loan situation on Democrats in liberals when this situation came about from deregulation something that is a sacred cow to conservatives.

So basically the conservatives are trying to club their political opponents over deregulation while they continue to offer it as a panacea for all of our problems.

[GladiatoRowdy]

Originally Posted by cml750 When "private" markets fail then they fail. The government should not "bail" them out. The government should also not push private banks to give out subprime loans which when they failed was the major catalyst for the mess we are in. This mountain of debt will cripple this country. At the rate we are going the interest on the debt will eventually end up surpassing GDP. I guess we can just print more money to cover the interest. Eventually this will become another Weimar Republic.

FWIW, the "major catalyst" was not the subprime loans themselves, it was the bundling of subprime loans into the turd sandwiches which were rated AAA and then sold across the globe.

Wall Street caused the crisis, subprime loans were but a contributing factor.

[Sweet Lou 4 2]

Originally Posted by rocketsjudoka I've heard this meme from conservatives for years of blaming the subprime loan situation on Democrats in liberals when this situation came about from deregulation something that is a sacred cow to conservatives. So basically the conservatives are trying to club their political opponents over deregulation while they continue to offer it as a panacea for all of our problems.

Why is this reality lost on these folks? That's what is so incredible. How do they come to believe what they do. That has always fascinated me.

[Major]

Originally Posted by rhadamanthus gee what a surprise. I'm interested in Major's take as he defended this inanity repeatedly saying "democrats have all the leverage".

Following up on this, here is the leverage I was referring to. As long as Obama holds, the GOP has no avenue out of this - if nothing is done, taxes go up on everyone and defense spending gets slashed.

http://www.huffingtonpost.com/2012/1...n_2124324.html


Obama Tells Progressives He Won't Budge On Bush Tax Cuts


WASHINGTON -- President Barack Obama will enter high-stakes budget negotiations firmly committed to seeing the tax rates for high-income earners rise to pre-George W. Bush levels, he assured a gathering of progressive and labor leaders on Tuesday.

"I am not going to budge," he told the group, according to an attendee who relayed material from the meeting on condition of anonymity. "I said in 2010 that I'm going to do this once, and I meant it."

The White House did not immediately return a request for comment, but two other sources who attended the meeting confirmed the quote. The administration seems to have staked out a firmer position than during the first stand-off over the Bush-era tax cuts, in November and December of 2010, leaving the impression that it won't sign off on a compromise that doesn't increase the tax burden on the wealthy as a means of paying down the deficit.

How the president plans to effect that outcome is still unclear. Top Democrats in the Senate have said they would be comfortable letting all the tax rates expire -- as they are scheduled to do -- at the end of the year, after which they will put together a tax cut bill that would re-establish the Bush-era rates for incomes below $250,000.

Several sources at the meeting said the president was, as one noted, "more nuanced than going off the cliff." Obama hopes to place "maximum pressure on House Republicans so at the end of the day he may be able to budge them," the source added.

"It seemed like he meant it," the first source said. "That suggests that they are ready to go over the ledge."

Following the meeting, a handful of attendees spoke briefly to the press, praising Obama for vowing to firmly oppose an extension of the tax cuts for the wealthy.

"It was a very, very positive meeting," said AFL-CIO President Richard Trumka. "We're very committed to making sure that the middle class and workers don't end up paying the tab for a party that we didn't get to go to, and the president is committed to that as well."

"The president was really standing firm on taxes," said Neera Tanden, president of the Center for American Progress. "Everyone in the room talked about how much they have the president's back in this fight."

The expiring Bush-era tax cuts are just one component of a larger budget deal that needs to be hammered out with congressional Republicans, the details of which remain unclear. White House Press Secretary Jay Carney ducked a question during Tuesday's press briefing as to whether Obama would be willing to put cuts to entitlement benefits on the table in negotiations with Republicans. Instead, Carney pointed to the $340 billion in savings from entitlement reform already in Obama's plan.

The first source said that the president "seemed to agree that Social Security" should not be part of any grand bargain because it "didn't add to the deficit."

Carney also left the door open to the idea of raising the threshold for extending the Bush-era tax cuts to $500,000 or $1 million. Obama drew the line at $250,000 in his proposal.

"He is not wedded to every detail of that plan," Carney said, when asked specifically if Obama would be willing to raise the limit.

In the process of putting together a far-reaching piece of legislation, the president will have the help of the progressive community's political arms. All of the meeting's attendees pledged to keep their election-season campaign apparatuses intact for purposes of drumming up support for the president's budget priorities.

Obama asked the attendees to focus their efforts on pressuring House Republicans to reach an agreement on the tax cuts, reminding them that the American people made clear in last week's elections that they want to see the wealthiest pay more in taxes, according to a source familiar with what was discussed at the meeting.

AFSCME president Lee Saunders, who attended the meeting, said his members are prepared to devote as much energy to pressuring Republicans to reach a balanced debt deal as they put into the campaign season.

"We're going to have our folks engaged, just like they were in the election," Saunders said. "They're going to be engaged in this campaign."