Is Default Preferable To Compromise?

The Daily Escape:

Wild Ocotillo blooms with Agave buds, Anza-Borrego Desert SP, CA – May 2023 photo by Paulette Donnellon

Yesterday, Biden met with the leadership of the Congress to discuss the debt ceiling and the dangers of default. Wrongo is writing this before we know what if anything concrete, comes out of that meeting.

This is the third time in twelve years that a Republican House majority has tried to use the debt limit to extort a Democratic president into adopting policies that the GOP failed to enact through normal political means. This time around, like the past two times, Republicans say they want spending cuts, but as Nate Cohn wrote in the NYT:

“The 2022 midterm campaign didn’t show evidence of a resurgent conservative passion for spending cuts either. The debt-deficit issue had such a low profile in the national conversation that a question about it wasn’t even asked in exit polling.”

But absent real news, let’s take a look at the Republican position as outlined in the bill McCarthy and the GOP passed in the House. They’re pushing to pair $4.5 trillion in spending cuts over a decade with a one year, one time, $1.5 trillion increase in the debt limit. Their plan achieves most of its savings with spending caps for discretionary spending — the part of the yearly budget that isn’t automatic (like Social Security payments) — but it doesn’t say which discretionary programs should be cut and which should be spared.

Their plan caps government spending at last year’s levels. This would be a decrease of ~ 9%. A yearly increase is capped at 1% annually for the next 10 years. This action would save approximately $3.2 trillion. They haven’t offered any detail about where the cuts would come from, and there is no inflation adjustment to the spending cap.

But since the GOP has said it plans zero cuts in the defense budget and that there will be no cuts for veterans or for border security, cutting everywhere else will be very deep. The NYT estimates that if those programs remained untouched, the GOP plan would cut the balance of federal spending by an amount of a 51% cut across the board.

Seems unrealistic.

Social Security checks could still be issued because a 1996 law provides a means of circumventing the debt limit. It allows the Treasury Department to pay Social Security benefits, along with Medicare payments, even if there is a delay in raising the debt ceiling. It allows for the Social Security and Medicare trust funds to be drawn down to keep those benefits flowing until the debt limit is raised, and the trust fund replenished. It also prohibits those funds from being used to pay for any other government programs.

In the past, the usual political rhythm of fiscal crises is that the GOP House stumbles around for a while, and then, right before the deadline, Senate Republicans and Mitch McConnell come off the sideline. They cut a deal with the Democratic president and pass the deal in the Senate with a big bipartisan majority. They then leave town with the hot potato squarely in the Speaker’s lap.

It’s questionable if this will happen in May, 2023.

Biden should address the nation after the Tuesday talks. How about an oval office address that lays out the facts, along with a call to action: Call your representatives and tell them to pass a clean debt limit bill. He could detail for the American people the cuts the GOP are demanding in return for raising the limit. He could also say that he is willing to negotiate in good faith on the budget with House Republicans as long as the debt ceiling is a separate matter.

The compromise might be to have a temporary debt ceiling increase to allow both to move forward together. Sadly, for McCarthy and the House Republicans, default seems to be preferable to compromise.

This is zero-sum politics with the highest stakes. At the end of the day, all paths lead to the same place: The US will need to find a way to pay the bills it has incurred as they mature.

The question is how much damage will have happened along the way.

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A MAGA Idea Wrongo Supports

The Daily Escape:

Sunset, Tucson, AZ – January 2023 photo by Leila Shehab

Sometimes your worst political enemies are on the same page with you. Axios reports that a:

“…threat of cuts to US defense spending has emerged as a flashpoint in House Republicans’ first week in the majority, widening the GOP’s isolationist fault line and exposing the fragility of Kevin McCarthy’s young speakership.”

The backstory here is that according to Bloomberg, among the concessions new House Speaker McCarthy made to secure the job was to agree to vote on a budget framework that caps 2024 discretionary spending at fiscal 2022 levels. Unless the Pentagon is exempted, that could result in a $75 billion drop in defense spending:

“National defense spending, which primarily funds the Pentagon, was about $782 billion in fiscal 2022 and rose $75 billion to $857 billion in fiscal 2023.”

The deal that McCarthy has apparently agreed to would have the House commit to passing bills that would cap all discretionary spending at fiscal year 2022 levels, or roughly $1.47 trillion.

But one of the big wins for Senate Republicans in last year’s budget talks was a bigger defense budget. Sen. McConnell might want to check in with the House MAGA Republicans, since they’re going in the opposite direction.

Wrongo agrees that the idea of cutting $75-$100 billion (or more) from the Pentagon should be up for discussion. Consider that in 2021, the Congressional Budget Office (CBO) released a study that outlined three options for saving over $1 trillion in Pentagon spending over the next ten years without damaging our defense capabilities.

