We Need to End The Debt Ceiling Distraction – Now

By Dan Kervick

The debt ceiling standoff is a massive national distraction, as is the rampaging blogospheric discussion of the standoff and its various possible resolutions.   I am convinced that both the White House and Congress are eager to keep the debt ceiling debate and conflict alive to distract the country from a much more important reality: that they are currently negotiating the final shape of an economically punishing and magnificently stupid austerity package that will be substituted in for sequestration cuts due to take effect in March.   The austerity package is Washington’s obsequious response to the disaster capitalism cattle stampede that has been urged on by Pete Peterson, Fix the Debt and affiliated groups of debt hysterics.  Whatever combination of tax increases and spending cuts are finally accepted, the result will be to tie a fiscal cement block amounting to about 1.5% of GDP to the legs of an economy that is barely treading water.

But on the odd chance that the White House is actually serious about bringing a quick end to this standoff, the President should make a curt and frank public statement that plainly calls on Republicans to discipline the incompetents in their increasingly ridiculous party before they humiliate the party even further.   The statement should go something like this.

The wealth of America depends not just on the amazing industry and creativity of the American people, but on the extraordinary reliability of US financial commitments.   The US Dollar is the world’s reserve currency.  Every day, people all over the world accept these dollars for the goods and services Americans buy from our friends abroad.  And every day, people purchase the securities of the United States Treasury as a means of saving US Dollars over time, and of preserving their access to the immensely lucrative US market.  Because the financial instruments of the United States government are so highly valued and respected, the purchasing power of the American people abroad is great.  The word of the United States is thus not just the ensign of our sacred honor, but an instrument for the promotion of the general prosperity.

Our reputation is hard won, and it is a surpassing responsibility of US political leaders to preserve it.   Americans are not deadbeats.  The world knows that.  But there are a few radicals in Congress who toy with deadbeat antics, and who seriously propose to others in their party that they take the radical step of defaulting on the nation’s contractual obligations in order to pursue partisan objectives.   People who propose such stupidities declare their utter incompetence to govern.   Either they are simply ignorant of the ramifications of what they are proposing, or they hate their country so much that they are willing to destroy the wealth and reputation of millions of their countrymen in order to pursue a fanatic agenda.

Only a heedless fool would risk damaging the word of the United States, and undermining the untold contribution that word makes to the prosperity of the American people, for the sake of a standoff over the latest budget battles.  To seek to achieve through blackmail what cannot be achieved through honest dealing is the practice of the coward.  And people willing to sacrifice the nation’s honor to achieve partisan political gains are themselves without honor.

I am persuaded that most of the members of the Republican Party are, whatever our differences, responsible stewards of the nation’s reputation and honor, and so I am utterly confident that the serious leaders of the Republican Party will take whatever steps are necessary to discipline that reckless minority within their own party who are, frankly, endorsing the path of pusillanimous scoundrels.

So confident am I in the ultimate sobriety and integrity of the Party of Lincoln, that I trust no more will ever need to be said about this matter.

Obama should circulate a draft of such a statement to key Republican leaders, and tell them it gets inserted in the Inaugural Address later this month if they don’t shut up about the debt ceiling, and desist in their zealous and insistent compulsion to damage the reputation of the US government at home and abroad.

The statement is admittedly sly and dishonest, because it is not just Republican back-benchers that are making debt ceiling threats, but top Congressional leaders like Mitch McConnell as well.  But Obama needs to hand the GOP leadership a knife, as it were, and tell them to take care of business within their own party or else watch him reduce the GOP to an object of global ridicule as the world watches Obama take the oath for his second term.

With the debt ceiling out of the way,  maybe we can get back to talking about the best way of avoiding the new recession that both parties in Washington seem determined to cause this spring.

20 responses to “We Need to End The Debt Ceiling Distraction – Now

  1. The status of the USD as reserve currency was not hard won, it was floated on oceans of blood. It is not like Obama lacks for insight that pieces such as this might inform, it is that he is our political and economic opponent. Speaking the truth to power when power makes the truth and knows it full well is a fools errand.

    • I would say “oceans of blood” = “hard-won”.

      If Obama doesn’t want to make this kind of statement, others should. In any case, the standoff is ridiculous and is distracting everyone from the real economy and the austerity agenda that is going to strangle it.

    • John Turner, Australia

      The “hard won” and “oceans of blood” comments ignores largely whose blood. Much of it was the blood of those of the occupied peoples of Europe and the troops and citizens of the British Commonwealth and Russia, reluctantly, who paid dearly to hold the Fascist Axis at bay until the USA had no alternative to join the fray.
      Preventing the next GFC depends on adopting a “basket of currencies” approach to financing international trade in real goods and services. In 1999 I wrote the following in response to an Australian magazine article;
      “The world really is upside down when many of the worlds leaders think it is reasonable for the largest and most prosperous economy to be seen as the consumer of last resort. We seem to have forgotten Keynes’ exhortation to look at the problems of the day and find solutions to them.”
      ” We are failing to clearly distinguish between various types of capital and what I consider to be pseudo capital. The longest lasting real capital is agricultural land whether it is growing crops meat or timber and all it demands is careful and adequate maintenance. A second class of real capital are depletable resources such as coal, oil and other minerals. If any country wastes or exports these items to support current consumption it is robbing it’s future generations. This leads to the pseudo capital.
      America is consuming, for example, Arabian oil (a real asset), paying for it by creating bank balances in American banks for Arab princes and claiming that these balances can be on lent as if they were real capital. Politicians need to institute a different exchange system for genuine international trade . This could be based on a composite international exchange currency instead of the ridiculous reliance on the American dollar and the USA’s unwillingness to control its money supply and the fictitious savings, in international trade terms, of its professional and business class.
      Everyone who believes that economic management is chiefly concerned with improving the well being of the human race needs to remember, every day, section 6 of chapter ten of ‘ The General Theory’ of Lord Keynes.

