How Obama could ruin Republicans over the debt ceiling stand-off


by Sunny Hundal    
9:10 am - July 22nd 2011

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In just under two weeks, the United States government could shut down if Congress does not pass emergency legislation to raise the ‘debt ceiling’. To explain: the US has always had an upper limit on how much outstanding debt the government can accumulate, by law.

That figure is currently around $14 trillion and needs to be raised by 2nd August or the US govt shuts down and financial markets go into a tail-spin. This has happened before, during Bill Clinton’s Presidency.

Rather cleverly, President Obama has created a trap for Republicans and they seem to be falling straight into it. At this point, believe it or not, if the US economy shuts down – Obama benefits.

Here’s how.

The Republicans are ideologically opposed to raising taxes. In fact, most of them have signed a pledge that demands they don’t raise taxes overall. With pragmatic Republicans gone and largely replaced by highly ideological Tea-Party type Republicans – raising taxes is a strict no-no.

But Republicans also control the House of Representatives – which has to pass the bill before The Senate (controlled by Democrats) approves it or rejects it. Obama cannot pass any bill he likes – he can only pass a bill that Republicans first agree to.

So what do you in that situation?

Here is where I get frustrated with people like Glenn Greenwald – who accuse Obama of gutting social security by offering Republicans far too much.

As far as I can tell, the Obama game-plan is this: you make a highly generous offer to Republicans they simply won’t accept. He’s offering $3 trillion of cuts + $1 trillion of tax rises over 10 years. The Republicans are highly unlikely to accept this offer (even though its stacked in their favour) because they oppose the trillion-dollar tax rise, and big cuts to defence spending.

The problem for the Republicans is that polling shows most people think Obama is being much more reasonable than Republicans. So if a default happens – people will blame Republicans.

Republicans are hence caught in a bind: if they agree to increase taxes, they break their own pledges and annoy the hell out of their base. If they don’t – they lose independent voters.

The most likely outcome will be this plan to pass a bill allowing Obama to unilaterally raise the debt ceiling. That way they can wash their hands off any legislation to increase taxes while ensuring the economy does not crash. That would be a stunning and clean victory for Obama.

Rather than betraying the left – Obama has nearly pulled off a master-stroke at a time his hands are badly tied.

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About the author
Sunny Hundal is editor of LC. Also: on Twitter, at Pickled Politics and Guardian CIF.
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Story Filed Under: Blog ,Foreign affairs ,United States


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Reader comments


1. Tyler

Betraying the left?

The US has a simply enormous budget problem. Not least beacuse social security is about 15% of GDP now….(data was on zerohedge the othe day).

And let’s not forget, that even a majority of democrat voters don’t want the debt ceiling increased.

2. Left Outside

I’m sick of this 13 dimensional chess Obama trickery. Voters don’t want Obama to win, they want a recovery, if the economy tanks as a result of these schinanigans then Obama will be punished in 2012. The Republicans aren’t makign life easy, but Obama seems to revel in this political brinkmanship as some sort of electoral asset, its more of a distraction.

Tyler, the Republicans are the last people to sort out America’s budget woes. They simply don’t care about the deficit, as year after .

Reagan, Bush, deficit exploding budgets, unfinanced tax cuts, Medicare Part D, unfunded wars of aggression. Clinton brought a surplus, Obama’s affordable care act is a massive step towards fiscal balance.

“And let’s not forget, that even a majority of democrat voters don’t want the debt ceiling increased.”

Lets not forget that a majority favour tax increases on the rich…hmmm.

3. crossland

I haven’t followed this enough to say whether Obama’s plan is ‘cunning’ or ‘falling backwards into the best answer’.

the debt ceiling is a left over relic from being on the gold standard. Holding to it is a very damaging belief now that we live in a fiat money system.

still ,if the teabaggers won this and kept the debt ceiling , i spose we would get an empircal test that would demonstrate much clearer than in the Eurozone why Austerity economics are a good/bad idea.

I suspect though that as we saw in the crash – rightwingers in positions of power dont believe in free markets,debt ceilings etc when push comes to shove they dont let the market rip.
The GOP will find a way out of this also.

