Terms of Debt Limit Debate Still in Flux
-- Approximate amount of borrowing power the federal government has remaining under the current debt ceiling.
Congress is in recess and President Obama is campaigning and fundraising in California, but the government is less than 10 days away from what administration officials have deemed an economic Armageddon.
Is the federal debt ceiling not as big a deal as we’ve been told? Can Treasury Secretary Tim Geithner begin to slow down borrowing to extend the deadline? Or is there just a serious lack of urgency here?
The federal government borrowed $3.8 billion on Tuesday. That’s the last day’s data available and fairly typical for a government that borrows about $125 billion a month – approximately 40 cents of every dollar it spends.
The current cap on federal borrowing is $14.29 trillion dollars, last increased by $1.9 trillion in February of 2010. The government’s debt is now something like $14.26 trillion. If borrowing remained at a steady clip, the government would exhaust its remaining $33 billion in credit sometime on April 29.
The first scheduled meeting of Vice President Biden’s bipartisan negotiating group isn’t set until May 5. Seems like they should have checked the calendar, yes?
House Republicans are itching to get the fight going. House Majority leader Eric Cantor, tapped by Speaker John Boehner to represent the House GOP in the Biden negotiations, said Wednesday that “…if the president and our Democratic colleagues refuse to accept serious reforms that immediately reduce federal spending and end the culture of debt in Washington, we will not grant their request for a debt limit increase.”
This is the strongest suggestion yet from Cantor that he is willing to actually say no to the Obama request.
But we don’t know exactly what the request is. Geithner has declined to give an exact date for the “calamity” he has foretold, rather saying that it will be sometime between the end of April and the middle of May. He has also declined to tell members of Congress how much more money he wants the authority to borrow, suggesting that they should decide that themselves.
The president is raising money from Silicon Valley and Hollywood, Congress is on Easter break until May 2 and Geithner, the guy who does the borrowing, won’t even say how much he wants. What the heck is going on here? Is this an Armageddon-calamity-disaster-worldwide depression thing or not?
First, the administration has considerable latitude when it comes to borrowing. How much it borrows and which dollars it spends first have a lot to do with how fast the president wants to gnaw through his credit limit.
Second, it helps Democratic negotiators for the discussion to take place as close to the cliff as possible. The less time for dickering and the closer the crisis, the easier it will be to paint Republicans as risking the destruction of Western civilization as we know it.
But reaching the debt ceiling initially means that the government can’t keep borrowing that $3.8 billion a day. It doesn’t mean defaulting on federal loans and creating the credit Armageddon of which the White House has warned. It just means that government has to operate on about $8 billion a day instead of $12 billion.
But since the $8 billion would have to include paying interest on money already borrowed, which varies by day depending on bond maturations, etc., the available pool of cash to operate the government might be as little as $5 billion or $6 billion per day.
The administration is negotiating over the debt-ceiling bump on the assumption that as soon as the government can’t operate at full bore borrowing it will blow up its credit rating and default on its obligations.
Republicans, instead, are negotiating from the perspective that not raising the debt ceiling means the federal government will have to shut down half of its operations to continue to meet its obligations. By Republican estimations, that half government could go on operating while negotiations continued over the full package.
Whichever side wins this framing round of the debate – immediate crisis threatened by Obama or the partial shutdown offered by the Republicans – will have the upper hand in the debt deal. Here, the administration has the initial advantage because Geither has so much latitude in arranging spending and debt obligations.
To minimize his advantage, House Republicans will be trying to pin down the administration on the specifics – when the ax will fall and how much the president wants – in a bid to get the negotiations jumpstarted.
Perhaps the president hasn’t noticed the impending doom of which he has warned. More likely, the administration understands that calamities of which it has warned are not so imminent as suggested.
The magic moment in all of this will be Monday, May 2 when Congress gets back to work and the bipartisan Gang of Six in the Senate unveils its plan. If that sucker doesn’t get off the ground quickly, May will be an ugly month in Washington.
