Posted on 05/24/2011 2:03:01 AM PDT by markomalley
Treasury Secretary Timothy Geithner announced May 16 that the U.S. government has reached its legal debt limit, and that he had to dip into federal pensions to meet the country’s obligations. And if Republicans stick to their demands for major spending cuts, Geithner is going to have to start getting even more creative. It wasn’t supposed to go like this.
When Democrats decided to pass on raising the nation’s $14.29 trillion debt limit during the 111th Congress’ lame duck session this December, the game plan for the 112th Congress was simple: scare “responsible” Republicans into voting to raise the debt limit, just as they were scared into voting for TARP. This would both negate charges that Democrats were the only party raising the country’s debt, and drive a wedge between Republican leaders in Congress and their tea party base.
At first, everything seemed to go according to plan. Geithner sent a scary letter to Congress warning of a financial crisis worse than 2008 if the debt limit was not raised before March 31. Republican congressional leaders even acknowledged that the debt limit had to be raised.
But the White House then made two mistakes: It believed its own news releases and underestimated the lessons of TARP. The two are related.
Many on the left seemed to actually believe the predictions of doom in Geithner’s first letter to Congress. Geithner claimed failure to raise the debt limit would force the Treasury Department “to default on legal obligations of the United States” causing “long-term negative impact on U.S. creditworthiness.” Geithner claimed, “Because Treasuries represent the benchmark borrowing rate for all other sectors, default would raise all borrowing costs … leading to reductions in spending and investment, which would cause job losses and business failures on a significant scale.”
But this reasoning assumes that markets treat all financial obligations equally. They don’t.
The other big mistake the Obama administration made was to forget how much skepticism TARP created in Congress about claims that the sky is falling. A number of incumbent senators (such as Utah Republican Bob Bennett) were forcibly retired by voters because they acted unquestioningly on such fears. As a result, the 112th Congress has a much stronger spine. And Geithner hasn’t helped matters by constantly shifting the date the world would end — beginning with March, then July, and now August.
The left’s response to this unexpected conservative resolve has been to call Republicans hostage takers. Paul Krugman is advising Obama to call the Republicans’ bluff and make them start shooting hostages. There is just one problem. Obama is the one holding the gun.
As the Government Accountability Office has certified, Geithner has complete authority over how to prioritize federal government payments. Over the next year, the U.S. government will have more than enough tax revenue to make interest payments on the debt, send out Social Security checks and pay the troops. The only reason the U.S. would ever default on its debt or miss a Social Security check would be because Geithner chose to fund other priorities instead.
Obama’s resulting bargaining position is quite weak. If he wants to raise the debt ceiling, he has only two alternatives — sign off on severe Republican spending cuts or on severe spending cuts by Geithner.
All this could have avoided by raising the debt limit when Democrats had control of Congress back in December. They thought they were being clever by forcing Republicans to buy in. They appear to have miscalculated.
SShhhh—msm is praying THIS story goes nowhere.
1. Is there a law that gives him this authority?
2. How much do you want to bet that Congressional pensions are safe and secure?
More Obamanation big mistakes. This doofus gets more swings (unaccountable) at the ball than a little leaguer playing tee ball.
The end is near. Tim Geitner / Rev. Camping
Yep, over at MSNBC the progressives kept repeating how the crossing the debt limit would bring on a great depression and that Republicans would get the blame for it, much like the 1994 shutdown. A number were predicting the the liberals(progressives) in congress could themselves hold out for concessions, that Boehner would have to look for Democrats to vote to pass the extension so he wouldnt get the blame for it.
“Rev Camping”. Harold Camping is not ordained, and is no more a preacher or reverend than Geitner is an effective economist. You are certainly correct in observing that both of them do share the same defective ability to read tea leaves in their chosen fields of non-expertise.
This was promptly proven wrong when S&P changed the US credit rating outlook to "negative" precisely because it felt that US debt was out of control.
“Over the next year, the U.S. government will have more than enough tax revenue to make interest payments on the debt, send out Social Security checks and pay the troops. The only reason the U.S. would ever default on its debt or miss a Social Security check would be because Geithner chose to fund other priorities instead.
Sound like Foreign obligations can be paid. Grandma and Grandpa can be paid. Soldiers can be Paid.
NO Reason for the Republican Congress to Increase the Debt. Reduce Spend or Shut down the Government.
BHO is your move.
Boehner’s strategy should be to make the Dems go first and own the debt issue.
Let’s all hope Boehner is savvy enough to sit on his hands; he has been so far.
I never knew it was an option for Barry to have his buddy Tim make the budgets cuts (Defense) rather than Congress. I wonder who Barry will choose?
Democrats being forced to make major cuts in spending is like vampires being dragged into the sunlight.
I think many are missing a key point of this, the Dems still fear the label "tax and spend". I believe that part of this was intended to force the Republicans to raise taxes. While the Dems could have forced through Tax increases in the Lame Duck session, they would have owned the tax increases, look at what happened with the extension of the "Bush Tax Cuts".
[Zero] has only two alternatives -- sign off on severe Republican spending cuts or on severe spending cuts by Geithner.
In fact the Democrats could have raised taxes on ‘the rich’ anytime in the two years 2009-2010. That only required 50 Democrat senators (plus Biden) and they had 59. They could have raised them while still losing 9 of their own Senators but didnt. But they talk like raising taxes on the rich will fix everything : deficits, entitlements, jobs, world peace, cure cancer, end hunger, ....but they wouldn't do it when they easily could.
Democrats staging a big loss on raising taxes was a much better political play for them than raising taxes. Hell, if they raised taxes on ‘the rich’ in 2009 then later after the economy sputtered out mid 2010, which it did anyway (when the stimulus money ran out) even without the tax increases, Republicans would have a winning message on taxes now: "Democrats tax increases killed the economy.". Democrats knew they couldn't let that happen.
By a staged 'losing' on tax increases Democrats can throw around all the above silly arguments for tax increases, and what arguments do Republicans have? They have the economy and deficits under Bush. That is a tough sell, except with Rush's loyal audience.
I'm not a big fan of Boner, but he is doing things right here. Sitting on his hands and keeping his mouth shut.
He is simply standing pat and refusing to argue...so far.
Dems fear "the label" - they don't fear taxing ans spending.
Luckily the press is in their pocket so they don't have to worry much about the truth getting out --- except for FOX, talk radio, FreeRepublic, and the Internet.
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