  2. Seems very partisan, petty, like most of his other rhetoric. Good chance he’ll put it in without consulting the Rs first. Then he’ll get a response in kind, with justifications that you consider invalid, just as these are considered invalid by the deficit hawks. And by the Republican majority in the House, which has passed a budget that would, if adopted, resolve the debt ceiling issue. Is it “honest dealing” for Obama and Reid to ignore the House proposal so as to force a crisis, and “blackmail” for the House to pass a budget like it is supposed to do?

    I don’t think such a speech is likely to advance anyone’s cause. The public reaction might be “A plague on both your houses”.

    • “And by the Republican majority in the House, which has passed a budget that would, if adopted, resolve the debt ceiling issue.”

      “The Path to Prosperity”? Surely you jest.

      • I didn’t say I agree with their proposals, just that they, and not the Democrats, are participating in the process we’re supposed to be using. If the Dems wanted a deal, they could have taken up the bill in the Senate and made their changes to it, and worked out the differences in conference, the way it has always been done. Instead, they’re effectively filibustering it, even though they are in the majority.

        • The problem with the house right now though is that, since they have no burden of national election and have all these gerrymandered districts, they’ve been pushed into this extreme right ideology that dominates their party. Romney’s campaign was a perfect example, he had to move so far back to center after the primaries just to seem reasonable.

          Makes it extremely difficult to negotiate, maybe we will see something coming out of the senate first again like we had with the cliff.. but I think the D’s have a lot of the political leverage and there is no reason for them to go play in that sandbox, the tea party can hopefully be outlasted at this point. Strange situation for sure.

          • “the D’s have a lot of the political leverage”

            Exactly right. And without leverage there can be no blackmail.

  3. For Obama to come out with a statement like that would be the height of hypocrisy. He and his predecessor have done more to destroy the international reputation of the US in the eyes of the people around the world than anyone could have believed possible. Of course, that doesn’t apply to his financial “mates” who have benefited greatly from his endorsement and enhancement of all of Bush’s policies.
    But today, in this Orwellian world, that is probably precisely the type of distortion that has become accepted as “truth”
    I’m surprised this has come from you Dan, unless you mean it as an attempt at satire?

    • It doesn’t matter whether it is hypocritical – it’s politics. I’m trying to point out that there are political tactics Obama can use to end the debt ceiling standoff if he really wants to do so. If he doesn’t employ them, then we can conclude that he doesn’t really want to end it and instead wishes to exploit the standoff to ram through an austerity package for Peterson, Bowles and his other Wall Street friends.

      We’re going to get lots of mainstream liberals trying to tell us “there was nothing else he could do” when Obama trades away debt ceiling reform for entitlement cuts. This is my way of saying, “oh yes, there was.”

      • I would be surprised if Obama even gets debt ceiling reform for entitlement cuts. He would probably get a lifting of the ceiling good for one or two years. I don’t see the deficit hawks giving up their biggest hammer that easily.

      • Unfortunately Dan, you have also confirmed the Machiavellian political treatise in Il Principe (The Prince), which centered on the ways and methods of manipulation of power by a ruler in an organised state. (Which today, has become, virtually, the universal handbook on how to organise a ‘Government’.)
        The thrust of Machiavelli’s seminal piece was that virtually any action taken by a ruler to preserve and promote the stability and the prosperity of his domain was inherently justifiable. Thus, the employment of violence, murder, deception and cruelty toward achieving these ends were not ignoble in so far as the ends justified the means.

      • Could not agree more. Obama is a wolf in sheep’s clothing.

        • Are you sure he’s not a sheep in a wolf’s clothing? Actually, I think Obama’s problem is that he really believes the national economy is like a family’s budget; limited income restraining growth. My guess is that he acquired this belief from listening to his grandmother (a banker by profession) sitting around the dinner table talking about bad loans, bankruptcy, credit worthiness, and living within your means. His family also made great sacrifices to send him to an expensive private school, a model of thrift for the country to follow. These are not unreasonable values for a family to have, but they are a great disservice for the nation.

  4. The issue is that either Democrat and Republican politicians don’t see that the US government is a special type of bank ( because of its sovereign currency issuing status ) that doesn’t need pre-funding by taxes and bonds and as such can issue credit (money) into the economy to help it escape the recession. Or they do but they are determined for reasons of greed for power and money to perpetuate the myth that only private banks can create credit (money) and the public use pre-existing savings to escape a recession.

    • They don’t want the public to figure out that their elected government actually controls the monetary system. If people figure this out, they will want to do something with that system.

  5. “They don’t want the public to figure out that their elected government actually controls the monetary system. If people figure this out, they will want to do something with that system.”

    I think the rich know full well that control of money begets power and power begets money and it’s instinctive on their part to try to close down or mask anything that threatens their control and the idea of having or even the public recognition of a government bank that could be genuinely controlled for democratic purposes frightens the life out them.

    • Precisely, you couldn’t have put it better Schofield. Rothschild also clarified this back in 1791, when is reported to have said, ‘Allow me to issue and control a nation’s currency and I care not who makes its laws’.

  6. How ironic that Barack Obama reared by a banker Grand-Mother now has to choose which side he’s on, the 99% or the 0.001%, for control of a super bank the United States government!