Talking Point Alert: Obama Looks to Recast “Big” and “Small”
“... a vision where everyone has a chance, no matter whether they came on a boat to Ellis Island, or on slave ships, or came across the Rio Grande.”
-- President Obama talking to donors at a San Francisco fundraiser about his vision for the country.
When President Obama tells his audiences in California that he’s glad to be there instead of Washington, that’s likely no stump-speech exaggeration.
Where else can Obama go and tell high earners he wants to raise their taxes and hear, as Facebook CEO Mark Zuckerberg said, “I’m cool with that.” Not what he’d likely hear from a hardware store owner in Ohio who made $251,000 last year.
Obama told Zuckerberg that people like them can afford to pay “a little more.” Zuckerberg politely declined to point out that he (2010 salary $3 billion) and Obama (2010 income $1.7 million) aren’t so similar when it comes to their finances.
The president seems much looser on his California trip than in Washington. Rather than the snappish responses of his last round of local television interviews before hitting the campaign trail, Obama sounds buoyant and energized.
It likely helps that he is in very friendly territory. His approval ratings in the state regularly run close to 60 percent, the kind of numbers he enjoyed nationally during his first four months in office. Plus, Obama is talking to the elites of the technology and entertainment industry, sectors in which approval for the president is near universal.
Out on the trail, Obama is trying out some new material with his friendly crowds. A theme that one can see developing is Obama describing his agenda as “big” and the Republican agenda as “small.”
This plays nicely off of the Republican mantra of “small government” and allows Obama to paint himself as the optimist for 2012. We heard the lines several times on Wednesday and will likely hear more today.
Here’s one of the “big and “small” riffs from Wednesday’s pool report:
"I am a congenital optimist when it comes to this country and I do not accept a vision that says America gets small, where suddenly we can't build a world-class smart grid, or we can't build the best ports and airports or we don't have the best scientific research or our kids can no longer access the best universities unless they're well-off or we can't afford to look after people who are the most vulnerable in our society, or we can't provide a guarantee to our seniors that they're gonna be cared for after a lifetime of hard work."
Obama coupled the new “big” versus “small” lines with more bare-knuckled partisan shots at the GOP, calling the Republican budget proposal “radical” and lacking in courage.
While Obama did allow that House Budget Committee Chairman Paul Ryan was “a patriot,” softening his previous allegation that Ryan is “not on the level,” Obama seems to be fully embracing his accusation that Republicans are “small” and that he is “big.”
But this is a dangerous rhetorical loop-de-loop – the kind of stunt flying that Obama often favors. For example, on Wednesday, he told a crowd that he “hated to be parochial,” but that he wanted America to have the best railroads, Internet access and green technologies.
Most folks would think that it was patriotic, not parochial, to want your country to gave good stuff. By referencing his own concern that wanting better railroads for America lacked a truly global concern, Obama likely left a lot of folks out of what could have been a simple expression of national pride.
As Obama looks to turn the “big government” versus “small government” argument into a “big America” versus “small America” discussion, he will likely lose a lot of people along the way. For many concerned about the size and cost of government, Obama’s rhetorical jujitsu will only reinforce their suspicions that he is a big government kind of guy.
Today Obama stops by for a campaign-style event in Reno, Nev. He will be at ElectraTherm, a company that makes mini power plants that allow companies that produce excess heat through industrial processes to generate electricity.
After that, Obama is heading to L.A. to continue his fundraising blitz, this time shutting down west L.A. at rush hour for an event at Sony Pictures with the Tinseltown rank and file and then to the trendy Tavern restaurant for some serious fundraising with the entertainment elite.
Look for more of the “small” talk as he continues his trip.
And Now, A Word From Charles
“I think the question about Obama is why is he doing this sort of hands-off interventionism [in Libya]? Number one is, I think because he believes America ought to be in the non-leadership role. This is going to be his experience and demonstration of how it can work sort of hyper multilateralism. But the other reason is… it insulates him on the domestic front. On that he is succeeding, but it's a hell of a way to run a war.”