The debt deal is bad economics, dishonest government, and surrender to blackmail. The alternative is not default, but government under the Constitution.
On the economics: by slowly choking off public services, public investment and regulation, the deal sets the economy on a path to strangulation. Every dollar cut from the budget, now or later, is a dollar less of private income. Less private income means less consumption, less private business investment, fewer jobs. Tax revenues will fall, and the deficits and debt will in the end not be reduced. The so-called "cloud of debt" will not lift. Contrary to the foolish claim made by the White House today, there is no magic by which "lifting a cloud of uncertainty" produces growth. There is no confidence fairy.
On dishonesty: the proposed cuts would reduce discretionary public spending as a share of GDP to what it was before the government had any major role in transportation, housing, education, safety, health, medical research or environmental protection. To where it was before the NIH or the CDC, before HUD, before the EPA, before OSHA, before the Department of Education. This is a false promise: those cuts cannot and will not be found. To promise them is to play to the gallery of the ignorant. To pretend that to make them would be good policy is to repudiate the entire past half-century. To make them would bring on a disaster, in many small and large ways, as the physical structures and legal and institutional protections built up over decades crumbled and fell apart.
On blackmail: This deal validates the making of real policy under the appearance of extreme threats. That process will not end here. And while Social Security, Medicare and Medicaid escaped in the first round, they are set up to fall in the second. The deal creates a new junta to force those cuts before the end of this year. The process is repellent, cruel, undemocratic, and designed to leave blood on the ground but not on anyone's hands.
And the alternative? Is it economic disaster? No.
The alternative is not default. No crisis need ensue. The Constitution forbids default -- not only on debt but also on pensions and on every public obligation of the United States. The Constitution is not a last resort; the 14th amendment is not obscure. It is the fundamental law, written in plain English. Debts, pensions and other obligations must be paid.
The true alternative is that the president will have to assert the authority he has so far ducked: his duty as president to defend the Constitution. He has that duty. He has that authority. He has the legal means to exercise that authority. If pushed to the last resort, he will have to do what the Constitution demands, and what he should have done from the beginning.
If the president cannot find the Constitution and the laws, then let the Democrats in the Senate show him where they are.
James K. Galbraith is a contributor to the New Deal 2.0 blog and the author of 'The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too'. He teaches at The University of Texas at Austin.
Wrong - every dollar spent by the government, is a dollar taken from a producing citizen, thus is a dollar less of private income.
I guess Galbraith gets his money from the government, and assumes that what we earn belongs to the government. But I'd prefer to keep my dollars rather than my dollars going to the government. They will certainly stimulate my spending and standard of living, much better than the recent government stimulus which stimulated the economy into a depression. But make me king, and I'm sure Gailbraith will change his mind when I start taking his income to spend it as I see fit. He'll no longer say that a dollar cut from spending is a dollar less of private income, because he won't be getting any income from the government if I'm king.
Spoken like a true downwardly mobile, left wing worker-class ideologue.
I have heard this argument for so-o-o-o long from so-o-o-o many folks who will never gain a Single Goddam Thing from the kind of policy you espouse except for another couple of six-packs and a carton or two more cigarettes a year, deteriorating roads, worse schools, reduced fire and police protection and the closing of public park lands.
The last one usually doesn't bother them though because they are working their asses off to stay afloat anyway and don't have time to visit a state or national park. They stay home instead and watch Rush and Hannity, finding all they need there. Besides, think of all the logs and oil we could get outta that land.
Must the People hire a private corporation to enforce the ethical conduct of government? If the justice department is too incompetent to recognize financial theft by misrepresentation maybe it's time to change the management. "Unethical" behavior in banking, when it deprives people of their valued property (like inflating the currency for example) , is theft. Failure to recognize, legislate, and enforce laws to discourage such malfeasance is beyond stupidity, it's conspiracy to commit theft. If the people we elected to run government did their jobs ethically, and actually abided by the Constitution, we'd see more corporate criminals in jail than unemployed druggies. And we'd all have jobs.
But better yet, keep government out of the business world, except when there are disputes and then the courts can get involved.
The Congress has already violated its self-imposed debt ceiling by authorizing expenditures over revenues that create that debt. The President is not in any way limited by the debt ceiling to borrow money if that money is used to pay debts, and not held in reserve.
We have already violated the debt ceiling. That ship has long sailed. But it was violated by equally legal acts of Congress. Thus, the debt ceiling really is superfluous, and has no power at all but is merely a symbolic statement by Congress of its intentions, which it can then, and often does, ignore.
Well that's all right then. And while we're at it, why not solve America's energy problems through a constitutional amendment revoking the laws of thermodynamics?
However, note the sentence: "He has the legal means to exercise that authority." That sentence is an oblique reference to the coin option, and it could also cover gold sales from the Treasury to the Fed, or perhaps other steps that have been suggested. Point being: the President could have beaten this legally without arrogating any additional power or breaching the debt ceiling.
I did not want to try to explain those things in this piece; I was congressional staff long enough to know what an attention-span is.
JG
My point is, our constitution is flawed and ineffective. It needs to be rewritten, but that's a long story. In the meantime Congress should suck it up and deal with these problems.
Think before you type.
The president has passed the buck to the House that has in turn passed the buck to the Tea Party that has in turn passed the buck to the Senate that has in turn passed the buck back to the president who has just signed off on surrendering to Tea Party demands.
We have enough money to pay these obligations without rasing the limit. We wont be able to pay for other important stuff. We should raise it. But your so called constitutional arguement is weak. I was in favor of it, but its on shaky grounds and does increase the executive power for the eventual future republican president which I assume you would hate already!!
Except that every dollar spent in the budget, now or later, is a dollar taken out of private income. The rest of this post ignores that very relevant fact, and is based on the assumption that government can somehow create money without ever having to take it from someone.
We all owe for roads, schools etc. Our public services are not overly expensive compared to other first world countries. We are the leader of the free world and should have first rate schools, good roads and infrastructure etc. You want people to visit AMerica from, say France, and soay to themselves "what a rundown place"? I don't--and I don't want to live in a run down place either.
the worker who provides this for us, without the expense of a corporation shareholders etc, is a good value for the taxpayer dollar.
I have freedom of speech not because the President "invoked" it, but because Its just the built-in law of the land as described in the 1st amendment. Why isn't the 14th amendment the same?
Or, if it must be "invoked" to take effect, can a citizen living under that Constitution invoke it? Or any Congressperson? WTF?
Finally, there is hostage situation only a leadership situation. This would not have happened under President Clinton, Bush or Reagan. You can disagree with their policies but they worked in bi-partisan congresses to get their chosen policies through. President Obama does NOT have a policy. He let two parties figure it out by themselves. This is not leadership and was totally predictable.