All three options involved cutting the size of the armed forces, avoiding large boots-on-the-ground wars like Iraq and Afghanistan, and relying on allies to do more in their own defense.

Wrongo wrote about the 2021 CBO study here. The CBO report put the potential cut in historical perspective: A $1 trillion cut (14%) over a decade would be far smaller than the cuts to America’s military spending in 1988-1997 (30%), and the 25% cut we had in 2010-2015.

A $1 trillion saving isn’t chump change. Those funds could be used to prevent future pandemics, address climate change, or reduce economic injustice. These are all pressing American problems.

The MAGA’s ideas on defense spending cuts might find support from a few progressives in Congress, including Reps. Barbara Lee (D-CA) and Mark Pocan (D-WI), who pitched a $100 billion haircut for the DoD earlier this year. But this year’s Pentagon budget boost easily passed both the House and Senate on a bipartisan basis.

Both Republican and Democratic House war hawks will resist the idea of cutting defense spending. Some will cite the defense of Ukraine, which will only account for $45 billion of military spending in the coming year. Some will mention Taiwan, citing China’s aggressive military stance toward the island nation.

But how about developing a clear global military strategy along with the willingness to carry it out? Instead of simply talking about how many dollars we should spend.

And the CBO’s proposed strategic shifts don’t account for what could be saved by streamlining the Pentagon by reducing its cadre of over half a million private contractors, many of whom perform tasks at prices higher than it would cost to do the same work with government employees.

The likely outcome is that House Republicans will fail to cut defense spending while sticking to their plan of holding the 2024 discretionary spending flat. So Republicans will focus on social spending to reduce the fiscal 2024 budget to 2022 levels. But if you ask Americans what spending they want to see cut, they will never say that we ought to cut people’s retirement security.

Wrongo has little hope that this 118th Congress will work to solve the three great problems that face America: Our revenue problem, our social spending/cost inflation problem, and our defense spending problem. As Jennifer Rubin says in the WaPo:

“The danger for the GOP has always been that a short stint in irresponsible governance will wake up the electorate to their manifest unfitness, thereby dooming the party’s chances in 2024. The danger for the country is that, in the meantime, the MAGA extremists will do permanent damage to the U.S. economy and national security.”

The hard Right MAGAs and the anti-democracy Republican Party must be made into a permanent minority, as it was during the Roosevelt years, and for decades thereafter.

The battle for 2024 starts now.

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Monday Wake Up Call – December 12, 2022

The Daily Escape:

Oak Creek in snow, Sedona, AZ – November 2022 photo by Ray Redstone Photography

What is it with our national politicians? There are only a few days left for the House and Senate to increase the country’s debt limit, but both Parties have been screwing around, and now it looks like they may punt the problem to the incoming Congress.

From the NYT:

“Congressional leaders have all but abandoned the idea of acting to raise the debt ceiling this month before Democrats lose control of the House, punting the issue to a new Congress when Republicans have vowed to fight the move, and setting up a clash next year that could bring the American economy to the brink of crisis.”

The plan had been for Democrats to act during the lame-duck post-election session to increase the legal borrowing limit. That would take advantage of the Dems’ final month of control of both Houses of Congress. It would head off a pissing contest with Republicans when they take over the House in January. Republicans have threatened to block the increase once they are in charge of the House. They plan to hold it hostage until the Democrats agree to substantial cuts to domestic spending and Social Security, Medicare, and Medicaid.

There are several problems here. The debt ceiling which the US will reach sometime next year; the expiration of the last stopgap funding bill that expires on Dec. 16; and passing an overall budget for the current fiscal year.

The Dems had planned to attach a series of other priorities to the big funding package, including the reform of the Electoral Count Act (ECA), a critical reform that helps prevent election denier shenanigans in 2024. On December 3, Wrongo warned that this was a high risk gambit: (emphasis by Wrongo)

“…the Democrats need Mitch McConnell and other GOP Senate leaders to agree to attach ECA reform to a spending bill and enlist the 10 GOP Senators to support it. That means the GOP controls whether this bill is enacted.”

Now we’re hearing that the leadership of both Parties can’t get to an agreement on the big package. More from the NYT:

“Republicans and Democrats remain at odds over how to split funding between military and social programs. Talks are set to continue through the weekend ahead of the Dec. 16 deadline, though aides said lawmakers could pass a one-week stopgap bill to give negotiations additional time.”

