Do we really need trillion-dollar brinkmanship?....
He again repeated the assertion that there will not be not enough money, absent a deal, to pay Medicare, Social Security, veterans' benefits, and compared his "balanced approach--also bipartisan" to the harsh plan of the Republicans. He harped anew on corporate jet tax breaks--that he restored to the tax code in his own 2009 stimulus bill--versus benefits for students and grannies:
Now, every family knows that a little credit card debt is manageable. But if we stay on the current path, our growing debt could cost us jobs and do serious damage to the economy. More of our tax dollars will go toward paying off the interest on our loans. Businesses will be less likely to open up shop and hire workers in a country that can't balance its books. Interest rates could climb for everyone who borrows money - the homeowner with a mortgage, the student with a college loan, the corner store that wants to expand. And we won't have enough money to make job-creating investments in things like education and infrastructure, or pay for vital programs like Medicare and Medicaid.
Because neither party is blameless for the decisions that led to this problem, both parties have a responsibility to solve it. And over the last several months, that's what we've been trying to do. I won't bore you with the details of every plan or proposal, but basically, the debate has centered around two different approaches....
Unfortunately, for the past several weeks, Republican House members have essentially said that the only way they'll vote to prevent America's first-ever default is if the rest of us agree to their deep, spending cuts-only approach.
If that happens, and we default, we would not have enough money to pay all of our bills - bills that include monthly Social Security checks, veterans' benefits, and the government contracts we've signed with thousands of businesses.....
So the debate right now isn't about whether we need to make tough choices. Democrats and Republicans agree on the amount of deficit reduction we need. The debate is about how it should be done. Most Americans, regardless of political party, don't understand how we can ask a senior citizen to pay more for her Medicare before we ask corporate jet owners and oil companies to give up tax breaks that other companies don't get. How can we ask a student to pay more for college before we ask hedge fund managers to stop paying taxes at a lower rate than their secretaries? How can we slash funding for education and clean energy before we ask people like me to give up tax breaks we don't need and didn't ask for?
To put the corporate jet versus students juxtaposition in perspective, the most popular student aid program is the Pell Grant, named for the late Senator Claiborne Pell of Rhode Island. A look at the Department of Education budget shows that for FY 2010 Pell Grants totaled $17.5 billion and that the estimated total for FY 2012 is $36.2 billion--a 107 percent jump in two fiscal years.
Bloomberg News reports that the revenue loss to the Treasury due to the corporate jet tax break is estimated at $3 billion for the coming decade. But the President made no mention of the revival of the break in 2009 in his own stimulus bill. It is also included in the equipment first-year expensing provision of the bipartisan tax deal made by the President with Congress in December 2010.
Let's do the math: The revenue loss for the decade due to corporate jets is one-twelfth of what Obama proposes to spend for Pell Grants alone in FY 2012 (which begins October 1, 2011). And the $300 million cost for FY2012 of the corporate jet break is less than one percent of the Pell grant amount.
Now, apply this to the maximum $5,550 Pell Grant that students can receive. Add in the 0.83 percent annual increase that phasing out the corporate jet break would allow to be ported to the Pell Grant program, and each student would get ... all of an additional ... $46. Yes, 46 bucks. Which will, at today's prices, buy (maybe) one hardcover textbook.
And, yes, he followed the newest Democratic practice: quote approvingly The Gipper himself, the now-sainted Ronald Wilson Reagan, 40th President of the United States, 12:01 PM Jan. 20, 1981 - 12:01 PM Jan. 20, 1989.
He noted that the two-stage proposal might not avert a credit downgrade:
For the first time in history, our country's Triple A credit rating would be downgraded, leaving investors around the world to wonder whether the United States is still a good bet. Interest rates would skyrocket on credit cards, mortgages, and car loans, which amounts to a huge tax hike on the American people. We would risk sparking a deep economic crisis - one caused almost entirely by Washington.
Defaulting on our obligations is a reckless and irresponsible outcome to this debate. And Republican leaders say that they agree we must avoid default. But the new approach that Speaker Boehner unveiled today, which would temporarily extend the debt ceiling in exchange for spending cuts, would force us to once again face the threat of default just six months from now. In other words, it doesn't solve the problem.
First of all, a six-month extension of the debt ceiling might not be enough to avoid a credit downgrade and the higher interest rates that all Americans would have to pay as a result. We know what we have to do to reduce our deficits; there's no point in putting the economy at risk by kicking the can further down the road.
While the credit rating agencies might indeed downgrade us if the two-stage proposal is adopted, they may equally do so as to any proposal he has made, or any his Democratic colleagues have made.
As for "kicking the can further down the road" the reason for the two-stage approach is to enable a Joint Committee of both houses of Congress to have enough time to craft a careful budget tax and spending fix to run into 2013.
Left unsaid was this: When Senate Majority Leader Harry Reid brought a bipartisan GOP - Democratic deal to the White House on Sunday, he flatly rejected it, because it did not run past the November 2012 election, into early 2013.
He presented himself as the Great Compromiser, the adult in the room, above the fray, while those in Congress squabbled endlessly. His refusal to sign a reasonable compromise the day before, his constant public sniping at his opponents, his petulant bolting from one negotiating session, his demonizing of anyone who disagrees with him, all these were on display yet again in his address.
House Speaker John Boehner offered the Republican reply (est. 5 min.). He said that the President would "not take yes for an answer"; also, the President moved the goalposts. Obama, he said, wants a "blank check" to spend more. He noted the GOP House bill would incorporate the bipartisan compromise (which the President rejected Sunday).
George Will acerbically and superbly eviscerates the President's non-deal-making performance, and sees him thus marginalized in the debate, as Congress reasserts its prerogative as a co-equal branch of government.
The 1979 technical default came when the national debt was all of $830 billion--nearly $2.5 trillion in today's dollars, about one-sixth of our $14.3 trillion current total debt ($10 TR is publicly held, the key number). It was the third default crisis in American history, after those of the 1790s & in 1933.
The 1979 technical default (failing to pay $122 million in Treasury bills on time, due to administrative errors) then cost the US a 60 basis-point rise in interest rates (1/6th of one percent)--about $5 billion that year, escalating as debt rose for a long time. in today's vastly more precarious global economic climate, a post-default interest rate exposure could be much more expensive. A 100 basis-point rise in rates (one percent) would be $100 billion per year on publicly held debt, a $1 trillion cost over a decade.
Jennifer Rubin of Right Turn summarizes the GOP plan that the House plans to send the Senate, which closely tracks the bipartisan deal Senate Majority Leader Harry Reid brought to the WH & Obama rejected. If both houses of Congress pass it, the President will bear responsibility for default if he vetoes the deal.
Bottom Line. President Obama is betting some $1 trillion dollars over the next decade that he can escape blame and thus enhance is prospects of winning re-election. This has to rank as one of the truly contemptible political wagers in memory.
Letter from the Capitol, LFTC, Ecconomy, Conservative Politics