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Off the Debt Limit Hook for at Least the Next Four Months

letsgetitdone's picture

Provided that the Senate and House follow through on the scenario now on the table, it looks like the game of chicken worked for the Democrats this time. We're off the hook on default and Government shutdown for now, and Washington village pundits are in full-throated cries of celebration.

Congress is off the hook too. They don't have to offer any solutions to real, rather than manufactured, problems.

The President is also off the hook, he won't, for now, need to exercise any of the options, like minting the coin, using consols, or premium bonds, or asset sales to the Fed, or others available to him to render the debt limit legislation impotent. So, he gets to preserve debt limit threats from the Republicans as a negotiating tool they can use to “force” him into entitlements cuts later on.

In fact, as I write Jay Carney is already talking about the President taking “a balanced approach” to future negotiations of fiscal policy so that the burdens of sacrifice will fall on everybody fairly. And, a bit later, there's Nancy Pelosi echoing the Administration line on future negotiations. That, of course is also the Pete Peterson, Bowles-Simpson, catfood line for justifying further victimization of food stamp recipients, seniors, children, and the people who have paid the price for the Crash of 2008 and the neoliberal period in American fiscal policy beginning in 1977.

However, the deal that looks like it will happen isn't a solution, but just kicking the can down the road including built-in pretty good possibilities for future Government shutdown and debt ceiling crises in just three – four months, if Congresspeople have the guts to subject the American people to this nonsense again in an election year. Here's Annie Rose-Strasser's outline and analysis of the deal at Think Progress:

-- Government funded through January 15 at sequestration levels

-- Debt limit extended until February 7, subject to vote of Congressional disapproval, which Obama can veto

-- A budget conference established to come up with long-term spending plans by December 13

-- Income verification for recipients of subsidies under Obamacare’s newly-established exchanges

-- Backpay for furloughed workers

Also, notably, here are some of the demands that Republicans have made in the last few days, but that are NOT in the bill:

No repeal of the “extraordinary measures” provision that allows the Treasury to do accounting tricks to avoid default

No ‘Vitter Amendment‘ that would have taken away employer contributions from the health plans of Congressional staff

No provisions related to birth control access

No flexibility in how government agencies make budget cuts to their programs, as they are required to under sequestration

No repeal or delay of the medical device tax

No repeal or delay of the reinsurance tax

No repeal, replacement, or delay of any aspects of Obamacare’s exchanges or individual mandate

It might look like this is overall a good deal for Democrats given the number of things that Republicans aren’t getting. It is good: It reopens the government and lifts the debt ceiling without doing any major additional damage to existing programs.

The word “additional” is the key here, since enormous damage has already been done to people and programs due to the various compromises made to avoid shutdown and debt ceiling threats since August 2011. These deals have placed increasing fiscal drags on the American economy and, increasing Government austerity that is preventing full recovery from the Great Recession. The current “deal” already involved a pre-surrender by Democrats to Republican proposed CR spending levels. Annie Rose – Strasser recognizes this.

But it’s important to remember that the baseline for negotiations wasn’t exactly even: Democrats accepted the major budget cuts of sequestration (slated only to get worse on January 15, the same day their budget deal expires), and their only demand was actually the status quo: Keeping the government running and having the country fulfill its financial obligations. They didn’t request to restore the funding sequestration took away, they didn’t demand any new programs or initiatives that Democrats support. And if the previous budget conference is any indication, the one established under this deal has the potential to blow up in Democrats’ faces, leading to more cuts instead of an actual, long-term budget. In that sense, while it is the best, cleanest deal we can get, the Democratic party has been pulled slightly from center to right, not from left to center.

Meanwhile, Republicans threw everything but the kitchen sink into their negotiations. It’s no surprise they’re taking a lot of losses.

Yes, we will have the Government open and the debt ceiling temporarily raised to get us through a few months, and the President is saved from going outside his comfort zone and giving the teahadists an excuse to try to impeach him, but the fundamental problem of the gradual imposition of increasing levels of government austerity creating economic stagnation is not being addressed, and, in addition, the even more serious problem of having laws in place that give a small minority in Congress the possibility of holding both the US and world economies hostage to their ideology is also neither being addressed nor solved.

So this is no victory, and no cause for celebration. The conditions are still there supporting a Great Betrayal, and another slide into recession, along with the possibility of another Global Crash due to financial manipulations in the mortgage international derivative markets.

Meanwhile, what can we look forward to? A brief respite from budget battles and then a rush through a manipulated membership budget conference designed to produce a Bowles-Simpson austerity “solution” to be completed by December 13, to be voted up or down, and with a good likelihood that this Conference will either fail to come up with a result, or that its results will be rejected by teahadists or fellow travellers who will never accept tax increases, and by progressives who will be unwilling to vote for entitlement cuts in the face of upcoming elections.

Meanwhile, the drag on the economy and the unhappiness of the 99% will continue with no real relief in sight because no in either party has the courage to repudiate the dogma that a sovereign fiat currency nation like the United States can have a long-term debt problem requiring a long-term deficit reduction solution. Truly, everyone in Congress needs to be replaced by people who understand the Modern Money Theory (MMT) approach to economics and who are willing to explain it to their constituents and to advocate for fiscal policies based on it.

(Cross-posted from New Economic Perspectives.)

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Richard Lyon's picture
Submitted by Richard Lyon on

What I wonder about is what happens in four months. I certainly have no doubt that Obama and Pelosi are willing to make concessions such as chained CPI. They were both endorsing it last time. However, what will change the atmosphere of insanity over the next four months that would mean that the players could actually sit down and make deals, no matter how objectionable some of the features might be.