4. Tim Fenton

I see Tyler is duty troll today.

Even the Fox News poll shows 50% of Democrats would raise the debt ceiling:

http://www.foxnews.com/politics/2011/07/20/fox-news-poll-majority-against-raising-debt-ceiling/

which is an interesting interpretation of “majority”.

5. Tim Worstall

“He’s offering $3 trillion of cuts + $1 trillion of tax rises over 10 years. The Republicans are highly unlikely to accept this offer (even though its stacked in their favour) because they oppose the trillion-dollar tax rise, and big cuts to defence spending.”

It’s a “tad” more complicated than that. The tax rises are real and now. The spending cuts are maybes somewhere down the line. Not quite the deal you make out.

6. Luis enrique

I thought this was interesting:
http://marginalrevolution.com/marginalrevolution/2011/07/the-benefits-of-fiscal-illusion.html

LO judging by your comment, perhaps you’ve already seen this:
http://www.nakedcapitalism.com/2011/07/matt-stoller-elizabeth-warren-versus-barack-obama-on-leadership.html

But I’m never clear how things would actually turn out if Obama became the uncompromising progressive fighter everybody on the left seems to want him to be. How does that work with US process, US voters. Beats me.

7. scandalousbill

Tim Worstall,

You say:

“It’s a “tad” more complicated than that. The tax rises are real and now. The spending cuts are maybes somewhere down the line. Not quite the deal you make out.”

Actually, if you check your calendar, focusing upon November 2012, Sunny has a point, the move is quite astute.

8. Tim Worstall

“focusing upon November 2012,”

Perfectly happy to agree that it might be good politics.

But then I’m of that tribe who tend to think that good politics and good economics are somewhat incompatible.

9. Left Outside

But I’m never clear how things would actually turn out if Obama became the uncompromising progressive fighter everybody on the left seems to want him to be. How does that work with US process, US voters. Beats me.

Its the pre-emptive concessions that wind me up. Obama never sets out what best practice would be, then starts negotiating.

10. Watchman

This trap is only smart so long as the Republicans all blunder into it, and then don’t turn round and start pointing out that whilst they were in good faith (no, I don’t really believe that either…) negotiating for the future of the economy, the President was playing politics.

I doubt that Mr Obama really wants to be labelled as more interested in political gain than sorting out problems, and by playing up the trap, you push that interpretation (that is, the irony may be that if Mr Obama plays politics really well here and is recognised for it, then he will be punished for playing politics).

11. John Ruddy

@ Tim Fenton
“I see Tyler is duty troll today.”

I just got this image in my head of an early morning briefing…

“Tyler, you’re on Liberal Conspiracy, they’ve got something attacking republicans for opposing tax rises. Guy – you’re up on Labour List. Keep them pinned down there, they’ve been covering this Blue Labour immigration debate. Meanwhile, the rest of you are on Comment is Free. I know – but we need to flood the guardian with inane crap while they are on this phone hacking story.”

12. Richard W

The US does need massive changes to get their finances on a sustainable trajectory. The debt ceiling limit is silly and dubious whether it is even constitutional. However, the Republican posturing is the usual hypocrisy. Reagan presided over 19 rises of the debt ceiling and Bush the W presided over 9. Those two are first and second in the league table for raising the debt ceiling. The last Republican president to sign a balanced budget was President Eisenhower in 1957. Their fake outrage over debt like all their other outrages only exists when a Democrat is in the White House.

I feel sorry for Boehner having to try and hold together that bunch of extremest ideological zealots. The heart of the Republican Party now resembles more an apocalyptic cult than a political party.

13. Sunny Hundal

I’m sick of this 13 dimensional chess Obama trickery. Voters don’t want Obama to win, they want a recovery,

Sure, voters want that, but Republicans don’t want that. And they control Congress. So what could Obama have done otherwise?

The point isn’t about ‘trickery’ or ‘spin’ or whatever else people dismiss this stuff. The point is that you have to play the hand you’re dealt and Obama is dealing with the most obstructionist, ideologically driven Republican House for over a generation. What choices does he have?

