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Sunday, December 30, 2012

Worse than the cliff

We're facing a problem that's worse than the fiscal cliff (which we are going over): In February, Congress must raise the debt ceiling or the economy will shatter. Senator Lindsay Graham says that he will destroy the economy if he doesn't get his way on Social Security. He wants to see the retirement age raised, and he also wants chained CPI, along with some other nasty stuff.

This is blackmail, pure and simple.

Fixing Social Security is easily done: Just raise the cap. Republicans won't contemplate that approach, alas, so they are going to force through utterly unpopular "solutions." It's clear that they want any change in the retirement age to occur under a Democrat's watch.

I don't see what can stop Graham and his cohorts from accomplishing this goal.

Krugman's predictions:
So what we’re probably looking at over the next few months is an epic confrontation. Maybe Obama wimps out — in which case he’s effectively surrendered the presidency to Grover Norquist; maybe GOP leaders back down, but then face a civil war within their own party; or maybe we’ll have a vast, rolling crisis that won’t truly be resolved until the 2014 elections.
What to do? What to do?

Quite a few people (including our friends at Corrente) have flirted with the "trillion dollar coin" notion. But there are a lot of reasons to take a skeptical attitude toward that solution.
The Trillion Dollar Coin is the name given to a proposal that would enable the US Treasury to avoid the restrictions legally put in place by the congressionally mandated debt ceiling. The idea behind it is disarmingly simple: If you don't have the money, and you can't borrow it, just make it up! Rather than adhere to long-established and institutionalized procedures for issuing debt when the government's projected outlays exceed its revenues (which would increase the debt beyond the debt ceiling), it is proposed that the Treasury seize upon a legal loophole that would enable it to spend unlimited amounts of money without having to suffer the inconvenience of incurring debt.
I agree that this is a risky, drastic, downright absurd measure. But if Congress refuses to pay our debts, what are our options?
I wouldn't worry about it, allowing the amount of money to come under democratic control is not on the agenda.

Personally, I think it would be a good idea, it's like the opposite of the gold standard. But it's not the sort of thing the current owners of capital would allow to just slip through.

I don't see what can stop Graham and his cohorts from accomplishing this goal.

You're making the patently false assumption that someone in a position of authority wants to stop them.

If Obama were a Democrat, he'd do what the last Democratic President did when the Republicans tried to blackmail him. He'd call their bluff and shut the government down.

He won't do that, of course, because he's been promising to "reform entitlements" since he was a candidate. He and Graham are pretty much in agreement.
It has long been rumored in Washington that Lindsay Graham and Mitch McConnell share a secret that would render both of them unelectable. If they don't back down on their threats, Obama should pull them aside and counter with a threat to open the closet.
This is another round of GOP economic terrorism--give us what we want or we'll blow the house down. Someone should refer these men to William Black, who is not some starry-eyed liberal but is probably the best authority on accounting fraud and financial crime. He was the main forensic auditor during the S&L scandal and takes no prisoners when it comes to calling thugs out. Using the 'nuclear option' on the debt ceiling is the same ridiculous suggestion The Donald made on Fox Entertainment--the man doesn't miss a chance for personal PR and general asshollery.

This is nothing more than blackmail at the expense of the country's credit worthiness. They would rather see the US default than give an inch. Congress is constitutionally obligated to pay the country's debts, which is what the debt ceiling is all about. What the likes of Graham suggest publicly flirts with treason.

William Black's comments on this are here:

Black worked with Poppy Bush, back in the day when we still believed The Rule of Law was something worth preserving. I have very little faith that POTUS will hold the line on this [he does have options]. But if he caves here, he will only cement his legacy as a Major Frontman for the MOTU.

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