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Reich writes: "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."

Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)
Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)


Obama's Gamble on the Debt Ceiling

By Robert Reich, Robert Reich's Blog

15 January 13

 

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.



Robert B. Reich, Chancellor's Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including the best sellers "Aftershock" and "The Work of Nations." His latest is an e-book, "Beyond Outrage." He is also a founding editor of the American Prospect magazine and chairman of Common Cause.

 

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+44 # cordleycoit 2013-01-15 10:44
This shows how the Rebubs are a noisy bunch of house wreckers not a real party.They are bought off nihilists doing the will of the usual one percenters. Republics easily drift into fascism.
 
 
+43 # CAMUS1111 2013-01-15 11:45
"drift into fascism"?--Hell , they have leapt into it gleefully and completely.
 
 
+40 # stoher9 2013-01-15 10:45
Why is it that Obama is never willing to play hardball against the Repugnican Loons? Does he need to be hit over the head with a full blown depression before he realizes that the Repugnican party only cares about their base? They will gladly ruin our credit rating & plunge the world into a depression because they think they are on a mission from God to stop the Obama, fascist, socialist, communist, Nazi, liberal, godless, black, taker, train to hell, from destroying THEIR America. He should direct treasury to mint the Trillion dollar coin now and declare he will invoke the 14th amendment as well if the debt ceiling isn't raised in 7 days. We The People, are all tired of this constant phony crisis BS. The only way to stop a bully is to call his bluff an/or knock him to the ground & stomp on him. Obama needs to grow a pair and do what we elected him to do. Fix our crumbling country and create some jobs!! As long as the Repugnicans keep setting the talking points and the corporate media keep trumpeting their LIES, nothing will get done. AGAIN!! Being the only adult in the room does you no good if you don't stop the children from building & exploding bombs in the room!!
 
 
+6 # bmiluski 2013-01-15 14:29
And how do you propose President Obama do that? He can't just order them to listen to him or do what he tells them to do? Please, tell me how should he do it with the repugs holding the majority of the seats.
 
 
+1 # GDC707 2013-01-18 01:19
He just told you how it should be done. Announce that he is directing the Treasury dept to mint the $1 trillion coin AND that he is invoking the 14th amendment and the country is no longer going to play these games with Republicans and we are going to start funding infrastructure projects and put people back to work. Obama would look strong and indeed he would BE strong and the public loves that stuff. But Obama won't do these things because he is really a closet 90's style Republican and is trying with all his might to chip away at Social Security and Medicare. He will use the debt ceiling battle to deal away entitlements. He has said this is what he wants to do and he is doing it.HE is one of THEM.
 
 
+10 # Texas Aggie 2013-01-15 14:30
He IS playing hardball. If he did any of the two things you mention, the repubs would complain endlessly about his dictatorship, and their base will listen to them. But if he makes sure that they will be blamed for any hardship that comes from their actions, then maybe enough of them will back off to allow the debt ceiling to be raised, and if they don't, then the gopers will disappear from the political scene even faster than they already are.
 
 
+8 # Todd Williams 2013-01-15 16:26
But this artticle just explained that he was standing firm. Didn't you read it? He seems to be tougher than he was during the first term. I may be wrong here, but it seems to me that he's doing what he said he would during the election.
 
 
+1 # 666 2013-01-17 06:34
quoting: "President Obama says he won't negotiate with Republicans over raising the debt limit."

ok, when has he EVER negotiated??! He typically caves before negotiations begin! "Obama standing firm" hah, what an oxymoron!
 
 
0 # GDC707 2013-01-18 01:14
You presume that the 2 parties are enemies. That's the Kabuki. They are, in fact, dance partners.
 
 
-40 # MidwestTom 2013-01-15 10:49
I think that we should not change anything as of now. By that I mean debt ceiling, as we always have and must do now, but leave the Cliff deal in place unaltered. It is the only way we will ever cut military spending, and it raises revenue. In 1984 19% of working Americans paid no taxes, today 47% pay no taxes, we need more with "skin in the game", if we ever want to truly cut military spending.
 
 
+45 # BradFromSalem 2013-01-15 12:02
That is because 47% don't make enough money to pay taxes.

The inequality of the American economy, especially as it pertains to income distribution just empowers the wealthy to clobber the rest of us. As citizens we all have skin in the game. And the amount any individual pays in taxes should make no difference.
 