Dromaius's picture
Submitted by Dromaius on

No repeal or delay of the medical device tax

This one is strange, given that I think both sides wanted it for their "constituency"

-- Backpay for furloughed workers

Hallelujah, amen. I think I'll take this little bone off to the back room and chew on it for awhile.

No repeal, replacement, or delay of any aspects of Obamacare’s exchanges or individual mandate

Neither side wants the repeal of their insurance company friends' mandated HMO's, but aren't they cute when they dance their little dance? Wanna pinch their little cheeks. LOL.

Alexa's picture
Submitted by Alexa on

Here's a link to the President's Fiscal Commission proposal, or Chairman's Mark, (which is the blueprint or "framework" for austerity) "The Moment Of Truth."

I expect that the American People will continue to see these phony crisis continue, until the entire proposal is passed and implemented.

And as long as they are "clever" in the way that they present their "phony fights," the campaign dollars continue to roll in.

And from what I've heard the political reporters say today on XM--both "bases" remain largely clueless, as to what is really going on before their very eyes. (To the advantage of the politicians, of course. They have "no price to pay"--and they know it.)

Alexa

“If a dog won’t come to you after having looked you in the face, you should go home and examine your conscience.” -- Woodrow Wilson

[Avatar Photo Credit: Conflagrate, jurvetson's photostream, flickr]

Submitted by jawbone on

these conditions which could lead to his Great Betrayal. And he's worked hard to keep them in place year after year after year, negotiations after negotiations.

Once again, we the non-wealthy are dependent on the obstinacy of Tea Party Republicans.

And, once again, there is no talk whatsoever of the huge and growing chasm between richest and the rest of us. Not talk of fairness in taxation. Just "sharing the burden.
Riiiight.

Time for lambert to put up the Aztec blood sacrifice illustration.

There will be blood, but it won't be coming from any of the Top One Percent nor much from those just below the massively wealthy Tippy Top.

jo6pac's picture
Submitted by jo6pac on

agree with both of you and I don't think we'll see the whole picture until after 2014 election and then sometime in the spring. The illusion will become reality at that time as they put the little pieces in place to trap Main Streets money here in the Motherland. What little we have that is.

http://www.zerohedge.com/news/2013-10-16/creeping-capital-controls-jpmor...

Coming soon to America, Cypress anyone?

jo6pac's picture
Submitted by jo6pac on

agree with both of you and I don't think we'll see the whole picture until after 2014 election and then sometime in the spring. The illusion will become reality at that time as they put the little pieces in place to trap Main Streets money here in the Motherland. What little we have that is.

http://www.zerohedge.com/news/2013-10-16/creeping-capital-controls-jpmor...

Coming soon to America, Cypress anyone?

Then the non deal is done today and the stock market goes crazy, amazing.

Submitted by lambert on

... the steering wheel out the window, so the other guy knows you can't swerve. Throw it first, that is. Which is exactly what Obama did.

First they ignore you, then they ridicule you, then they fight you, then you win. -- Mahatma Gandhi

Alexa's picture
Submitted by Alexa on

The Cadillac Plans are generally "high value/high cost" plans.

Although these plans don't apply only to many union plans, without a doubt many of their more generous plans fall within this category.

Summary

Beginning in 2018, a 40 percent excise tax will be imposed on the value of health insurance benefits exceeding a certain threshold.

The thresholds are $10,200 for individual coverage and $27,500 for family coverage (indexed to inflation).

The thresholds increase for individuals in high-risk professions and for employers that have a disproportionately older population.

Frequently Asked Questions

What is the 'Cadillac Tax' or excise tax under the health reform law?
Is this tax permanent?

Why is this tax important to sales and customers now?

Does this tax apply to all funding types?

When does the tax begin?

The Cadillac tax provision will first apply to tax years beginning after Dec. 31, 2017.

Who does the tax apply to?

Will any groups be given a different threshold if their risk factors are higher (i.e., older populations, high-risk professions)?

What are the thresholds above which the individual/group would be taxed?

According to the WaPo piece that Lambert posted:

In negotiating the compromise legislation, Democrats dropped their demand to delay a new tax on existing health-insurance plans, a change intended to benefit organized labor.

Let's not forget the LA convention, and the fact that some of the AFL-CIO's unions loudly condemned another ACA provision.

I intend to find a way (although I've been unsuccessful thus far) to get my "Tweets" into some of the union feeds.

I would never have imagined that Democrats would throw unions under the bus in such an "in your face" manner!

And tragically, most unions rank-and-file members will probably not even hear about this until the very last minute--when Labor Leaders must "fess up!"

I'm wondering if this will start January 1, 2014, or if the Administration waits at least until after the midterm elections.

After all, they're sure as h*ll going to need those "union boots on the ground" before the midterms (and in 2016).

Hopefully, most of these folks will wake up after this betrayal.

Jeeeeezzzzz!!!!!

I'll be limited in time to do much 'til next year, but "By George, I'll do what I can to get the word out!" This absolutely makes my blood boil.

Isn't there anything that Dems will stop at, when it comes to inflicting harm on "everyday working people?"

Alexa

“If a dog won’t come to you after having looked you in the face, you should go home and examine your conscience.” -- Woodrow Wilson

[Avatar Photo Credit: Conflagrate, jurvetson's photostream, flickr]

Alexa's picture
Submitted by Alexa on

Thanks, lets.

I guess "misery loves company."

;-)

Alexa

“If a dog won’t come to you after having looked you in the face, you should go home and examine your conscience.” -- Woodrow Wilson

[Avatar Photo Credit: Conflagrate, jurvetson's photostream, flickr]