Tuesday, July 26, 2011

Surviving the debt ceiling crisis unscathed: highly unlikely

At times, the debt ceiling debate has resembled a schoolyard brawl. We’ve heard everything but “so’s your mother!” But this squabble, now a bloody slugfest, has gotten very dangerous and, even if resolved, will have serious consequences for our nation.

Many experts now believe that Standard &Poor’s (or some other agency) will have no choice but to downgrade our credit rating. The manner in which our leaders have repeatedly failed to resolve what should have been a routine transaction will, according to many, inevitably lead to a loss of our AAA rating, raising interest rates and costing ordinary individuals more for mortgage, consumer credit, and student loan borrowing. (The Boehner plan would not avoid the downgrade threshold of the rating agencies.)

Our leaders’ reckless behavior has already hurt the nation’s reputation in the global community. This is no longer a country that everyone can depend upon to do what’s right, in a timely fashion. We have squandered our leadership credentials.

Even if the debt ceiling is raised by August 2, the factors that precipitated the brouhaha will remain unsolved. My former colleague Phil Balboni, CEO of GlobalPost.com , has just launched a weekly commentary series and, as always, has summed up expressively the profound and sweeping nature of our difficulties. China, for example, is now seeking alternatives to some of its US bond investments.

There are plenty of reasons things went from bad to worse and much blame to go around. It’s staggering that one of the most feasible outcomes of a debt ceiling resolution will be the creation of, yet again, a new bi-partisan commission to deal with our long-term indebtedness. Can you say “Simpson-Bowles?” “Rivlin-Ryan?” Equally appalling, depending on what is decided this week, is that we may have to go through the whole messy debt ceiling process again in six months.

President Obama vowed to veto any solution that would be a short-term fix. But the Republicans have rolled Obama, and he hasn’t so far been up to the task. (Knowing the Republicans would likely block a clean vote on raising the debt-ceiling, why didn’t he last year make it part of the Bush tax cut extension?) It seems now unlikely he would actually veto any debt ceiling bill, however undesirable, if it gets to his desk. He doesn’t want to own a default.

Obama seems to have yielded on nearly every point, and I wouldn’t be surprised to see him cave on the short-term fix as well. The GOP is trying to leave him without any choice. The Republicans want this to be an issue in an election year. Obama does not. In this regard, his political interests and the country’s best interest coincide. It’s ironic that when people really understand the details, they side with Obama.

A National Journal poll  showed that 46% trust Obama most to "make the right decisions" on the deficit while 34% said they place more faith in congressional Republicans. Regarding the debt ceiling, a virtually identical 46% leaned toward Obama and 35% chose the GOP. But Americans are split on whether there is any need or urgency to raise the debt ceiling in the first place.

Clearly, President Obama has repeatedly failed to use his bully pulpit effectively enough to educate the public about the dangers of default.

It doesn’t matter to the Republicans. Goaded by their Tea Party members, they seem intent – like the Slim Pickens character in the last scene of Dr. Strangelove – on riding the bomb to oblivion, waving their ten-gallon hats and crying “yee-hah!”

Please let me know your thoughts in the comments section below.

Wednesday, July 20, 2011

Myra Kraft, a grand and grounded lady

Back on January 14, 2006, after winning three successive Superbowls, the New England Patriots lost the AFC Divisional playoff to Denver by a score of 27 to 13. For days most New England fans felt depressed, hung over, a knot in the pits of their stomachs.

Two days after the loss, I stood behind Myra Kraft in a line for a donors’ reception before the Martin Luther King Day performance of the Boston Children’s Chorus. I expressed my condolences and wondered aloud at her even being ambulatory after the previous day’s outcome.

“Of course I’m ambulatory,” she said, “Really, Margie, It’s only entertainment.”

Patriots’ owner Bob Kraft’s wife Myra died this morning. Her devoted husband may not have been so philosophical in the wake of that painful playoff loss, but Myra ‘s reaction said a lot about who she was. She developed a sophisticated understanding of the intricacies of the game, but she never believed that players should only be held accountable for their behavior on the field.

The Patriots drafted college football star Christian Peter in the fifth round of the 1996 draft, just a month after his eighth conviction in seven years, many for violent acts. He also had settled two rape charges with a victim, the second attack allegedly occurring while his Nebraska teammates looked on. Myra was outraged and demanded the team give up all rights to him immediately. And the team did, explaining Peter’s behavior was “incompatible with our organization’s standards of acceptable conduct. " To Myra, you didn’t need to hire thugs to build a championship team.

