What Obama can do about the debt ceiling

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Published on Friday, 08 July 2011 18:13

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The big news item in the US, other than the Casey Anthony trial, has been the need for Congress to raise the national debt ceiling, in order to avoid defaulting on bonds sold by the government, and wrecking the U.S. government's credit rating.

The Repugnikans aren't really going to do anything that upsets their Chamber of Commerce masters, but they are trying to hold Medicare and Social Security hostage; they want Obama to agree to cuts to these programs in exchange for their support to raise the debt ceiling.

One aspect of this we're not hearing about in the media, with the notable exception of Portland-based talk radio host Thom Hartmann, is that Obama has another weapon he can use if he needs to call the Repugnikans' bluff on this; see Does Obama have a secret weapon in the debt ceiling debate?

It works like this: Congress can authorize or not authorize money for programs, but it's the Executive branch that actually writes the cheques.

Here's an analogy that lots of Americans can relate to right now. You haven't taken home much money the past couple of months, your credit cards are maxed out, and you don't have enough money to pay the bills. This is the situation the U.S. Government is faced with.

So what do you do? First, you pay the mortgage payment or the rent, because you don't want to be evicted.

Second, you make the car payment, because you don't want the car to be repossessed.

Third, you'll buy groceries, because you don't want to starve to death.

Fourth, you'll make the minimum payments on your credit cards, because you don't want your credit rating to be downgraded.

Then what? You'll tell other people that you owe money to that you can't pay them right now, but you recognize the fact that you owe them, and you'll pay up later.

Obama's Executive branch can take the same approach. They can pay Social Security, Medicare, government salaries, and bond interest first.

Next, the Government can simply refuse to cut cheques for subsidies to the oil and gas and ethanol industries. This move will give Obama overwhelming public support; they only people who won't like this are the oil and gas and ethanol industries, and the Repugnikans they have in their pockets.

He can also refuse to cut cheques for the Transportation Security Administration (TSA), the people who do those intrusive searches of airline passengers. Again, the reaction of most people will be "good riddance". The inspection of passengers and baggage will have to be done by someone else, which means airlines and airports. This cost will have to be passed along to passengers, and a lot of them are... Repugnikans.

They can stop writing cheques to defense contractors. If the contract is for delivery of jet fighter planes, the government can say, "we'll take delivery of those planes when we can afford them." If it's for ongoing work, which is paid for on a monthly basis, the contractor can do one of two things; lay people off, or continue with business as usual, with the knowledge that they will get paid eventually. Until then, the contractors will be making daily phone calls to their Congressperson, demanding that the budget impasse is resolved ASAP, or "no post-Congress soft job for you."

Are you starting to get the idea here? If not, here's one more example. Sen. Rand Paul of Kentucky is saying that he will filibuster against any effort to raise the debt ceiling. OK, Rand, how about no Federal money for highway construction in Kentucky for the next few months?

This is what is known in the political arena as "hardball". So far, Obama has shown no ability to play it. In particular, I thought that Obama made a huge mistake by not allowing the tax cuts for the rich to expire. (See The institutionalization of fiscal irresponsibility elsewhere on this blog.) Obama must learn that caving to the Repugnikans won't work this time; the more progressive members of Congress have made it clear that they simply won't vote for cuts to Social Security and Medicare.

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