14. Watchman

Sunny,

The point isn’t about ‘trickery’ or ‘spin’ or whatever else people dismiss this stuff. The point is that you have to play the hand you’re dealt and Obama is dealing with the most obstructionist, ideologically driven Republican House for over a generation. What choices does he have?

Well, he could just point out the key flaw at the heart of the Republicans (with the results that others have publicised here, that they will not balance budgets) – they are a combination of special-interest groups determined to keep their funding with radicals determined to cut spending (albeit they will normally be satisfied with taxation). Whilst the Democrats are not really much better in terms of special-interest groups, they are (unlike say Labour here) better at keeping them away from the agenda. Problem is, they are far more prone to tax and spend, which is not exactly useful for the US (even if you want to argue it works anywhere). Just remember, our (rather outdated) left-right divide is hardly ideal for understanding US politics anyway.

15. Sunny Hundal

Obama never sets out what best practice would be, then starts negotiating.

He did! He said he wanted a clean bill to raise the debt ceiling, without concessions on either side. But look at the polls – Obama is to the left of voters while Republicans vastly to the right

Well, he could just point out the key flaw at the heart of the Republicans

He has – repeatedly. He has attacked them repeatedly as the party that wants to protect subsidies for oil companies and tax breaks for corporate jets. This is why Republicans are losing public opinion.

16. Watchman

He did! He said he wanted a clean bill to raise the debt ceiling, without concessions on either side. But look at the polls – Obama is to the left of voters while Republicans vastly to the right

So a moderate Republican could walk right down the middle in 2012? The party may well back one to get rid of President Obama.

17. Adam

It doesn’t matter whether a majority of Democrats/Republicans/Americans don’t want the debt ceiling raised. It has to be done. The debt needs to be raised to make payments that Congress has already authorised, not to allow new payments to be promised.

If it isn’t raised then that’s it, it’s great depression time and if that happens then it doesn’t matter whether it’s Obama’s fault or that of the children who make up the Republican party in Congress; economics are blamed on the incumbent president.

Fair or not, the most reliable variable for whether a president is re-elected is personal income growth. If that’s falling when the election happens then the president is a goner, even if it’s because of an economic depression brought about entirely by the other party.

18. Sunny Hundal

So a moderate Republican could walk right down the middle in 2012?

Yeah good luck finding one.

19. Watchman

Yeah good luck finding one.

Ruddi Gulliani off the top of me head…

There’s plenty – only one of the main presidential candidates is a nutjob remember – one even pioneered state medical care in his state. Don’t let your prejudices get in the way of politics; the Republican candidate will not be a Tea Party member, although may well give some concessions to them. They will probably not be a rabid ‘pro-lifer’ or something like that either – if they are, President Obama has a second term.

20. Richard W

There are only two non-nutjobs who stand any chance of gaining the Republican nomination. Gulliani has no chance.

Huntsman is moderate but is hated by the primary voting base because he worked for Obama. Romney the Mormon is favourite to win but is not a born again. I suppose he could become a born again for the election. Perry who is second favourite is a fundamentalist Christian fruitcake.

Bachmann is nuts.

Palin is deranged. However, she would provide endless entertainment as she took stupidity to new levels.

Pawlenty changes his views every other day. Although, not to be left out he too is trying to pretend that he is fundamentalist crazy.

The rest do not matter.

What a state the Republican Party has got itself in when the only way to get the nomination is to be crazy or pretend to be crazy.

21. jungle

Watchman:

Have you actually observed any of the Republican primary race thus far?

They will get a fruitcake, or someone pretending to be one so fervently that they’ll have to at least act partly like a fruitcake in office.

Their base absolutely will not elect anyone else. They live in an extremist rage bubble. Deviation from orthodoxy is not something they tolerate. In this atmosphere, the idea a candidate would be nominated on a manifesto involving tolerating contraception, let alone abortion, is verging on the absurd. States controlled by them have been prosecuting women for having miscarriages. Seriously.