 
+27 # Lolanne 2013-01-15 12:49
Quoting BradFromSalem:
That is because 47% don't make enough money to pay taxes.

The inequality of the American economy, especially as it pertains to income distribution just empowers the wealthy to clobber the rest of us. As citizens we all have skin in the game. And the amount any individual pays in taxes should make no difference.


Besides which, that 47% garbage is pure nonsense. It IMPLIES those who don't pay income (note that: INCOME) taxes are all deadbeats and cheats. Not so! There are all kinds of taxes, and everyone with a job pays them, EXCEPT for income taxes, when those jobs pay so little they are exempt. I am sick and tired of this old "47%" crap that keeps coming out over and over, no matter how many times those who keep shoveling it get shot down.
Give it a rest, MT! You KNOW better!
 
 
+15 # Texas Aggie 2013-01-15 14:37
47% don't make enough to pay income taxes in 2012, but in 1984, the separation between the average worker and his boss was a LOT less than it is now. Remember that the top 1% has seen its income go up 300% in the last twenty years while the median wage hasn't changed noticeably. Restore equality by ensuring that those who are responsible for actually doing the work reap the fruits of their labor in our society and you will see that once again only a small proportion don't make enough to pay income taxes.
 
 
+17 # Jackpine 2013-01-15 14:59
47% may pay no INCOME tax, but that includes retirees, disabled people, workers in bottom-end jobs, military personnel deployed in combat settings, etc. And most of these folk do pay FICA, sales taxes, etc.
 
 
+1 # 666 2013-01-17 06:35
How many "artificial people" (corporations are included in the 47%?

also, the 53% includes an awful lot of rich folks who pay virtually nothing (%) compared to the workers of the world (unite!)
 
 
+20 # tapelt 2013-01-15 13:30
Maybe not federal income tax, but they do pay other taxes.
 
 
+10 # MidwestDick 2013-01-15 14:35
"In 1984 19% of working Americans paid no taxes, today 47% pay no taxes."
This is a misleading statistic. When the payroll withholding (FICA) was increased by %200 in order to pay forward the Social security obligations of the boomer generation, the taxes at the low end became extremely burdensome. At that point, those earners were given some breaks on their income tax, which was very low anyway. The net effect was to increase the amount of money withheld from their checks while canceling out their "income tax" obligation.
 
 
+11 # genierae 2013-01-15 16:17
MidwestTom: Just because they pay no income taxes doesn't mean they pay no taxes. There are many other kinds which we all pay. And if the lunatic GOP would allow Obama's jobs plan to go through there would be many more people who could be paying income taxes. Another factor is that the Republicans are gutting the middle class, so that wages are going down and so taxes will be less. This is happening especially in Republican-led states, such as Ohio. It's a slow-motion tragedy that makes me sick to see it happen.
 
 
+19 # jky1291 2013-01-15 10:50
Agreeing with the Republicans by passing the following reforms solves their concerns or reveals their disingenuous hypocrisy so that barely 1% could continue to support them.

Equitable and Logical Program Reform

The majority of working taxpayers in this nation pay Social Security and Medicare taxes on 100% of their income their entire lives to earn the modest benefits of these programs that sustain them when they are no longer able to work. The 2% vigorously resisting paying less than 7 cents per dollar above $250,000.00 pay these taxes on less than 45% of their income, while those receiving $1,000,000.00 pay on barely more than 11%, and those collecting 10,000,000.00 are taxed on only 1.1% of their income for Social Security and Medicare. To address entitlement reform, eliminating the 99%+ tax break received by the wealthiest 1%er's would essentially eliminate the unfunded liabilities in Social Security and reduce the federal deficit and national debt substantially by equitably funding Medicare. (Social Security and Medicare taxes applied to approximately 1/2 of 1% of Mitt Romney's income.)

The SignOn.org petition below might suggest the solution to many of these problems by providing the greatest detriment to the Republican obstructionists talking points: TRUTH!!!

http://signon.org/sign/equitable-and-logical?source=c.url&r_by=1279693

Add your support to the petition if you agree this is the appropriate means to frame the debate and redirect the discussion.
 
