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

What will spending cuts do to the faltering economy in the run-up to November 2012? Will the Dems come out well in that regard? We'll see.

 

in before the 30 page thread

 

July 31, 2011

The President Surrenders

By PAUL KRUGMAN


A deal to raise the federal debt ceiling is in the works. If it goes through, many commentators will declare that disaster was avoided. But they will be wrong.

For the deal itself, given the available information, is a disaster, and not just for President Obama and his party. It will damage an already depressed economy; it will probably make America’s long-run deficit problem worse, not better; and most important, by demonstrating that raw extortion works and carries no political cost, it will take America a long way down the road to banana-republic status.

Start with the economics. We currently have a deeply depressed economy. We will almost certainly continue to have a depressed economy all through next year. And we will probably have a depressed economy through 2013 as well, if not beyond.

The worst thing you can do in these circumstances is slash government spending, since that will depress the economy even further. Pay no attention to those who invoke the confidence fairy, claiming that tough action on the budget will reassure businesses and consumers, leading them to spend more. It doesn’t work that way, a fact confirmed by many studies of the historical record.

Indeed, slashing spending while the economy is depressed won’t even help the budget situation much, and might well make it worse. On one side, interest rates on federal borrowing are currently very low, so spending cuts now will do little to reduce future interest costs. On the other side, making the economy weaker now will also hurt its long-run prospects, which will in turn reduce future revenue. So those demanding spending cuts now are like medieval doctors who treated the sick by bleeding them, and thereby made them even sicker.

And then there are the reported terms of the deal, which amount to an abject surrender on the part of the president. First, there will be big spending cuts, with no increase in revenue. Then a panel will make recommendations for further deficit reduction — and if these recommendations aren’t accepted, there will be more spending cuts.

Republicans will supposedly have an incentive to make concessions the next time around, because defense spending will be among the areas cut. But the G.O.P. has just demonstrated its willingness to risk financial collapse unless it gets everything its most extreme members want. Why expect it to be more reasonable in the next round?

In fact, Republicans will surely be emboldened by the way Mr. Obama keeps folding in the face of their threats. He surrendered last December, extending all the Bush tax cuts; he surrendered in the spring when they threatened to shut down the government; and he has now surrendered on a grand scale to raw extortion over the debt ceiling. Maybe it’s just me, but I see a pattern here.

Did the president have any alternative this time around? Yes.

First of all, he could and should have demanded an increase in the debt ceiling back in December. When asked why he didn’t, he replied that he was sure that Republicans would act responsibly. Great call.

And even now, the Obama administration could have resorted to legal maneuvering to sidestep the debt ceiling, using any of several options. In ordinary circumstances, this might have been an extreme step. But faced with the reality of what is happening, namely raw extortion on the part of a party that, after all, only controls one house of Congress, it would have been totally justifiable.

At the very least, Mr. Obama could have used the possibility of a legal end run to strengthen his bargaining position. Instead, however, he ruled all such options out from the beginning.

But wouldn’t taking a tough stance have worried markets? Probably not. In fact, if I were an investor I would be reassured, not dismayed, by a demonstration that the president is willing and able to stand up to blackmail on the part of right-wing extremists. Instead, he has chosen to demonstrate the opposite.

Make no mistake about it, what we’re witnessing here is a catastrophe on multiple levels.

It is, of course, a political catastrophe for Democrats, who just a few weeks ago seemed to have Republicans on the run over their plan to dismantle Medicare; now Mr. Obama has thrown all that away. And the damage isn’t over: there will be more choke points where Republicans can threaten to create a crisis unless the president surrenders, and they can now act with the confident expectation that he will.

In the long run, however, Democrats won’t be the only losers. What Republicans have just gotten away with calls our whole system of government into question. After all, how can American democracy work if whichever party is most prepared to be ruthless, to threaten the nation’s economic security, gets to dictate policy? And the answer is, maybe it can’t.

http://www.nytimes.com/2011/08/01/opinion/the-president-surrenders-on-debt-ceiling.html?_r=1

 

Same old obama. You have to increase taxes on the rich.

 

It would be nice if a Democrat were in the White House.

 

Obama's a ****ing p***y and I'm really getting sick of this ****. Despite the weak GOP crop, he'll have a tough time getting re-elected because a lot of Democrats will refuse to vote for him again. They won't vote for the Republican candidate either, they just won't vote.

 

Who cares, Miley Cyrus got a hand tattoo in support of gay marriage! Lets put all our focus toward well-being benefits for a fringe group of people and sell everyone ELSE to hell!

The administrative party in power residing over the previous economic meltdown is now pushing its austerity measures on the following admistration, and the following administration is taking their word for it...

Could be worse, but President Ed Wade isnt getting max value in his negotiations.

 

If Liberals/Dems are too stupid to see the big picture and stay away from the polls, then I hope they're ready to live with the consequences of Tea-Party-controlled executive and legislative branches of government for the next 4 years. And with a Tea Party President in charge of appointing our judges (with no opposition in the legislature), I hope these same Liberals/Dems are prepared to live with 20-30 years of a radically conservative judicial branch.

 

What did Obama do wrong with this announcement?

 

A Democrat IS in the White House and that's the problem, because no one gets the nomination from either party unless they promise to serve the interest of wall street over the interest of the public.

 

This.

This.

And this.

And also this. Where are the massive cuts to DoD?

 

I love how some of these party rats still cling a hold of their sinking ship, continuously blaming the other party for the problems in this country.

Personally, I think this went quite well. The most effective congress is one that gridlocks itself. In the ends, the bills will get paid. If the credit rating drops, its due to the work of both parties through the years, not one party in the last 10 years.

Rats, keep clinging to your ships. Individuals like yourself are the reason why we keep electing the same ideological people to our government year in and year out, again, regardless of party.

 

Jennifer Rubin, writing in the post, on the taxes prt of the deal:

UPDATE II: If you are confused on the taxes, you are not alone. A GOP aide authorized to speak on background explains: “CBO’s current law baseline assumes millions of middle class families will be hit by the AMT and also assumes large, across-the-board tax increases in 2013 (i.e., the expiration of all 01/03 tax rates). With current law as the baseline to measure deficit reduction, efforts by this Joint Committee to increase revenue would not officially ‘reduce the deficit’ unless the proposed tax increases are in excess of $3.5 trillion — in other words: tax hikes aren’t going to be a part of this deal. Tax hikes on top of tax hikes are a non-starter for the American people. This exercise underscores the painful folly on trying to chase ever-higher spending in Washington with ever-higher tax hikes on job creators and American families.”

 

I'm tired of this "job creators" nonsense. We've had these tax cuts for 10 years and haven't seen squat except for the so called "job creators" getting richer. This trickle down BS didn't work in the 80s, it's not working now, and it will never work.

 

I can't believe our government and elected 'representatives.' How can we not single out the department of defense? How can we not close these ridiculous tax loop holes enjoyed by so few? How can we not increase taxes on those making 500k+?

Our representatives did nothing that would place any type of additional financial burden on themselves. Meanwhile, they'll continue getting 'theirs' while hiring Goldman to funnel the cash off shore and hide it when our economy finally goes belly up. The corporate plutocracy is laughing their asses off right now.

 

For those of you who really hate this "deal," you have hope yet. A lot of teaparty folks are going to try to kill this today and tomorrow. Should be entertaining (for those who hate our country anyway.) Not so entertaining for me.

 

I, for one, am looking forward to the oncoming civil war.

 

Out of curiosity, for those upset with the deal, what specifically did Dems give up that you're not happy with?