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2011-GOP-default-threat-cost American taxpayers 1.3 billion in higher interest rates.

A Republican Ransom Note

By THE EDITORIAL BOARD
Published: September 26, 2013 757 Comments

On Wednesday, Treasury Secretary Jacob Lew sent the House a very serious warning .. http://graphics8.nytimes.com/packages/pdf/business/26treasury-lewletter.pdf .. that, for the first time, the United States would be unable to pay its bills beginning on Oct. 17 if the debt ceiling is not lifted. House leaders responded on Thursday with one of the least serious negotiating proposals .. http://www.nytimes.com/2013/09/27/us/politics/house-gop-leaders-list-conditions-for-raising-debt-ceiling.html .. in modern Congressional history: a jaw-dropping list of ransom demands containing more than a dozen discredited Republican policy fantasies.

We’ll refrain from deliberately sabotaging the global economy, Speaker John Boehner and the other leaders said, if President Obama allows more oil drilling on federal lands. And drops regulations on greenhouse gases. And builds the Keystone XL oil pipeline. And stops paying for the Consumer Financial Protection Bureau. And makes it harder to sue for medical malpractice. And, of course, halts health care reform for a year.

The list would be laughable if the threat were not so serious. A failure to raise the debt ceiling would cause a default on government debt, shattering the world’s faith in Treasury bonds as an investment vehicle and almost certainly bringing on another economic downturn. Unlike a government shutdown, a default could leave the Treasury without enough money to pay Social Security benefits or the paychecks of troops.

The full effects remain unknown because no Congress has ever allowed the government to go over the brink before. The Government Accountability Office estimated .. http://www.gao.gov/products/GAO-12-701 .. that simply by threatening to default in 2011, Republicans cost taxpayers $1.3 billion in higher interest payments because of that uncertainty. The 10-year cost of those higher-interest bonds is $18.9 billion .. http://bipartisanpolicy.org/sites/default/files/Debt%20Limit%20Analysis%20Sept%202013.pdf .

Any sober-minded lawmaker should realize that the danger of trifling with the debt limit is far too high. But Mr. Boehner has been encouraging his members to toss their pet projects — hey, let’s insist on Congressional approval for every major federal regulation .. http://www.nytimes.com/2011/12/05/opinion/undermining-the-executive-branch.html ! — onto the towering list of demands.

By day’s end, many Republican members remained skeptical of the leadership plan. But the House leaders clearly hope the president will take the bait and negotiate on a few items on the list, forcing him to break his promise never to bargain over the debt ceiling. Many items on the list are intended to put vulnerable red-state Democratic senators on the spot should the plan wind up in their chamber. One of them, Joe Manchin III of West Virginia, said Thursday he could support a year’s delay on health reform .. http://www.bloomberg.com/news/2013-09-26/democrat-manchin-breaks-ranks-to-back-mandate-delay.html . If the unified Democratic opposition to the debt-ceiling threat is shattered in the Senate, the pressure on Mr. Obama to come to the table would be intense.

But the absurdity of the list shows just how important it is that Mr. Obama ignore every demand and force the House extremists to decide whether they really want to be responsible for an economic catastrophe. He made a mistake by negotiating in 2011, hoping to reach a grand bargain; that produced the corrosive sequester cuts.

To prevent the House from making every debt-ceiling increase an opportunity to issue extortionist demands for rejected policies they can achieve in no other way, the president has to put an end to the routine creation of emergencies once and for all by simply saying no.

http://www.nytimes.com/2013/09/27/opinion/a-republican-ransom-note.html?ref=editorials

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Wonkbook: Democrats to Boehner: There will be no debt-ceiling negotiation. Seriously.

By Ezra Klein and Evan Soltas, Published: September 23 at 8:28 am 146 Comments


(Photo by Scott Applewhite/AP)

On Friday afternoon, just hours after the House passed a continuing resolution defunding Obamacare, President Obama placed a call to Speaker Boehner.

Surprisingly, Obama didn't want to talk about the CR, or even the possibility of a shutdown. Instead, in a conversation Boehner's aides characterized as "brief," President Obama reiterated that he would not, under any circumstances, negotiate over the debt ceiling.