 
+10 # jky1291 2013-01-15 11:51
Equitable and Logical Program Reform

To President Barack Obama, House Representatives , and Senators,

Whereas there is great concern for the sustainability of Social Security and Medicare due to unfunded liabilities, and in consideration of demands for reform to strengthen those programs for future generations, and in consideration of the burden on our budget deficit and national debt due to persistent high unemployment:

Be it proposed that all exemptions of income subject to Social Security and Medicare taxation be immediately eliminated and the $110,100.00 cap on income subject to such taxes be permanently removed, thus equalizing the percentage of income upon which all income brackets are fairly paying to support these programs that benefit all the citizens of our nation.

Furthermore, be it proposed that the Social Security retirement age be returned to 65 years for 2 years in order to simultaneously reduce both the deficit and unemployment through eligibility of more than 2% of the workforce to voluntarily relinquish their jobs to be filled by the unemployed, while massively increasing the economic impact of their Social Security benefits spending from the increased funding resulting from taxing all income brackets equally.

http://signon.org/sign/equitable-and-logical?source=c.url&r_by=1279693
 
 
+8 # Barbara K 2013-01-15 12:09
jky1291: Thanks for the petition, I signed and hope everyone signs it. Makes perfect sense.

.
 
 
0 # tbcrawford 2013-01-15 12:42
If this petition requires seniors to give up employment at 65 I oppose. Had this been my lot for 10 additional years, I would have been homeless (and probably dead by now). If this pleases you, good luck.
 
 
+1 # jky1291 2013-01-15 22:59
tbcrawford, I clearly stated "voluntarily relinquish", as I personally don't believe in retirement from something one enjoys, and if one isn't enjoying their work why on earth are they doing it in the first place. The suggestion of this petition only allows someone the option of receiving their Social Security benefits earlier if they want to make their job available to reduce our nation's unemployment compensation expense adding to the deficit and national debt.
 
 
-25 # RLF 2013-01-15 11:03
I your approval roating is in the pits, then you have nothing to lose. The rep.s can barely go down more so what do they care. Obama wants to cut the deficit but he doesn't want to have to take the reponsibility, so he will bitch and moan and then sign whatever the rep.s hand him.
 
 
+9 # BradFromSalem 2013-01-15 11:14
I think Obama's gamble is just as Robert Reich points out. The public and especially Wall Street will not allow Boehner et al to hold the world's economy hostage.
They are willing, however to hold the American worker and the American economy hostage to the sequester. The back and forth right now over the debt ceiling is both sides blowing smoke. Allowing the sequester by itself to occur will not bring the economy to a crashing halt overnight. But it will slide backwards. Sliding backwards instead of crashing off a cliff will give plenty of time for Republicans to shift votes back to themselves.
I would hope that the President by removing Plans B and C from the debt ceiling foolishness, has in mind Plans B, C and D for the sequester, We already know Plan B, which is to kick it down the road a little further hoping the economy will gain enough momentum to prevent any cuts. Plan C is likely to be give the Republicans some cuts in Social Security like the chained CPI. I have no idea what Plan D is, but hopefully is the Platinum coin, and more importantly he uses before he offers up any "entitlement" cuts.
 
 
+11 # Nell H 2013-01-15 11:24
What happens if President Obama ignores the debt ceiling? What if the government just goes about its business, paying all the stuff Congress has authorized? How can that be against the law?
 
 
+2 # tbcrawford 2013-01-15 12:48
Worth a try!
 
 
+1 # AndreM5 2013-01-15 16:25
It has to have the CA$H or credit to pay the bills. Only Congress can appropriate.
 
 
0 # David Heizer 2013-01-15 20:22
It can't. No money in the account, no checks can be written. That's known as "the power of the pursestrings," and Congress holds 'em.
 
 
+7 # reiverpacific 2013-01-15 11:28
Why should the Reprobate party care what the majority of Americans think?
They have the majority of the plutocrats on their side and now, thanks to a bent judiciary and Citizen's United, they can continue to finance their medievalist nonsense almost ad infinitum, as there are still enough sheeple who eat of the insane root rather than be engaged and pro-active, who will stumble along the road most smoothed by their corporate master's exploitive capitalist funds and the owner-media, by which means they'll continue to block any attempts at progressive taxation and a social safety net, no matter how primitive and backward it makes the US look in the eyes of the rest of the world.
But they can still cause so much damage globally which is the main universal problem for the rest of us.
 
 
+1 # mikes1060 2013-01-15 11:38
The President blew his best chance on 1-1-13. He should have started down the fiscal slope slowly, gotten the taxes he said he wanted (or did he?) and bargained from strength. He gave up most of his power, passed the ball to Biden and now his tough talk is just that, tough talk. Remember folks, much as we love him, he's a centrist friend of the plutocracy...
 
