Quotes of the day

“The Republicans are being totally outmaneuvered. The House speaker appears disoriented. It’s time to act. Time to call Obama’s bluff.


“A long-term deal or nothing? The Republican House should immediately pass a short-term debt-ceiling hike of $500 billion containing $500 billion in budget cuts. That would give us about five months to work on something larger…
“If conservatives really want to get the nation’s spending under control, the only way is to win the presidency. Put the question to the country and let the people decide. To seriously jeopardize the election now in pursuit of a long-term, small-government, Ryan-like reform that is inherently unreachable without control of the White House may be good for the soul. But it could very well wreck the cause.”

***
“Standard & Poor’s (S&P) Ratings Services said late Thursday it has placed US sovereign credit ratings on watch for possible downgrade — saying the action ‘signals our view that, owing to the dynamics of the political debate on the debt ceiling, there is at least a one-in-two likelihood that we could lower the long-term rating on the US within the next 90 days.’

“S&P had already lowered its outlook on the US triple-A long-term rating to negative in April, but since then ‘the political debate about the US’ fiscal stance and the related issue of the US government debt ceiling has, in our view, only become more entangled,” it said, according to MarketWatch.’”

***
“So the credit-rating agencies that helped to create the financial crisis that led to a deep recession are now warning that the U.S. could lose the AAA rating it has had since 1917. As painfully ironic as this is, there’s no benefit in shooting the messengers. The real culprit is the U.S. political class, especially the President who has presided over this historic collapse of fiscal credibility.

“Moody’s and the boys are citing the risk of a default on August 2 as the proximate reason for their warning. But Americans should understand that the debt ceiling is merely the trigger. The gun is the spending boom of the last three years and the prospect that Washington lacks the political will to reduce it in the years to come…

“So now we have the inevitable showdown over the debt limit, which must be raised to pay for all of this spending. And Mr. Obama is blaming Republicans for being irresponsible because they won’t raise taxes in return for promises of modest future spending restraint. And some people even fall for it.”

***
“More broadly, [default could] mean that any victories achieved in 2012 would be superficial and Pyrrhic. The public would not trust either side to carry out its agenda. The next several election cycles would be extremely volatile. Prospects for independent candidates for president and for third parties, whether emerging from the center of American politics or from the wings, would improve significantly. And within the major parties, power would tend to transfer away from those who hold it…

“The stock market could drop by thousands of points. Some major corporations, particularly in the financial services sector, might go under. Although the consequences might take some time to filter through the broader economy, there would nevertheless be a number of immediate and extremely visible effects. Many voters would feel as though they had perfectly reasonable grounds to connect the dots.

“You’d have to weigh two things against each other: the additional damage to the economy, which is bad for the president all else being equal, and the additional ownership of the economy that Republicans would take for it, which is bad for them all else being equal. I don’t know which effect would win out, but it’s not a risk that either side should feel happy about taking.”

***
Via News Busters.

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7:46 AM | 0 comments

Time only for small ball

In retrospect, the notion of a grand bargain that included a reset of the debt ceiling, profound structural changes to federal spending, tax reform, and a rethinking of American military doctrine within a two-week period was fanciful at best, and more likely delusional, as I argue in my column for The Week. The Big Deal already ran aground on the shoals of tax hikes because the time frame didn’t allow for a better approach that would have allowed all sides to claim some victory in a comprehensive reform package. And that doesn’t even begin to include entitlement reform or Pentagon spending:

 Not only would the grand bargain need to resolve all of these issues, Congress and the president would have to solve them in a matter of days. With the debt ceiling deadline generally accepted as August 2, all sides want a resolution early enough to pass the bill and have it signed before that date to keep the markets from getting spooked. Even if the negotiators managed to agree on the particulars of perhaps the most complex fiscal reform attempted in decades within that period of time, Democrats and Republicans in Congress would want a full debate on structural changes that would be so extensive as to dwarf ObamaCare.

Obama would love to get the Republicans to provide cover for tax hikes, both to get them passed and to protect himself in the next election cycle. But in order to give them a reason to buy into changes that close targeted (so-called) loopholes, the White House has to give Boehner a way to sell it to his caucus. Republicans want sweeping reforms of the tax code, both in personal and corporate taxes that flatten and simplify the tax code in order to provide easier compliance and better predictability for investors. That kind of reform could pay substantial benefits to both parties; Republicans can take credit for lowered top rates, while Democrats could take credit for boosting revenues and promoting “fairness” through closed loopholes.


