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Robert Reich
NationofChange / Op-Ed
Published: Tuesday 15 January 2013
In a pinch, the Treasury could issue IOUs to the nation’s creditors — guarantees they’ll be paid eventually. But there’s no indication that’s Obama’s game plan, either.

Why Obama’s Gamble on the Debt Ceiling Depends on the GOP Being More Sane Than it Is

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A week before his inaugural, President Obama says he won’t negotiate with Republicans over raising the debt limit. 

At an unexpected news conference on Monday he said he won’t trade cuts in government spending in exchange for raising the borrowing limit. 

“If the goal is to make sure that we are being responsible about our debt and our deficit - if that’s the conversation we’re having, I’m happy to have that conversation,” Obama said. “What I will not do is to have that negotiation with a gun at the head of the American people.”

Well and good. But what, exactly, is the President’s strategy when the debt ceiling has to be raised, if the GOP hasn’t relented?

He’s ruled out an end-run around the GOP. 

The White House said over the weekend that the President won’t rely on the Fourteenth Amendment, which arguably gives him authority to raise the debt ceiling on his own. 

And his Treasury Department has nixed the idea of issuing a $1 trillion platinum coin that could be deposited with the Fed, instantly creating more money to pay the nation’s bills.

In a pinch, the Treasury could issue IOUs to the nation’s creditors — guarantees they’ll be paid eventually. But there’s no indication that’s Obama’s game plan, either. 

So it must be that he’s counting on public pressure — especially from the GOP’s patrons on Wall Street and big business — to force Republicans into submission. 

That’s probably the reason for the unexpected news conference, coming at least a month before the nation is likely to have difficulty paying its bills.

The timing may be right. President is riding a wave of post-election popularity. Gallup shows him with a 56 percent approval rating, the highest in three years. 

By contrast, Republicans are in the pits. John Boehner has a 21% approval and 60% disapproval. And Mitch McConnell’s approval is at 24%. Not even GOP voters seem to like Republican lawmakers in Washington, with 25% approving and 61% disapproving. 

And Americans remember the summer of 2011 when the GOP held hostage the debt ceiling, bringing the nation close to a default and resulting in a credit-rating downgrade and financial turmoil that slowed the recovery. The haggling hurt the GOP more than it did Democrats or the President. 

But Obama’s strategy depends on there being enough sane voices left in the GOP to influence others. That’s far from clear. 

Just moments after the President’s Tuesday news conference, McConnell called on the President to get “serious about spending,” adding that “the debt limit is the perfect time for it.”  And Boehner said “the American people do not support raising the debt ceiling without reducing government spending at the same time.”

The 2012 election has shaken the GOP, as have the post-fiscal cliff polls. Yet, as I’ve noted before, the Republican Party may not care what a majority of Americans thinks. The survival of most Republican members of Congress depends on primary victories, not general elections — and their likely primary competitors are more to the right than they are.

This article was originally posted on Robert Reich's blog.



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ABOUT Robert Reich

 

ROBERT B. REICH, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including his latest best-seller, “Aftershock: The Next Economy and America’s Future;” “The Work of Nations,” which has been translated into 22 languages; and his newest, an e-book, “Beyond Outrage.” His syndicated columns, television appearances, and public radio commentaries reach millions of people each week. He is also a founding editor of the American Prospect magazine, and Chairman of the citizen’s group Common Cause. His widely-read blog can be found at www.robertreich.org. Robert Reich's new film, "Inequality for All" is available on DVD
and blu-ray, and on Netflix in February.

I'm sorry that Obama is not

I'm sorry that Obama is not willing to utilize a few tricks to step around a belligerent and irrational faction in the House. He would have my support. The $1T coin would be a great museum piece someday.

But I am glad that he seems to be setting a marker for this negotiation. The Republican party LOST ground in the last election even in their carefully gerrymandered districts. They lost the White House (and seemed earnestly shocked at that result. I Wonder why). THEY LOST. How in the hell do they now come forward in the new Congress and attempt to extort the president to adopt their agenda? I say let's see if they are true believers or not. It can only be the final convulsion of one of the most treasonous factions of Congress in our factionalized history.

Rick La Pointe's picture

Robert is right here,

Robert is right here, President Obama should have learned his lesson when he tried negotiating with the house leader, the house is out of control and the Tea Party members have effectively removed the house as a functioning part of our
government. The President must do everything in his power through Executive
Power to move this country forward.