Today, Senate Democrats will back Obama up. Patty Murray, the chairwoman of the Budget Committee, and Max Baucus, the chairman of the Finance Committee, are sending a "dear colleague" letter .. http://www.washingtonpost.com/blogs/wonkblog/files/2013/09/Murray-Baucus-Memo-September-23-2013.pdf .. stating "President Obama has been clear that he is not going to negotiate over the debt limit, and Congressional Democrats stand behind him strongly."

The letter goes on to note that "since 1960, the debt limit has been raised a total of 78 times, including 49 increases under Republican Presidents and 29 increases under Democratic Presidents. President Ronald Reagan said in 1983 that, 'the full consequences of a default — or even the serious prospect of default — by the United States are impossible to predict and awesome to contemplate.'"

If it seems odd that Democrats are spending the week before a possible government shutdown trying to talk Republicans out of potentially breaching the debt ceiling sometime in October or November, it's worth keeping three things in mind:

1) Democrats don't fear a shutdown. They do fear a debt-ceiling breach. Politically, Democrats think Republican brinksmanship is all gravy for them, and many believe some kind of massive Republican misstep would actually be healthy for the political system, as it might lead to a public rejection of the GOP's more extreme tactics. But in terms of actual impact on actual human beings, Democrats aren't particularly concerned about the consequences of a shutdown, while they're horrified by the potential consequences of even a short-lived default.

2) Democrats are worried Boehner is backing himself into a corner. A common criticism of Boehner among both Hill and White House Democrats (not to mention some Republicans) is that he's a short-term strategist who buys time and consensus by making promises to his members that he can't deliver on -- and that end up making future crises worse. This is what they see him doing on the debt ceiling, where he's trying to get his members to keep the government open by promising them an even bigger fight over the debt ceiling.

3) Democrats are trying to convince Boehner that they're serious by backing themselves into a corner. Democrats believe Boehner is going to come to them in a few weeks and say that as much as he agrees the debt ceiling simply has to be raised there's no way he can raise it without concessions given the promises he's made in public and to his members. Democrats are trying to preempt this strategy by making a series of very public statements that they won't negotiate, such that they can reply that their credibility would be endangered by any kind of a deal, and negotiations are simply politically impossible for them.

That leaves us in a situation where Boehner can't raise the debt ceiling without concessions and Democrats can't give Boehner anything in return for raising the debt ceiling.

So how does the country gets out of this mess? The most honest answer is no one really knows, at least not yet. Far and away the scariest facet of reporting on the debt ceiling is that even the participants in the process who are extremely confident that Congress will find a way out don't have any plausible explanation for what that way out might be.

Wonkbook's Numbers of the Day: 83 percent and 2.88 times. The first number .. http://www.bloomberg.com/news/2013-09-22/demand-strong-as-ever-as-institutions-bid-for-83-of-bond-sales.html .. is the percent of all bids for U.S. Treasuries that came from investors this year. The second is this year's "bid-to-cover ratio" (explainer here .. http://en.wikipedia.org/wiki/Bid-to-cover_ratio ), which is how many times the value of bids exceed the value of Treasuries at auction. The combination of numbers show strong demand for U.S. debt. No debt crisis. No bond vigilantes.

.. much more in Ezra Klein's Wonkbook .. http://www.washingtonpost.com/blogs/wonkblog/wp/2013/09/23/wonkbook-democrats-to-boehner-there-will-be-no-debt-ceiling-negotiation-seriously/ ..

.. here are some tweets mixed in the much more ..

@RBReich: Most fanatical series #Emmy goes to House Republicans' efforts to repeal Obamacare.

@markknoller: Coburn says he agrees with House Republicans objective to shutdown ObamaCare: "if we could do this, we should do it, but we can't."

@ByronYork: Just for record: I believe GOP's last chance to stop Obamacare before implementation was 2012 election.

@JohnJHarwood: As Rs say shutdown/debt threat is to prevent O-care harm, economist Zandi: "I don't see any evidence Obamacare is impacting job market."

.. one other bit from inside ..

KRUGMAN: Free to be hungry. "The right’s definition of freedom, however, isn’t one that, say, F.D.R. would recognize. In particular, the third of his famous Four Freedoms — freedom from want — seems to have been turned on its head. Conservatives seem, in particular, to believe that freedom’s just another word for not enough to eat." Paul Krugman in The New York Times .. http://www.nytimes.com/2013/09/23/opinion/krugman-free-to-be-hungry.html?partner=rss&emc=rss .