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Declaring the Grand Bargain Dead Is Premature

letsgetitdone's picture

Stories in The Washington Post and the New York Times have some in the blogosphere proclaiming that it's time to celebrate the death of the Grand Bargain, and others at least raising a question about its death. I'll go on record as saying that celebrating its death is definitely premature.

It is so because we've yet to go through the budget or continuing resolution-passing activities coming up in September, and also have yet to go through the debt ceiling conflict to come in October. Mainstream Washington commentators believe John Boehner is determined to avoid a government shutdown crisis of the budget/CR conflict and that one or the other will be passed before October 1. Assuming they're right, that still leaves the matter of the debt ceiling “crisis,” which the same commentators are saying will happen because Boehner has to promise his tea party caucus a chance to coerce the Administration, if he's going to get their acquiescence on the budget/government shutdown matter.

So, they think, we are looking at a debt ceiling crisis around October 15, when Jack Lew says the Government will run out of borrowing authority, and he will be reduced to juggling $50 Billion in available cash to both repay debt and pay for the other obligations of Government legislated by Congress. The position on the debt ceiling being taken by the Administration now is that it will not negotiate over it, and that it's demanding a clean bill raising the debt limit to pay for spending Congress has already approved.

Matthew Yglesias commented on this position on August 27, 2013:

Back in 2011, in an act of hubris and weakness, the administration decided that debt ceiling negotiations might be a good backdoor way to entrap both mainstream conservative Republicans and liberal Democrats into a "grand bargain" on long-term fiscal policy. We got no bargain, just a panic. It can't happen again. My favorite solution would be to exploit the platinum coin loophole and put this issue behind us forever. But a smarter political strategy is probably the one Lew outlined on TV. No negotiations. No tricks. Congress just needs to step up.

I'm glad using Platinum Coin Seigniorage (PCS) to avoid the debt ceiling is Yglesias's favorite solution, since it's mine too. But, first, I don't see why that, alone, would put the debt ceiling issue behind us forever unless the President were 1) willing to use it again when the debt ceiling is reached or 2) he then uses Josh Barro's terrible and unnecessary “negotiation with the Republicans” idea, to trade away the Treasury's PCS authority in return for repeal of the debt ceiling legislation. In addition, I'd like him to explain why he thinks a smarter political strategy is “No negotiations. No tricks.”

What's smart about a political strategy that risks default?

What's smart about a strategy that gives tea party Republicans a chance to creates hysteria in international markets?

What's smart about a strategy that creates a finger-pointing spectacle where Republicans blame the Administration and the Democrats for ideological intransigence and vice versa, when we don't need to have this spectacle to completely defang the tea party Republicans?

Sure, the Administration will probably win the shouting match in the short run and the Republicans will be forced to back off, hopefully in time to avert more than minimal damage to the economy. But this kind of brinksmanship by the smart money in the Administration is the same kind, fed by the same underlying attitude, that brought us the sequester, which is now slowing down the US economy.

From where I sit, it would be an awful lot smarter to wait for the Republicans to agree to a CR and then mint the $60 T coin the day after it's passed. That would make the debt limit a dead letter and also change the political climate in a way that would free up the Administration to push for jobs programs, Medicare for All, reconstructing the economy, doing something concrete about climate change, energy, education, and infrastructure and actually strengthen the safety net by enhancing and extending it. In that new political climate the Democrats could actually win the elections of 2014, and the President could thereby avoid impeachment, which is what he's going to get from the tea party if the Republicans take over the Senate.

While I don't think the President will follow that kind of strategy, it seems a lot smarter to me than a strategy of “No negotiations. No tricks.” How about you? If you like it better, then please read this Post and sign the Move-on petition linked from it.

(Cross-posted from New Economic Perspectives.)

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Alexa's picture
Submitted by Alexa on

My comment's at NC, and I'm one who also has little faith in "MoveOn,." for reasons that I stated over there.

But I didn't mean to "give you any heat," LOL!

I really do appreciate your writing.

One reason I don't get involved in "petition signing," is privacy and security.

We "do" call our Senators, Reps and the White House--for what good it does. ;-)

letsgetitdone's picture
Submitted by letsgetitdone on

Hi alexa, I was thinking more about the comments by Vox Populi and docg. Actually yours was quite good, as it almost always is.

jo6pac's picture
Submitted by jo6pac on

I agree great post and I have the great confidence in 0 doing the Right thing and that is pushing ahead with the not so grand bargain for Main Street but great for the 1%. The repugs and most demodogs well go along because that's what their puppet master want.

Yes, many so-called progressive sites have been saying it's doa but 0 hasn't been meeting with repugs because likes to have dinner with them. Then demodogs will say we didn't read the bill but we are sure we can fix it later.

letsgetitdone's picture
Submitted by letsgetitdone on

However, I think the GB will go back on the table as part of the debt ceiling negotiations in the two week pressure cooker after the budget or CR is passed. That's when Dems will be most vulnerable to caving. However, there's a chance that rightist repugs cannot be brought to agree on fig leaf tax increases. Then Obama will be faced with default or PCS. In that situation I think he'll try limited PCS and then later try to make people forget that he crossed a rubicon at that point.

letsgetitdone's picture
Submitted by letsgetitdone on

If we got the $60 T coin, then it would be hard to say we couldn't afford a JG at a living wage. At that point the JG determines what the miniwage would be, a bit higher than the JG wage.

jo6pac's picture
Submitted by jo6pac on

I thought I would ask here instead at FDL why is it that I don't trust my govt. leaders to do the right thing for Main Street. There has to be something in writing that says the money is for Main Street and not banksters or dod vendors. If there isn't some wording as such I'm afraid the 1% would end up with it. That the new normal in this nation at this time, just saying.

An amazing number.

letsgetitdone's picture
Submitted by letsgetitdone on

Jo, the money is for the public purse. I can't ensure it won't be used for the rich. But, as you've pointed out, our money is now used for the rich, and one of the important reasons given for why it can't be used for the 99% is that we're running out of fiat. So, if we take that reason off the table, then I think we're in a new game, which the plutocrats haven't won yet, and are better off for that.

Submitted by jawbone on

Or Obama may make it part of getting War On by giving McCain, Lindsey, other Repubs the cuts to SocSec he's been dying for them to accept,.

He'll now have the debt ceiling as back up.

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