House Republicans have lost sight of the country’s welfare. It’s hard to conclude anything else from their latest actions, including the House speaker’s dismissal of President Obama’s plea for compromise Monday night. They have largely succeeded in their campaign to ransom America’s economy for the biggest spending cuts in a generation. They have warped an exercise in paying off current debt into an argument about future spending. Yet, when they win another concession, they walk away.
This increasingly reckless game has pushed the nation to the brink of ruinous default. The Republicans have dimmed the futures of millions of jobless Americans, whose hopes for work grow more out of reach as government job programs are cut and interest rates begin to rise. They have made the federal government a laughingstock around the globe.
In a scathing prime-time television address Monday night [ http://www.nytimes.com/2011/07/26/us/politics/26fiscal.html ], President Obama stepped off the sidelines to tell Americans the House Republicans were threatening a “deep economic crisis” that could send interest rates skyrocketing and hold up Social Security and veterans’ checks. By insisting on a single-minded approach and refusing to negotiate, he said, Republicans were violating the country’s founding principle of compromise.
“How can we ask a student to pay more for college before we ask hedge fund managers to stop paying taxes at a lower rate than their secretaries?” he said, invoking Ronald Reagan’s effort to make everyone pay a fair share and pointing out that his immediate predecessors had to ask for debt-ceiling increases under rules invented by Congress. He urged viewers to demand compromise. “The entire world is watching,” he said.
Mr. Obama denounced House Speaker John Boehner’s proposal to make cuts only, now, and raise the debt ceiling briefly, but he embraced the proposal made over the weekend by the Senate majority leader, Harry Reid, which gave Republicans virtually everything they said they wanted when they ignited this artificial crisis: $2.7 trillion from government spending over the next decade, with no revenue increases. It is, in fact, an awful plan, which cuts spending far too deeply at a time when the government should be summoning all its resources to solve the real economic problem of unemployment. It asks for absolutely no sacrifice from those who have prospered immensely as economic inequality has grown.
Mr. Reid’s proposal does at least protect Medicare, Medicaid and Social Security. And about half of its savings comes from the winding down of two wars, which naturally has drawn Republican opposition. (Though Republicans counted the same savings in their budgets.)
Mr. Boehner will not accept this as the last-ditch surrender that it is. The speaker, who followed Mr. Obama on TV with about five minutes of hoary talking points clearly written before the president spoke, is insisting on a plan [ http://www.speaker.gov/Blog/?postid=253567 ] that raises the debt ceiling until early next year and demands another vote on a balanced-budget amendment, rejected by the Senate last week. The result would be to stage this same debate over again in an election year. Never mind that this would almost certainly result in an immediate downgrade of the government’s credit.
We agreed strongly when Mr. Obama said Americans should be “offended” by this display and that they “may have voted for divided government but they didn’t vote for a dysfunctional government.” It’s hard not to conclude now that dysfunction is the Republicans’ goal — even if the cost is unthinkable.
Vice President Joe Biden listens to a speech by Chinese Vice President Xi Jinping during a China-US Business Dialogue in the Beijing Hotel on Aug. 19, 2011. How Hwee Young/AFP/Getty Images
By Bloomberg News - Aug 19, 2011 11:09 AM CT
Vice President Joe Biden told Chinese Premier Wen Jiabao that China has nothing to fear when it comes to its investment in U.S. Treasuries.
Biden and Wen both expressed confidence in the U.S. economy, with the Chinese premier saying its stability “is in the interest of the whole world.”
“We appreciate and welcome your concluding that the United States is such a safe haven because we appreciate your investment in U.S. Treasuries,” Biden told Wen yesterday in Beijing, where he was on the second day of a nine-day trip to Asia. “I want to make clear that you have nothing to worry about in terms of their viability.”
While Biden’s trip was scheduled before the first-ever downgrade of U.S. debt by Standard & Poor’s on Aug. 5, the issue has been prominent in the public discussions between the vice president and Chinese leaders. A day after S&P cut U.S. debt to AA+ from AAA, China’s official Xinhua News Agency said the U.S. government must realize it can no longer “borrow its way out of messes of its own making.” China is the biggest single foreign creditor of the U.S. with $1.17 trillion in holdings.
Biden said the U.S. will “take care” of U.S. Treasuries “not merely because China owns 8 percent of them, but because the Americans own 85 percent.”
Wen told Biden that during his trip he has sent a clear and vital message that has reassured the Chinese people regarding the safety of Treasuries.
Back on Track
Wen said “in spite of the difficulties facing the U.S. economy at present” he believes that the U.S. can weather the economic downturn and “get its economy back on the track of healthy growth.”
Concern about Europe’s debt crisis and a global economic slowdown has pulled the Standard & Poor’s 500 index down 16 percent from a three-year high on April 29. The MSCI All-Country World Index has dropped 17 percent during the same period. The S&P 500 fell 0.3 percent to 1,137.83 at 11:18 a.m. in New York after rising as much as 1.2 percent. The Dow Jones Industrial Average lost 41.47 points, or 0.4 percent, to 10,949.11.
Yields on 30-year bonds were little changed at 3.41 percent and headed for a weekly drop of 31 basis points, the most since tumbling 49 basis points in December 2008. Yields on 10-year notes increased four basis points, or 0.04 percentage point, to 2.11 percent at 9:44 a.m. in New York, according Bloomberg Bond Trader prices.
Lack of Confidence
“There’s a total lack of confidence in policy makers’ ability to defuse the situation,” said Nader Naeimi, a Sydney- based strategist for AMP Capital Investors Ltd., which manages almost $100 billion. “Fear is breeding fear now.”
Biden’s counterpart Xi Jinping, the man most likely to replace Chinese President Hu Jintao in 2013, said yesterday that China and the U.S. need to work together to restore confidence in the face of an “intensified” upheaval of the global economy.
In his public statement, Wen told Biden: “It’s particularly important that you sent a very clear message to the Chinese public that the United States will keep its word and its obligations with regard to its government debt. It will preserve the safety, liquidity and value of U.S. Treasuries.”
China’s Treasury holdings of $1.17 trillion, while down from their high of $1.18 trillion in October, have increased for the past three months, data compiled by Bloomberg show.
Meeting With Hu
After Biden met with Wen at the Leadership Compound, he met with Hu at the Great Hall.
Biden told Hu that President Barack Obama asked him to come to Beijing “to reaffirm our absolute total commitment to a strong and enduring positive relationship with China.”
Administration officials said much of Biden’s trip is meant to strengthen his relationship and understanding of Xi as Hu’s likely successor. The two will leave Beijing today for Chengdu in southwestern China.
Tomorrow Biden will make remarks about the U.S.-China relationship at Sichuan University in Chengdu. Afterward he and Xi will visit Dujiangyan, a city in Sichuan Province that was badly hit by an earthquake in May 2008. The two will visit a high school there that was rebuilt after the quake. In the evening, they will have a private dinner.
To contact the reporter on this story: Kate Andersen Brower in Beijing at kandersen7@bloomberg.net To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net.
Market Data 
Markets 
AI