22. John Q. Publican

Watchman @19:

Which Overton window are you looking through which shows Guiliani as a moderate? He’s not a neo-con. He’s certainly not a moderate, look at his actual actions in office as Mayor of New York.

The policy shift at the RNC when Rove & co. took over left them dancing in the light of their burning moderates. If you spend 15 years pursuing an electoral policy of polarisation and destroying the middle ground in order to fire up your base, you end up with a political reality in which any heavy-weight moderates have been driven out by your rush to the right.

I’m also amused by the extent to which this whole issue is another instance of life imitating the West Wing…

23. azia

The fucking Bush Administration should be in prison for the mess they put the government in. The entire Republican party should be permanently shut down. I think war crimes trials as well as financial irresponsibility trials are in order. NO MORE CONSERVATISM!

24. Poller1

23. azia

azia, did you misplace your meds again? They must be somewhere in your mom’s basement!


Reactions: Twitter, blogs
  1. Liberal Conspiracy

    How Obama could ruin Republicans over the debt ceiling stand-off http://bit.ly/qstF3X

  2. Greg Eden

    How Obama could ruin Republicans over the debt ceiling stand-off http://bit.ly/qstF3X

  3. sunny hundal

    I think Obama is playing a blinder over the debt ceiling stand-off. Here's why – http://bit.ly/qstF3X

  4. TeresaMary

    But here's a different take on US debt: RT @sunny_hundal:I think Obama's playing a blinder over debt ceiling stand-off. http://bit.ly/qstF3X

  5. Liza Harding

    I think Obama is playing a blinder over the debt ceiling stand-off. Here's why – http://bit.ly/qstF3X

  6. Nicola Chan

    I think Obama is playing a blinder over the debt ceiling stand-off. Here's why – http://bit.ly/qstF3X

  7. Mark Braund

    RT @sunny_hundal: I think Obama is playing a blinder over the debt ceiling stand-off. Here's why – http://bit.ly/qstF3X Great piece!

  8. DJ SS

    I think Obama is playing a blinder over the debt ceiling stand-off. Here's why – http://bit.ly/qstF3X

  9. Jonathan Davis

    How Obama could ruin Republicans over the debt ceiling stand-off | Liberal Conspiracy http://bit.ly/n6xhvN (via @sunny_hundal)

  10. Paul Krishnamurty

    I think Obama is playing a blinder over the debt ceiling stand-off. Here's why – http://bit.ly/qstF3X

  11. George

    I think Obama is playing a blinder over the debt ceiling stand-off. Here's why – http://bit.ly/qstF3X

  12. Marcus A. Roberts

    “@sunny_hundal: I think Obama is playing a blinder over the debt ceiling stand-off. Here's why – http://t.co/fDSx2RP” <here's hoping!

  13. sunny hundal

    “@sunny_hundal: I think Obama is playing a blinder over the debt ceiling stand-off. Here's why – http://t.co/fDSx2RP” <here's hoping!

  14. sunny hundal

    What's going on with US debt-ceiling stand-off? Let me explain why Republicans will cave to Obama http://t.co/tsPfSZC

  15. Caliph of Zephyrs

    What's going on with US debt-ceiling stand-off? Let me explain why Republicans will cave to Obama http://t.co/tsPfSZC

  16. Sam Liu

    How Obama could ruin Republicans over the debt ceiling stand-off | Liberal Conspiracy http://t.co/5Tp3fDa via @libcon

  17. John Warrender

    What's going on with US debt-ceiling stand-off? Let me explain why Republicans will cave to Obama http://t.co/tsPfSZC

  18. Frances Coppola

    RT @saipang: How Obama could ruin Republicans over debt ceiling stand-off | Liberal Conspiracy http://t.co/5Tp3fDa <<interesting #gfc2

  19. Andy Bean

    RT @saipang: How Obama could ruin Republicans over debt ceiling stand-off | Liberal Conspiracy http://t.co/5Tp3fDa <<interesting #gfc2

  20. Pyrmontvillage

    What's going on with US debt-ceiling stand-off? Let me explain why Republicans will cave to Obama http://t.co/tsPfSZC

  21. The Dragon Fairy

    RT @saipang: How Obama could ruin Republicans over debt ceiling stand-off | Liberal Conspiracy http://t.co/5Tp3fDa <<interesting #gfc2

  22. Itsmotherswork

    MT “@sunny_hundal: What's going on with US debt-ceiling stand-off? Why Republicans will cave to Obama http://t.co/hdj3pzZ ”

    Really?

