DEBT CEILING

From the New York Times, Krugman on Republican roulette:

Not that the confidence issue is trivial. Failure to raise the debt limit — which would, among other things, disrupt payments on existing debt — could convince investors that the United States is no longer a serious, responsible country, with nasty consequences. Furthermore, nobody knows what a U.S. default would do to the world financial system, which is built on the presumption that U.S. government debt is the ultimate safe asset.

But confidence isn’t the only thing at stake. Failure to raise the debt limit would also force the U.S. government to make drastic, immediate spending cuts, on a scale that would dwarf the austerity currently being imposed on Greece. And don’t believe the nonsense about the benefits of spending cuts that has taken over much of our public discourse: slashing spending at a time when the economy is deeply depressed would destroy hundreds of thousands and quite possibly millions of jobs.

And

So what’s really going on is extortion pure and simple. As Mike Konczal of the Roosevelt Institute puts it, the G.O.P. has, in effect, come around with baseball bats and declared, “Nice economy you have here. A real shame if something happened to it.”

More here.

Yeah so, as Krugman observes, all the so-called "serious" people in DC don't think it's going to come to this, that some sort of deal will be reached before the red hour begins. And they're probably right, if only because Obama's administration has characterized itself, again and again, by caving in to the demands of wealthy interests and the GOP. But who knows? The President may grow some balls. He might be getting sick of all this shit. Or the Republicans might actually be trying to push Obama past what even he is willing to tolerate. I mean, I don't think so - Obama has already shown that he's quite willing to tolerate all kinds of right-wing bullshit - but you never can tell. Election season is nigh and he might be wanting to throw some red meat to the liberal base he's sold out so many times. So anything's possible.

But what happens then?

Again, the pundits appear to be thinking that the Republicans will back down--they believe that, in the end, these tea-imbibing patriots have some sort of reasonable nature deep down in their hearts. Of course, I'm not nearly so optimistic, and it has less to do with any sense of reasonableness on the part of House Republicans than it has to do with how fucking stupid they are. That is, in short, these guys don't understand economics. They think the multi-trillion dealings of an enormous institution such as the US government can be considered in terms of your own personal household budget. They continue to think deregulation of business is always the way to go, in spite of the fact there is a mountain of evidence, including the recent financial meltdown and the BP oil spill, proving the opposite. They continue to believe that tax cuts for the rich stimulate the economy and create jobs, even though numerous studies over the last three decades show such a notion to be untrue. So the Republicans are fucking stupid as all get out on this issue and may very well not understand what kind of fire they're playing with.

Or they may not care. That's stupid, too, because economic chaos is something everybody should care about. Actually, during a time of economic chaos, everybody does care about it because, you know, how can you not? But we're not there yet, so not caring is an activity in which Republicans can luxuriously engage. But either way, if they refuse to raise the debt ceiling, we're all fucked.

On the other hand, there's this scenario described by former Reagan economist Paul Craig Roberts: Obama, as a war president, can simply pull a Bush and declare that the debt ceiling is a matter of national security and take this power away from Congress. On the one hand, I'd hate for the executive branch to have this kind of power, but, on the other hand, I'd love to hear the howls of indignation from the right.

But really, Obama's going to back down and fuck the poor and working classes in the ass. No lube. That's how he rolls.

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