 
+8 # Charles3000 2013-01-15 12:03
The huge question lurking in the background is why does the US Govt have any debt? With the constitution authorizing congress to produce and denominate money (coin)and the US Treasure busy producing ALL of the legal US fiat money in the world then why does the government borrow money? Why don't they just spend the money they produce instead of giving it away and then borrowing it back at interest. This is the obvious question that should be asked; it is the number one issue that should be on the table. This question was there when the constitution was written, it was there when Lincoln opted to print and spend "greenbacks" to avoid the usurious interest demanded by bankers to pay for the Civil War. It was there in the 40s when money was printed and spent directly to finance the rapid build up of the WWII effort. The question is still there, silently awaiting an answer, awaiting a very long overdue look at how we have organized our monetary system and for whose benefit has it been organized.
 
 
+2 # BradFromSalem 2013-01-15 15:11
The answer is very simple. While our money supply is not tied to a collection of a one or many metal rocks, people still think it is.

As I note in my response to Mr Eagle money is a commodity. Just as we grow wheat, we via the Fed, print money. But in order for that money to do any good, it has to be consumed and recycled. When there are limited resources left to consume the money, then it value decreases. If we grow too much wheat, the price drops. When money has less value relative to wheat, it takes more money to buy the same quantity of wheat - inflation. That is the risk. But over-planting wheat is also a risk, as I just noted. Ideally, when money is a commodity and not a piece of metal, we just need to design our tax and economic rules to manage it as a commodity.
Unfortunately, these concepts are intuitively foreign and dangerous and the President is risk adverse. Mint the coins!
 
 
-26 # Robt Eagle 2013-01-15 12:07
So Obama doesn't care one bit about fiscal responsibility. Obama just will spend as much as he chooses to and run up the National Debt even further as it rapidly approaches $16.5 trillion. No worries, the borrowing will increase exponentially and he will blame it on the Republicans. OK, so who is responsible enough to realize that there is a problem here? At 1.0% what is the interest annually on that amount of debt? OK, what happens when the world figures out that it is unsustainable and interest rates go up? OK, so who gives a crap...we will get our freebies that Obama promised us on the backs of the wealthy! Yeah for us and screw the wealthy! Yeah, we are felling all warm and fuzzy cause the rich are paying even more...yeah! OK, now back to reality...there isn't enough to sustain this kind of spending, something has to give at some time, that is the reality. When that happens the poor will suffer the most, and the middle class will suffer a lot. The ultra-rich will suffer, but maybe not...because they will leave the US and go where there aren't any taxes to pay. Guess what? America loses, but Obama won't care as long as he can fly anywhere he likes on your expense. Oh, and Michelle and the girls fly on your dime also with the immense enterage. Why not, it's free for them.
 
 
+5 # BradFromSalem 2013-01-15 13:27
RobtEagle,

How about we turn things around? How about instead of collecting taxes to fund the government, we let the government print whatever it needs to fund it. Then, taxes are used as a deflationary brake if the economy heats up too much?

Remember that money is just another commodity. If you have too much available (think wheat) then its value decreases. If you have too little available its value increases. It is something the economists call supply and demand.
Right now we don't have enough money to pay for all the things we need to have. So, here is the solution! Lower taxes to put more money into circulation and increase the money supply. Raise taxes on the wealthy but a lot more than a measly 4%, since we need to make their money available. Deficits will ensue! Mint the coins, a Trillion at a time. As soon as everyone is employed and individual debt starts to diminish; raise taxes on the middle class until there is an uptick in unemployment and individual debt starts to increase. Start at the beginning and repeat the cycle for infinity.

After two or three cycles, the wobbles will smooth out and you neo-liberals can finally shut up. Nothing personal, but I wish you guys could at least out together a narrative that explains your theory in terms of PIZZA (in this case I used only the wheat for the crust).
 
 
+8 # bmiluski 2013-01-15 14:35
The rich ARE NOT paying even more. The rich are still getting a lower percentage of their paycheck taxed then YOU are. Contrary to FAUX News, we do not want the rich to pay a higher percentage rate then us, we just want them to PAY THE SAME RATE as us. Why is that so hard for you people to understand?
 