In fact, that is the kind of approach that Obama’s own debt commission recommended. However, that isn’t what Obama offered Republicans. He demanded tax hikes first, with promises for reform later, a position that puts the GOP entirely at odds with the pledges it made in the 2010 election, which voters across the nation endorsed. Republicans remember all too well another deal on spending cuts that required them to raise taxes first — the 1990 budget deal with the first President George Bush, whose “read my lips” pledge to stop new taxes got turned into a series of attack ads by Democrats in 1992. Republican leadership isn’t about to fall into that trap again.

In fact, isn’t it curious that even in this extremity — we’ll stipulate that the White House’s hysterical pronouncements on the upcoming default are certainly their reality — Obama hasn’t yet used the recommendations of his own debt commission? Republicans might not have liked the Simpson-Bowles plan much, mainly because of the tax increases, but it’s a much better basis for negotiations than anything Obama has offered since. Had Obama started negotiating on that basis in February, we might not be staring at the deadline of August 2nd at the moment.

Obama said he’s ready to listen to any serious proposals. How about the proposal his own blue-ribbon commission sent?
 
But even if he did start using Simpson-Bowles, it would take longer than a few days to write, debate, and pass, given the complexity of the bundled issues. These are the same issues over which Congress has fought for years. Who seriously expected all of these issues to get resolved simultaneously in a couple of dinner dates and a couple of days of floor debate? Even if Obama negotiated in good faith, we’d need the rest of the summer to hammer out the language, review it, and pass it. The answer to that is simple: pass a 90-day deal to extend the debt ceiling for breathing room. Obama flatly refuses to do so, which is why it’s fairly obvious that he’s either negotiating in bad faith, delusional, or both.

In that context, Mitch McConnell’s plan makes some sense, as flawed as it is:

Senate Minority Leader Mitch McConnell recognized that Obama might still try to walk away from even a moderate-scale deal, at least for a few days, in order to pressure Republicans into the tax trap. That’s why he floated what amounts to the nuclear option for both sides late Tuesday. Republicans would give up trying to control the debt ceiling for most of the next two years, in exchange for 1:1 cuts from Obama — but Obama would end up entirely owning the debt ceiling, the deficit, and spending for the 2012 election. Conservatives might not like this option for a number of good reasons, but if Obama refuses to drop his ultimatum for a commitment to $1 trillion in tax hikes now in exchange for gauzy promises to reform the tax code later, they may have no better way to set up the 2012 elections than to make Obama take responsibility for his own spending spree.

It seems very clear that these issues won’t get resolved by the present administration. The responsible action would be to secure American credit for the next two years and take it to the voters in 2012, with the burden on those who failed so badly to negotiate in good faith that they wouldn’t even put their own best proposal on the table.

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7:52 AM | 0 comments

Obama takes in $47 million in first fundraising quarter

No, it’s not the $86 million figure that’s been bouncing around since last night, at least not for Barack Obama’s re-election campaign specifically. Jim Geraghty explained in his first report that the more spectacular figure included money that Obama raised for the DNC. National Journal’s Reid Wilson got the specifics of what funds went into which coffer, but still calls the Obama result “staggering”:

President Obama‘s campaign will report raising a staggering $47 million in the past three months, his campaign manager said in a web video released early Wednesday morning.

That amount dwarfs the money raised in the last three months by the entire Republican field, underscoring just how great an advantage the incumbent will have over the eventual GOP nominee. Obama’s haul is well over twice as much as the $18 million the leading Republican, Mitt Romney, managed to pull in. …

The Democratic National Committee will report having raised an additional $38 million in the last three months. The two committees may raise money jointly through the Obama Victory Fund, an entity that allows donors to write checks for up to $35,800. That money is divided, with the first $5,000 of any contribution going to Obama’s campaign and the rest going to the DNC (The DNC must report their fundraising totals every month, meaning the committee will report raising about $14 million in June when they file their own reports).

The figure for Obama is staggering, all right, but perhaps not in the sense that Wilson means. As Geraghty explains, the figures fall well below what is needed for the pledged $1 billion pace, and even well below the pace needed to match Obama’s performance in 2008:

But again, to match his $750 million from the 2008 cycle, Obama would need to average $107 million for seven quarters. Obviously, [it] is possible that Obama can make up ground in the next few quarters. But to hit that hyped $1 billion number, Obama would need to raise a bit more than $142 million per quarter. As impressive as the $86 million figure is, it’s below those markers.

And $47 million is almost half of the pace suggested. It’s a pretty good number for an incumbent President, but comes just a little shy of George W. Bush’s 2003Q3 figure of $49.5 million. But if Obama ends up maintaining this pace through the next three quarters, he will have raised just under $200 million in time for the general election — not a piddling amount by any means, but not the kind of fundraising that most people believed we would see from Obama, either. At that point, Obama would have to raise $200 million a quarter to surpass his fundraising total of 2008, and closer to $270 million per quarter to hit the $1 billion mark.

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7:03 AM | 0 comments