How Big Will Obama Go on Debt Deal?
“So far, the president has only outlined an irresponsible budget that would impose a job-crushing $1.5 trillion tax hike, add $9.1 trillion to the debt over the next decade, and do nothing to address our autopilot spending. Instead, it locks in place the spending binge that has increased every child's share of the national debt to $45,000.”
-- House Speaker John Boehner in a USA Today op-ed.
On Wednesday, President Obama will make his case for the fourth increase in the federal debt ceiling since taking office.
The $1.9 trillion increase in borrowing power granted Obama in February 2010 is just about exhausted, and the president and his financial team have warned of a worldwide depression if Congress doesn’t extend the government’s credit limit in the next month.
Aside from backing a tax increase, there is little as unpopular that a president can do on fiscal policy than push up the debt ceiling. Voters in surveys overwhelmingly oppose the idea, even if it means a government shutdown.
Having just taken a pasting in the negotiations with House Republicans over funding the government for the rest of the fiscal year and facing much higher stakes, Obama is looking to get out in front on this issue. Republicans have made it clear that there will be no increase in borrowing power unless Obama is willing to back structural changes to the long-term structure of the federal debt load.
Obama is expected on Wednesday to call for a tax code overhaul to close loopholes on deductions and increase tax rates for upper income earners. He will also discuss his willingness to consider changes to the biggest drivers of the debt in the near term – Medicaid and Medicare.
The president punted on these questions in his own budget and Republicans seized the initiative with Rep. Paul Ryan’s budget proposal, leaving the president at a disadvantage on the increasingly important issue. The credibility gap hurt Obama in final negotiations over the spending levels for the current fiscal year.
Republicans are talking about a balanced budget amendment or the adoption of Ryan’s blueprint as the price Obama must pay for more borrowing power, outcomes that would be catastrophic defeats for the already struggling president.
That suggests that the president would be well served to make his request for more debt rather modest. If he asks for another $1.9 trillion, Obama might be on the hook for big concessions on spending.
But, if Obama doesn’t ask for at least $1.6 billion, he might be forced to ask for another bump before the 2012 election, not exactly a good campaign talking point.
Between now and Wednesday, the White House will be sketching out the scope of Obama’s initial offer on the debt ceiling. If it seems like the president is talking about broad, systemic changes, get ready for a big ask on debt and an equally large battle.
Liberals in an Uproar Over Obama Cuts Cave-In
“… did Mr. Obama have to celebrate his defeat? Did he have to praise Congress for enacting ‘the largest annual spending cut in our history,’ as if shortsighted budget cuts in the face of high unemployment — cuts that will slow growth and increase unemployment — are actually a good idea?
-- New York Times Columnist Paul Krugman
Good golly, liberals are unhappy with the deal President Obama made on funding the government for the final 25 weeks of the federal fiscal year.
There is deep discontentment with the size of the cuts – nearly $40 billion – and the priorities – trading a $300 million subsidy for Planned Parenthood, the nation’s leading abortion provider, for billions in cuts to other programs.
While Speaker John Boehner will have to deflect some potshots from his own caucus as the final details of the package emerge this week, the chance for an actual uprising seems much higher on the left.
Today, New York Reps. Jerry Nadler, Charlie Rangel, Carolyn Maloney, Eliot Engel and Anthony Weiner will take to the steps of city hall to denounce the Obama-Boehner deal and call for cuts to nonprofit subsidies to be rescinded. Other lawmakers are becoming more vocal in calling for the deal to be scrapped.
Remember, the vote on the legislation won’t likely be until Wednesday and a written version of the plan won’t emerge until late today.
Democrats are increasingly accusing Obama of selling out on core principles as part of an effort to boost his reelection chances. The split between Obama and congressional Democrats was made worse by the Boehner deal. Coming after Obama’s reversals on maintaining the current tax rates and holding military trials for terror suspects, the president’s spending slash has convinced many on the left that the time has come for a little community organizing.
When the deal language comes out today, watch for murmurs of disapproval on the right, particularly for those with other offices in mind for the 2012 election cycle. The real outrage and best chance for the deal to be blown up will come from the left.
Remember, if the deal breaks down this week, we go right back to a shutdown countdown.
Desert Rat Qaddafi Burrows in
“The brother leader [Gaddafi] delegation has accepted the road map as presented by us. We have to give a ceasefire a chance.”