She was grounded in solid values, not inclined to be swept away by things that, in the final analysis, don’t matter. That includes not just her perspective on sports and glitz, but on how she handled her significant wealth.

Our paths crossed over the years. Her demeanor was modest but her role in the charities and causes she cared about was hands-on and substantive, not just check-writing. She set a tone that should well be emulated throughout the philanthropic world.

The Kraft family – indeed, the whole community – has suffered an incalculable loss.

Please let me know your thoughts in the comments section below.

Wednesday, July 13, 2011

Partisan debt ceiling politics exasperating and dangerous

Former Senator Alan Simspon, a Wyoming Republican, just about summed up my reaction to the debt ceiling impasse. He said that the extent to which pettiness has overcome patriotism is nothing short of disgusting. Despite Republican longstanding charges about Obama’s failure to embrace “American exceptionalism,” it is not he who is prepared to risk the economic consequences of failing to honor the full faith and credit of the United States, for the first time in its history. It is not Obama who’s willing to have the US dollar lose its “dominant role in the international financial system,” spook bond markets, have our creditors unload their investments in American debt, dramatically force up borrowing costs, and plunge us into another recession.

The debt ceiling law is a “pointless, dangerous historical relic”  of World War I, which virtually no other advanced economy has. But few in Congress have the testicular fortitude to face the fact and repeal it. It’s too good a political pinata for posturing by an opposition party. Senator Obama did it with George W. Bush’s request. But after a ritual charade, in which individual solons get to vamp for CSPAN, Congress traditionally votes to honor our debts and raise the ceiling.

This year is different. Today’s impasse seems at least as much a function of hostility within the Republican Party as between Republicans and Democrats. Under the circumstances, the schism between Speaker John Boehner and Majority Leader Eric Cantor is contemptible.

The split seems driven as much by Cantor’s personal ambitions as his ideological rigidity. Playing to the most rigid ideologues on the right, Cantor undercut Boehner, opting for a smaller package that entailed cuts without new revenues and walked out of earlier budget talks.

As the President said, there is a “moral imperative to deal with the deficit in a meaningful way.” The big package Boehner and he were working on would tackle sacred cows on both sides – cutting spending even for defense and health and, gasp, raising revenues by closing loopholes. And they weren’t even closing loopholes before 2013. (God forbid that cutting the perks for hedge fund managers and owners of corporate jets might even remotely be suspected of dampening enthusiasm for job creation!)

We all need to realize that a default is not an abstraction: it means higher costs on car loans, credit card borrowing and mortgages. Real conservatives should oppose that.

I’d like to think this is just political theater, a game of chicken, leading up to – and, at the precipice, swerving away from – economic calamity, a strategy designed to wring out maximum budget concessions from the Democrats. But it seems too real to be just a “game” of chicken, and the risk is that, if the GOP refuses any kind of compromise, we’ll all end up fried.

The Speaker tried earlier this week to warn House Republicans that “they will quickly lose leverage in the debate as the country gets closer to the Aug. 2 debt default deadline and Wall Street” pushes for a deal. Right on cue, the Chamber of Commerce warned of dire consequences. But is anyone on the GOP right listening ?

In May, Boehner decried the nation’s debt as a “moral threat” and promised “real leadership,” not just kicking the can down the road. Three months later he’s wilting from the $4 trillion bargain he recently favored.

The Republican Pary, as David Brooks eloquently pointed out, may be more of a “psychological protest” than a “practical governing alternative.” Grover Norquist of Americans for Tax Reform has scared congressmen and presidential candidates alike (including John Boehner and Mitt Romney) into signing a no-tax pledge, which Tea Party members treat as more sacred than their oaths to support the Constitution and keep the country running. (Remember, Ronald Reagan and George H.W. Bush both took the pledge and raised taxes.) Norquist is closer to a Charles Manson anarchist than he is to an Edmund Burke conservative. Once again, Norquist’s followers are chugging the Kool Aid. (And nowadays, even Edmund Burke would have a primary challenger!)