 
+7 # Texas Aggie 2013-01-15 14:45
Bud, you are aware that it's Congress, not the president, that decides how money is spent, aren't you, but that the president is obligated to see that the money is spent? You are aware that your second sentence is pure baloney, aren't you? You are aware that people who read your screeds just shake their heads in awe that someone who can write a complete sentence is so clueless as to the way the world works, aren't you?
 
 
+5 # Texas Aggie 2013-01-15 14:48
Oh, and by the way, where will the ultra rich go that they don't pay taxes, but still have the type of lifestyle that they are accustomed to? Somalia? Central African Republic? Haiti? Saudi Arabia or one of the emirates? Can you see Ann Romney walking around in a burkha?
 
 
+6 # tabonsell 2013-01-15 18:36
Can understand why you get so many thumbs down.

Obama can spend only what Congress authorizes him to spend. And the problem with debt and deficits didn't start with Obama.

It was your beloved Ronald Reagan who put the nation on the road to financial crises with massive tax cuts for the aristocracy and tax increases for the working classes. His stupidity was followed by George Bush the Daddy and George Bush the Buffoon who followed suit with the "voodoo economics" that threaten the nation, which the nation's sane people realize.

Reagan raised spending much more than he did tax receipts. Bush the Daddy out did him and Bush the Buffoon blew both out of the water with his irresponsible handling of the economy.

That is not "blaming someone else", it is remembering history.

By the way; just a reminder that you live under a capitalist system and capitalism can only survive when capital flows constantly through the system. That flow is called spending. Without it the system dies. After thee decades of right-wing nuts waging war against the consuming class in America, it doesn't have the capital to spend.

So where do you propose we get spending to keep capitalism alive?
 
 
0 # Sallyport 2013-01-15 14:37
Since there's not all that much to choose between the two parties, maybe what we need is a wave of party-switching so that we can put up an array of moderate-to-rea sonable candidates to challenge the T-P-ers in primaries in 2014. They won;t have the big bucks, but they might exert some power through the polls.
 
 
+4 # mrb46 2013-01-15 15:09
Don't under-estimate the power of GREED.
The last time this came up, the market dropped off a cliff. Are you aware that members of Congress can profit from insider information? Bet those T-baggers made MILLIONS.
I lost about 18% of my meager retirement savings; I have regained about 9% of that, but I'm still down about 9% -- even with the market at near highs. How many Americans had the same (or greater) losses? Just another hit to the middle-class.
 
 
+5 # dick 2013-01-15 15:18
People LUV strong, principled leadership, even if they aren't so supportive of policy. Dems must define raising debt ceiling as paying bills for purchases already made. Be RESPONSIBLE; it's unavoidable anyway. EVERYONE in DC knows we won't default.
 
 
+2 # tabonsell 2013-01-15 18:24
It's been offered to Obama to require all members of the House to provide a detailed plan to cut $1Billion in government spending from his/her district; and only from his/her district. Then an examination is to be made to compare how much spending is done in each district and how much is raised in taxation. if a district gets $2 dollars in spending for each $1 in taxation the spending cut would be raised to $2Billion. If a district gets less in spending than it pays in taxes, its spending cuts would be revised downward.

Then send each congressman/wom an home to run for re-eletion on the proposed spending cuts and only on the spending cuts.If voters want those cuts to be made, they will re-elect that person. If voters don't want such spending to damage their home district they would elect someone new who would have to retract the spending-cut proposal. Let those fools who think a cut in government spending is a panacea for the problems they created put their political careers where their moths are.

So far there is no indication Obama has listened to anyone on this issue; or any other issue as well.
 
 
+1 # wrknight 2013-01-15 18:32
Why should the Republican party care about what the majority of Americans think? The majority of Americans don't decide who goes to Congress because the majority of Americans don't even bother to vote except in presidential elections. Besides that, their elections are paid for by corporations and big spenders, not the majority of Americans. Given that, why would Republican politicians give a damn about what the majority of Americans think?
 
 
0 # robcarter.vn 2013-01-15 21:14
if you can take from Capital account or Fort Knox reserve to bail banks and they just lend you back at massive Sovereign bond fees, you can just $1tr coin borrow from Capital account to finance or bail yourself FEE free in the expenses budget and destroy coin wen done = paid back to Reserves.
 
 
0 # robcarter.vn 2013-01-15 21:24
Can you declare war on Debt or war on creditors Buss style War on Terror or War on Islam, or war on drug .

Or state we pay debt first and so cant pay Politicians till problem solved?
 

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