-- South African President Jacob Zuma, leader of an African Union effort to negotiate an end to the Libyan civil war.
The problem with a cease fire in Libya is that someone has to enforce it.
Rebel leaders say that they cannot abide by any deal that leaves Col. Muammar al-Qaddafi in power, but as the ragtag force of Cyrenaican tribesman and Islamists continues to lose ground, their demands are of less consequence.
The African Union, which Qaddafi led in 2009, is trying to find a way to end the civil war, a peace plan that essentially sounds like granting the rebels autonomy over their territory in the eastern part of the nation.
The European powers which, along with Secretary of State Hillary Clinton, led the charge for Western entry into the war. The French, who are increasingly being drawn into the murderous civil war in their former colony of The Ivory Coast, sounded open to the idea of some kind of brokered settlement with Qaddafi.
The French, like the Italians and Spaniards, depend heavily on Libyan oil. The longer the conflict persists, the worse the interruption to production will be. A stalemate might mean a slower return to peak production, but it at least would stop people from blowing up pipelines, ports, etc.
With the conflict having deepened tribal divisions that have long rented the nation, partition seems the only viable option. A unity government seems unlikely.
As a primary combatant in the conflict, the U.S. will have something to say about whether a negotiated settlement with Qaddafi is acceptable. The downside: U.S. power would be necessary to enforce any cease-fire. The upside: it would further diminish the profile of an unpopular war effort.
With little appetite from president Obama for toppling Qaddafi and the rebels unable to do so, a long stalemate might be looking pretty good. One of the advantages about the president’s ambiguous language about the definition of success upon entering the war is that Obama can back a truce without making an explicit flip-flop.
Whatever the rhetoric, though, the idea of being fought to a draw by a costume-wearing weirdo with an army mounted on Toyota pickup trucks can’t be appealing to Obama.
Egyptian Uprising Now Aimed at Army
"We expect thugs to slip into the square and break up our ranks. So we must be vigilant.”
-- Cairo protester Mohamed Fahmy talking to Reuters about why he and his compatriots have barricaded themselves into Tahrir Square.
The heroes of the Egyptian revolution – the professional, American-trained military – are now being cast as villains by the leaders of a renewed round of protests in Cairo.
The Egyptian army maintains that it has not been using live ammunition to try to root out crowds – estimated in the tens of thousands and expected to grow to the hundreds of thousands -- now barricaded inside the famous Tahrir Square. But protestors say that the army is killing opposition figures and trying to protect the inner circle of former President Hosni Mubarak.
There is broad popular dissatisfaction with what has worked out to be a power-sharing agreement between the military and the Islamist groups who helped kick off the revolution in the first place.
The young Facebookers who captured the world’s imagination say that they have been marginalized and that real reforms have been squelched by a rapid transition and a lack of transparency.
The other despots of the region have learned from the fate of Mubarak – promises of incremental change will not keep you in power. In Syria, Saudi Arabia, Yemen, Bahrain, Oman and elsewhere, rulers have been willing to use force to keep order.
And as the civil war in Libya bogs down and the Egyptian protesters face off with their onetime allies in the country’s army, the lesson for the revolutionaries may be that it is better to stay home and tweet than it is to take to the streets.
The upshot for the U.S. though are fewer allies in the region and less clout with those who remain.
Rising Prices, Rising Interest Rates for U.S. Loans
"One gets a little bit depressed talking about it, but we are getting closer.”
-- Trilby Lundberg, whose firm tracks prices at 2,500 gas stations across the country, talking to Bloomberg News about the chances of $4 a gallon gas.
Experts expect the Treasury Department to pay a considerably higher rate to borrow money in bond sales this week as international investors brace for worsening inflation.
The most tangible example of this inflation is the price of gasoline – up 20 cents in the past month to a national average of $3.77 a gallon. Increased demand around the world coupled with Middle East unrest has pushed oil prices into the stratosphere.
When oil prices go up, that drives up the price of everything else – adding to the already existing inflationary trends in food and other staple items.
While there are concerns that prices rising so fast with growth essentially stagnant will kill off the stirrings of recovery – higher prices and flat wages mean less disposable income.
But the other consideration is that if the buyers of U.S debt see a weaker dollar ahead and the government has to pay more to float loans, interest rates for loans at home will increase too.