The President’s strategy of laying claim to the middle, reengaging the Independents who helped him win in 2008, is good economics and politics, but people need more education. As David Leonhardt pointed out in today's Times, politicians continue to imply we can turn the clock back to an era of free lunches, in which we can have the world’s largest military, highest medical costs, and some of the lowest tax rates.
Senate Minority Leader Mitch McConnell, who wants to do nothing that might advantage the President, now is proposing a convoluted solution that would give Obama the power to raise the ceiling and, in doing so, set the President up for attacks he failed to deal responsibly with the national debt. The NY Times supports this fallback idea. Obama’s hope would be that voters blame Congress more. But absent a real deal, isn’t it better for Obama, the law professor, to simply use the clear language of the 14th amendment and say the Constitution made him do it?
Please let me know your thoughts in the comments section below.

Sunday, July 3, 2011

The 14th Amendment: a solution to the debt ceiling impasse?

What better day than Independence Day to contemplate the meaning of the U. S. Constitution? What better issue to use as context than the current debate about raising the debt ceiling?

Three groups of politicians, Republicans, Democrats and 59 Tea Party Congressmen, are at loggerheads. Sensible people among Republicans and Democrats know the debt ceiling must be raised to avoid a first-ever U.S.default on its financial obligations. But those sensible Republicans – Speaker John Boehner, for example – feel they can’t cut a deal with Democrats because the Tea Party stands ready to oppose them in the 2012 primary if they do the responsible thing.

A new discussion is getting some traction: the question of whether it is even Constitutional for Congress to refuse to pay debts that it has already authorized the government to incur through borrowing. Most of us know the 14th Amendment guarantee of equal rights under the law. Less known is the Amendment’s Section Four, “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”

In other words, refusing to lift the debt ceilng may be impermissible and the ceiling itself could be unconstitutional. With that line of thinking, the President could simply raise the debt ceiling without Congressional approval. MSNBC reporter Chuck Todd asked President Obama at his press conference this past week his opinion on using the 14th Amendment’s requirement to avoid default looming from Congressional obstinacy. The President did a tap dance, refusing to “put on my constitutional law professor hat.”

Senator Chuck Schumer (D-NY) says the 14th Amendment strategy is worth considering during the next debt crisis but this time around “it’s probably not ripe.” More tap dance.
MA Congressman Bill Keating was similarly dismissive at a meeting this week of the New England Council.

Senator John Cornyn, on Fox News Sunday, dismissed this as “crazy talk.”
The Republican alternative, prioritizing payments, would, according to Treasury Secretary Tim Geithner, be a de facto default. This is not a solution. (As one blogger put it, “if you had friends that were drowning in debt, would you tell them to immediately start defaulting on their mortgage, their car loans and their credit cards?”) So why not go the 14th Amendment route?

Default, for our first time in history, would, in today’s global economy , be a financial disaster. And a dysfunctional Congress, prepared to paralyze the government and risk a second great recession, needs something to save it from itself.

Failing to raise the debt ceiling and causing the nation to lose its excellent bond rating could be viewed as a national security matter. If the deficit is serious now, driving interest rates to double digit levels would make our bad economic situation exponentially worse.

Some scholars like (e.g. Garret Epps and Bruce Bartlett -) ) observe that invoking the 14th Amendment to prevent default is “no less justified than using American military power to protect against an armed invasion without a Congressional declaration of war.”
Jack Balkin traced the legislative history of the 14th amendment. His review, as Jonathan Chait points out in The New Republic,  notes that the goal was to remove political opponents from using debt default as a way to extract revenge. “Section Four was placed in the Constitution to remove this weapon from ordinary politics”.

Isn’t this just such a situation?

To be sure, it could trigger a Constitutional showdown. Some of the Congressional Tea Party financial illiterates could bring suit to allow the U.S. to default on its obligations. If they won, the ensuing default crisis could be catastrophic . But would a majority of Supreme Court justices, (especially swing vote Anthony Kennedy,) none of whom has to face a Tea Party primary opponent, really ratify the Constitutionality of the US defaulting on its debts and turning the world economy on its head?
The 14th Amendment solution may even be a way out for Speaker Boehner and other similarly inclined Republicans. Taking the matter out of their hands would permit them to get the result they ultimately want while still posturing for those in their pitchfork-toting primary base.

Maybe Obama and Boehner talked about this when they played golf recently.

Please let me know your thoughts in the comments section below.