Will Obama Stand Up to Republican Threats to Blow Up the Economy?

05/13/2011 02:40 pm ET | Updated Jul 13, 2011

Virtually unanimously, Americans cheered President Obama for giving the order to send Navy SEALs to get Osama Bin Laden. We applauded the physical courage of those Navy Seals who risked their lives to carry out the raid.

But it also took political courage by President Obama to order the raid -- Sending Navy SEALs to cross hundreds of miles of Pakistani territory without alerting Pakistani authorities that their air defenses were being breached could easily have ended in disaster with American helicopters shot down and Navy SEALs killed or wounded. If the mission failed -- as Jimmy Carter's mission to rescue the American hostages in Iran failed despite the best intentions -- such failure could have destroyed Obama's Presidency, much as Carter's failure helped pave the way for the election of Ronald Reagan. Obama had the political courage to do the right thing to defend America, whatever the political risk.

The question is, will President Obama show similar courage in defending the nation against those who threaten to blow up the American economy -- indeed the global economy -- if he doesn't give into their demands to slash Medicare and Medicaid, as he did in going after than man responsible for blowing up the World Trade Center?

And make no mistake about it, that's exactly what Congressional Republican leaders are doing -- they are taking the economy hostage and threatening to blow it up if their demands to eviscerate Medicare, Medicaid and other programs vital to the middle class and the disadvantaged are not met.

If Republicans actually follow through on their threats and the US government defaults on its debt, worldwide credit markets will freeze, stock markets around the world will plunge, businesses will stop investing, millions will lose their jobs, and the global economic crisis will dwarf the fiscal crisis of 2008 that led to the federal bailout of the banking system to prevent global depression.

The rule in dealing with hostage takers is that you don't negotiate their demands. If you give into even some of their demands in exchange for releasing hostages, they will just learn that hostage-taking works and they or others will keep come back to take more hostages the next time they want something. Obama must have the courage to treat Republican demands to refuse to raise the debt limit and let the economy blow up in the same way he would treat other hostage takers. No negotiations!

Once the debt ceiling is raised, if negotiations are necessary to pass a budget, that's another matter. But if Obama starts down the road of negotiating with Republican leaders on cuts to Medicare, Medicaid and other government programs in exchange for raising the debt ceiling, the Republicans (whose long-term goal is to abolish Medicare and Medicaid) will already have won. Their demands will just keep escalating right up until 11:59 before the government will default on its debt and Obama will have little choice but to give into more and more of their demands.

Unfortunately, President Obama has already started down the road of negotiating with the hostage takers, sending Vice President Biden to meet a "bipartisan" group of Congressional leaders to try to negotiate a deal. Predictably, Republicans immediately escalated their demands. Senate Minority Leader Mitch McConnell rejected a clean vote on the debt limit, demanded "significant" cuts to Medicare and Medicaid in exchange for raising the debt limit, and took tax increases on absolutely anyone off the table. House Speaker John Boehner told the Economic Club of New York, "Without significant spending cuts and reforms [code for cuts to Medicare and Medicaid]...there will be no debt limit increase."

If President Obama even continues negotiations on this Republican ground, the hostage takers have already won. Since half of the Federal budget is for Social Security, Medicare, Medicaid and other insurance programs, a quarter is for the military, and a quarter is for everything else the government does, if you take defense cuts and tax increases off the table and demand trillions in spending cuts, the only place get enough cuts is from Medicare, Medicaid and Social Security. This is the only conceivable result of negotiating on these terms with the Republican hostage takers.

If President Obama doesn't want to go down in history as the Democratic President who began the dismantling of the signature Democratic achievements of Medicare, Medicaid and Social Security, he must have the same courage in standing up to Republican hostage takers as he did in going after Bin Laden. He he must hold firm and make clear that there will be no negotiations on cuts to these core programs -- cuts which are opposed by the vast majority of the American people -- in exchange for Republican votes to raise the debt ceiling.

Republican leaders can threaten away to refuse to raise the debt ceiling and blow up the economy. But if Obama actually stands up to them, they will never follow through on their threats. Their corporate funders will never allow them to -- As much as America's corporate elite may want to keep their taxes low by cutting programs for the middle class and the poor, they are not suicidal. They will not allow Republican (and Democratic) politicians whose campaigns they fund to send the economy into a global depression by defaulting on the Federal debt. Indeed on Wednesday, 62 leading business groups--including the Business Roundtable, The American Gas Association, The Telecommunications Industry Association, and the Association of American Manufacturers--sent a letter to Congress asking them to raise the debt ceiling and warning of the dire consequences to the economy if they don't. These are the corporate interest groups who fund the Republican Party and from whom ultimately, Republicans take their orders.

If Obama stands firm, he will win. He must make it clear that he won't negotiate with hostage takers. No retreat! No surrender!
UPDATE: On Friday the US Chamber of Commerce sent a letter to all members of Congress stating that "The Chamber urges Congress to raise the debt ceiling as expeditiously as possible". From 1989-2010 the Chamber made $31,333,791 in direct political contributions (85% to Republicans), not counting tens of millions more in Republican-leaning issue advertising not directly to candidates, and from 1997-2010 spent $515,565,445 on lobbying. When the Chamber says "jump", Republicans in Congress say "how high?" This just underscores the fact that if Obama has the political courage to call the Republicans' bluff on the debt ceiling and refuses to negotiate cuts to Medicare, Medicaid and Social Security in return for their voting to raise the debt limit, the Republicans will fold.