I fully support our President

I fully support our President in his good efforts to raise our Debt Ceiling over the opposition of some mean-spirited people, but in the best interests of our Nation and People!

During the eight years from 2001-2008, our Overall Public and Private Debt rose from $26.5T (Trillion) to $54.5T, an increase of $28T, which averages to a 9.5% increase per year compounded during that interval in our overall debt, and of which the increase in the Private portion was $23.1T (from $20.8T to $43.9T) or roughly 9.8% compounded on average for each year, with both of these rates somewhat higher than the 8.1% compounded growth rate of our National Debt over those same eight years, which increased from $5.7T to $10.6T

Over President Obama's first term, Overall Public and Private Debt has risen to an estimated $67.5T, about a 5.5% increase compounded annually in this overall total debt, as compared to the much higher 9.5% compounded annually for 2001-2008.

Our National Debt has increased at a somewhat faster pace over the past four years compared to the prior eight, from $10.7T to $16.4T, which works out to an average increase of about 11.2% in the Public portion, but this is due mainly to a gargantuan portion of Private Debt being shifted to Public Debt through the follow up to the bailout process commenced in 2008, rather than continuing with our public spending programs on behalf of our American People, which must continue unabated if we are to recover our good economy.

Note that our Private Debt was $43.9T in January, 2009, and is now $51.1T with an average increase of about 3.8% per year, as compared to 9.8% annual growth in that debt for 2001-2008.

This huge disparity in average compounded annual growth (9.8% for 2001-2008 vs. 3.8% for 2009-2012) is the real underlying foundation of our present Financial Crisis, which has been caused by an on-going sparsity of money to consumers over the past five years that is injuring our economy in general, including causing the formation of the Fiscal Cliff, the Fiscal Slope and also the Debt Ceiling that is now being used to whack the American People in the back of our heads as we and our coming generations are encouraged to decline down this Slope.

In a fantastic irony, those same Members of Congress who are willing and even pressing for most Americans to suffer as a result of this, blame we Americans for "excess," due to our taking on so much Public Debt to offload the Private Debts created in the first place to benefit those very interests that seem to direct these same Members of Congress who whine mean-spiritedly about our erstwhile Middle Class.

Go figure!

Seriously, go figure, and you will see that President Obama has the correct approach, and is right to support the interests of our good American People through raising our Debt Ceiling while we are taking on so much Private Debt load as forced by our Financial Crisis now underway for five years at least and that is based on the Private Debt bubble that was expanded over 2001-2008.

I support our Good President, and so may you, once you realize that the above is true!

To help spread this good word supporting our President and to discover an astonishing next step to transform our Monetary Policy to one that works, please join together with our cause to unite all Americans in solving our Financial and Climate Crises: www.causes.com/causes/810177-unite-to-solve-our-financial-and-climate-cr....

Seen this movie before,

Seen this movie before, there is a long car chase and the hero catches the bad guy. While I certainly condone using this space just for beating up on Republicans, that's not actually the best use of it in all cases.

From Peter Loeb: Dr. Reich

From Peter Loeb:

Dr. Reich continues his pseudo-analyses. The only excuse for Reich's
blindness is his presumption of good intentions by our "noble" President.
Cuts in defense are "off the table". As a result, there are only "spending
cuts" left, a k a cuts in programs for our domestic quality of life.

INSTEAD: Massaive cuts in defense should be at center stage. We do not
need the "investment" of vast sums of money in US bases around the globe
(I believe there are some 170 plus such bases, most on "Status of Forces
Agreements"---"SOFA's"). Our so-called "patriotic" forces are not "defending" the US: they are giving their lives and limbs and families because they have nowhere else to go in this wrecked economy. In the
military they get money and training. They are not "unemployed". Instead they slaughter millions of others, men-women-children. Why aren't these
men and women trained intensively for work for medical service? On this
route, the US is headed toward a third world status .

Dr. Reich complains about the GOP (which is quite legal) but willingly
accepts their analyses of economic options. So too do most of
American politicians, at least those who intend to survive.

bho got his tax hike [in the

bho got his tax hike [in the middle of a recession] now it is time to give up 1 day of golfing and present cuts

Congresspeople who proudly

Congresspeople who proudly refer to themselves as the "American Taliban" don't have an iota of sanity or intelligence.

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