GOP May Blow Off Obama’s Debt Limit Demand
"Put up or shut up.”
-- Gov. Chris Christie, R-N.J., on “FOX News Sunday” encouraging Republicans in Congress to block a requested increase in the federal debt limit.
Republicans are trying on for size the possibility of actually saying no to a pending request from the Obama administration to raise the nation’s debt ceiling, despite warnings of an economic “catastrophe” worse than the Panic of 2008 if no action is taken.
The idea is gaining momentum and sets up a huge fight and a potential government shutdown. It will also prove embarrassing for Obama to have the discussion about rejecting the increase while the leader of America’s biggest creditor, China, is in town for a state visit.
Chinese President Hu Jintao will be Obama’s guest this week, and the federal government owes China’s government-controlled banks about $1 trillion. Hu has expressed concern in the past about America’s ability to meet such staggering debt obligations, causing jitters among other lenders, who together provide about 40 cents of every dollar the U.S. government spends.
If Republicans are serious about brushing off Obama’s demand to add to the current $14.3 trillion limit, which was bumped up by $1.9 trillion less than a year ago, it will not reassure Hu and the Chinese lenders that American debt is a safe haven anymore.
And Republicans may be getting serious. Polls show Americans hate the idea of borrowing more, even if it is to meet existing obligations. Add in the Tea Party 'tude of the new GOP House majority and rejecting the president’s request starts to look like a real possibility.
Even establishment Republicans behind closed doors are now talking about the possibility of waving off the Obama request, an idea that would have been unthinkable to many just a month ago.
New Jersey Gov. Chris Christie and former Minnesota Gov. Tim Pawlenty were just the latest GOPers to give voice publicly to the opposition in their appearances on “FOX News Sunday,” but they are important voices.
Christie adds some spice as the current idol of fiscal hawks across the land. He called for the GOP to refuse Obama and urged national Republicans to do what Newt Gingrich and the 1994 revolutionaries failed to do and bring the public into the process early on – to say “This is what we are doing, and this is why.”
Pawlenty, a sober and serious political player, adds additional credibility to the move. And he has also articulated a way for Republicans to avoid a total budgetary calamity if they refuse. What Pawlenty recommends is for Congress to put American obligations in sequential order so that bills that must be paid, like interest on existing debt, payrolls, etc., get paid first and long-term obligations, like planned stimulus projects and other work not underway, gets pushed off.
Pawlenty argues that Congress should oblige the president with an early answer on the debt ceiling, but tell him no. Then turn to managing the fallout so that instead of a dramatic shutdown, there would be a priority shift that wouldn’t affect most Americans.
It would be a tricky turn for Obama. While Bill Clinton may have succeeded in his budget showdown with Republicans in 1995, Obama isn’t asking for Congress to appropriate.
Obama is pushing more borrowing, a very unpopular position. And having made a big show as a senator of refusing to vote for President George W. Bush’s request for more borrowing, Obama will have a harder time denouncing political gamesmanship in his opponents.
China Prez Bucks the Dollar Ahead of U.S. Visit
"The current international currency system is the product of the past.”
-- Chinese President Hu Jintao to The Wall Street Journal on the dollar’s status as the medium for international business.
At the top of the list for President Obama during Chinese President Hu Jintao’s visit to Washington this week is getting China to allow the value of its currency to rise. It’s part of Obama’s bid to juice American exports and a big political priority.
But Hu has upped the ante by pushing his own currency beef with the U.S. ahead of the visit. In an email interview with the Wall Street Journal, Hu slammed the weak U.S. dollar, which has been strained by huge deficit spending and liberal monetary standards at the Federal Reserve aimed at stimulating the nation’s economy.
Hu has long sought to depose the dollar as the standard currency for international trade, and will use the trip to make his case that greenbacks aren’t strong enough to be the world reserve currency. His plan, backed by other emerging economies like Russia and Brazil, is to have a new global trade currency not subject to the same vagaries as the dollar.
The current policy at the Federal Reserve of printing money to buy up undesirable federal debt hurts China in another way. The purchases push down the rates paid on U.S. Treasury bonds, and since China is America’s main creditor, that means less profit from U.S. debt.
Obama wants Hu to get China to stop manipulating China’s currency downward so that American exporters have a shot at China’s rapidly expanding market. The Chinese currency scheme is aimed preserving at the mainstay of the communist nation’s economy – dumping cheap manufactured goods on Western markets.
But it may be immaterial.
China is currently beset by the start of what may be debilitating inflation. The country engaged in a much larger government intervention that the U.S. did in the aftermath of the Panic of 2008. China’s 8 percent economic growth has largely been a result of government intervention – a sugar high.
Now, prices are rising fast in China amid fast growth and rising demand for energy and food. It’s the same problems that economists foresee for America, just on a much larger scale. Europe is already experiencing the beginnings of the inflationary wave, but China is farther down the path.
So, Hu may not be able to do much to increase the value of his currency as inflation takes hold. Plus, it is unclear how much clout the lame (Peking) duck has. Hu is out after this year and China’s military and economic leaders are making it clear that the ChiComs are tuning Hu out.
But Hu may yet succeed in undercutting the dollar’s status as the global reserve. The American currency has looked very shaky of late, and the Fed’s cash pumps have unsettled countries around the world. Printing money to buy your own debt does not imbue markets with currency confidence.
And here’s the uh-oh moment for Americans. One of the reasons that the dollar is still valuable has been its position as the international standard. If that goes away, the dollar will tumble and Americans will find that their paychecks don’t go nearly as far.
Palin Plunges Ahead Amid Post-Tucson Threats
"The police have told me that I had better not go to any large events right now. It wouldn't be safe."
-- Trent Humphries of the Tucson Tea Party on the death threats he has received since the assassination attempt on Rep. Gabrielle Giffords, D-Ariz.
Sarah Palin’s interview on “Hannity” tonight will be appointment television for the national press corps.
The former Alaska governor’s video last week defending her right to political engagement in the wake of accusations from the left that she was responsible for six murders in Arizona was already endlessly dissected.
Now, the Palin-obsessed press will have new footage to pore over as she sits down with Sean Hannity to talk about the shooting of Rep. Gabrielle Giffords, D-Ariz., and the state of the public debate.
It comes as new threats against Tea Partiers and conservatives emerge, confirming fears on the right about the consequences the widely discredited effort by liberals to blame Republicans for the shooting, now believed to be the work of a deranged 22-year-old without an identifiable political affiliation.
The concern is that the misplaced blame will cause radicals to believe that conservatives have resorted to political violence and respond in kind.
One of the shooting victims disrupted an ABC taping with Tea Party members in Tucson on Saturday shouting, “You’re dead!” J. Eric Fuller, a Giffords supporter shot in the knee in the attack, was arrested and held for a brief mental health evaluation.
Palin and other high-profile conservatives blamed by liberal commentators for the attack have reportedly been subject to an increase in death threats since the shooting.
The effort to exploit the shooting by some on the left may have the very effect that the liberal commentators were warning of when they attacked Palin for using crosshairs on a Web graphic.
Their intemperate rhetoric may have inflamed the hostilities of the unhinged members of their political movement.