  23. Chris

    What's going on with US debt-ceiling stand-off? Let me explain why Republicans will cave to Obama http://t.co/tsPfSZC

  24. Richard JB Kay

    What's going on with US debt-ceiling stand-off? Let me explain why Republicans will cave to Obama http://t.co/tsPfSZC

  25. James Stanhope

    RT @saipang: How Obama could ruin Republicans over debt ceiling stand-off | Liberal Conspiracy http://t.co/5Tp3fDa <<interesting #gfc2

  26. Marcus A. Roberts

    “@sunny_hundal: What's going on with US debt-ceiling stand-off? Let me explain why Republicans will cave to Obama http://t.co/fDSx2RP” <yes

  27. Gus Baker

    Great article by @sunny_hundal on Obama and the debt ceiling http://t.co/tiVR0jb

  28. Frank Spring

    “@sunny_hundal: What's going on with US debt-ceiling stand-off? Let me explain why Republicans will cave to Obama http://t.co/fDSx2RP” <yes

  29. Eileen Left

    How President Obama could ruin Republicans over the debt ceiling stand-off
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  30. cozella

    How President Obama could ruin Republicans over the debt ceiling stand-off
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  31. Joan Danenberg

    How President Obama could ruin Republicans over the debt ceiling stand-off
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  32. Donna

    How President Obama could ruin Republicans over the debt ceiling stand-off
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  33. Mojo Uprising

    How President Obama could ruin Republicans over the debt ceiling stand-off
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  34. Herbert Pimlott

    How President Obama could ruin Republicans over the debt ceiling stand-off
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  35. Progressive Warrior

    How President Obama could ruin Republicans over the debt ceiling stand-off
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  36. B.L. McMillan

    How President Obama could ruin Republicans over the debt ceiling stand-off
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  37. backbeat

    How President Obama could ruin Republicans over the debt ceiling stand-off
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  38. INTL.Revolver

    How President Obama could ruin Republicans over the debt ceiling stand-off
    http://is.gd/iFmZQy #p2 #OFA #DFA #PDA #gopFAIL #ProgCa

  39. Catherine

    How President Obama could ruin Republicans over the debt ceiling stand-off
    http://is.gd/iFmZQy #p2 #OFA #DFA #PDA #gopFAIL #ProgCa

  40. cecil berry lee

    How President Obama could ruin Republicans over the debt ceiling stand-off
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  41. cecil berry lee

    How President Obama could ruin Republicans over the debt ceiling stand-off
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  42. cecil berry lee

    How President Obama could ruin Republicans over the debt ceiling stand-off
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  43. cecil berry lee

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  44. cecil berry lee

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  45. Ms. Núñez

    How President Obama could ruin Republicans over the debt ceiling stand-off
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  46. Fran Joy

    How President Obama could ruin Republicans over the debt ceiling stand-off
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  47. Art Pressley

    http://t.co/DxgmnhV Leftist thinking like Odrama

  48. sunny hundal

    @TenPercent on the table doesn't mean much. There's no deal until EVERYTHING is agreed on http://t.co/tsPfSZC

  49. haynony mouse

    RT @sunny_hundal: I think Obama is playing a blinder over the debt ceiling stand-off. Here's why – http://bit.ly/qstF3X Great piece!

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    [...] week Sunny told us that he was frustrated with people like Glenn Greenwald who think Obama is giving away too much in [...]

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    [...] couple of weeks ago I said President Obama had the Republicans over a barrel in the debt-ceiling negotiations. But it turns out I over-estimated Obama prowess as a negotiator [...]





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