So America’s Christmas present from Congress will be no Electoral Count Act reform and no new budget, and no debt ceiling increase. Instead, we’ll get another Continuing Resolution that will fund the government until early in 2023 when the Republicans will try once again to toss the US credit rating off a high cliff with their far Right ideological theories on US government debt.

Under the last debt limit increase passed late in 2021, the federal government can borrow $31.381 trillion. Total national debt has been slightly above that level, but since a small portion of the debt is exempt from the debt ceiling, we’ve stayed in compliance. As of last week, total debt subject to the debt limit got as close as $31.345 trillion.

The consequences of failing to extend the debt limit are immediate and bring great risk. For example, it could force the government to choose between paying Social Security checks or paying the interest due on the country’s debt. That happened in 2011, when Congressional Republicans pressured President Obama to accept similar spending cuts in exchange for raising the debt limit.

That standoff led to downgrading the credit rating of the US. It rattled American investors and the US economy. This time, it could have global economic implications, given that the world is facing a global recession.

Before you say: Well, these birds learned this lesson back then, so they surely will make a deal this time. Consider that Goldman Sachs reports that less than a quarter of Republicans and less than a third of Democrats who will serve in the House in 2023 served there in 2011.

Time to wake up, Congress! Sure, some of you are very old, and want to go home for the holidays. But we pay you to fix things, not to make them worse. Schumer and Pelosi should make them all stay in DC until they vote on what the country needs.

To help them wake up, watch, and listen to a live version of the Allman Brothers’ “Midnight Rider” with Vince Gill, Gregg Allman and Zac Brown from a 2014 performance at the Fox Theater in Atlanta. One of the wonders of live music is what happens when artists collaborate in a live setting:

We’re also seeing Chuck Leavell on keyboards and Kenny Aronoff on drums.

Sample Lyric:

And I don’t own the clothes I’m wearing
And the road goes on forever
And I’ve got one more silver dollar
But I’m not gonna let ’em catch me, no
Not gonna let ’em catch the midnight rider

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Saturday Soother – September 22, 2018

The Daily Escape:

Bridge of Sighs, Venice, Italy — photo by _enk

Another week in Trumplandia is in the books. And, for the second consecutive year, there was no “Trump’s Summer Reading List“. That idea seems so preposterous that his handlers don’t even try to fake it. He’s never wandered far from the limo or the hotel lobby. He’s simply not interested in our world.

With that as background, consider Trump’s meeting with Spanish Foreign Minister Josep Borrell in which Trump suggested building a wall across the 3,000 mile-long Sahara Desert to prevent African migrants from making their way into Europe:

You need to build a wall around the Sahara…When Borrell asked Trump if he understood just how big the Sahara is, Trump argued that “it can’t be bigger than our border with Mexico.” Borrell then informed Trump that the Sahara is far bigger than the U.S. border with Mexico.

And this was in The Guardian, not The Onion. Hold on to Trump’s fixation with walls for a bit, and read this tweet:

I want to know, where is the money for Border Security and the WALL in this ridiculous Spending Bill, and where will it come from after the Midterms? Dems are obstructing Law Enforcement and Border Security. REPUBLICANS MUST FINALLY GET TOUGH!

— Donald J. Trump (@realDonaldTrump) September 20, 2018

He tweeted this because the Senate approved their conference report with the House by a bipartisan 93-7 majority. It funds the departments of Defense, Labor, Health and Human Services, and Education for the next fiscal year.

The best part was that it included a continuing resolution to keep the rest of the government agencies funded until after the mid-term election, so no shut-down, unless Trump refuses to sign the bill.

And, Congress designed it to prevent a standoff about Donald Trump’s border wall. Apparently, the lack of wall funding was a surprise to Trump, so he asks via tweet, “where is the money for the WALL?”

Once the Kavanaugh/Dr. Ford’s: “is it attempted rape, or just teen-age hijinks?” debate stops sucking up all of the oxygen in DC, Democrats should start praising Congressional Republicans continuously for defying Trump about the wall.

Dems should loudly praise Republicans for sending Trump a bill he can’t veto. They should hammer that wedge hard.

And, if Trump does veto it, we’ll see an instant shipwreck for the Republicans.

But right now, you need to get away from it all for at least a few minutes. You need to let your brain calm down. Wrongo calls this the Saturday Soother. We start by brewing a hot steaming cup of coffee. Today, we return to coffee roaster Geoffrey Martinez of Compton, CA’s Patria Coffee. Wrongo purchased a 12 oz. bag of Patria’s Peru Amazonas WP Decaf, and it was liked by all. So why not brew up a Vente cup of that, and enjoy. (A blog reader asked Wrongo if he receives any payment for these weekly coffee recommendations. He does not.)

Settle back in a comfy chair and watch the fall season begin outside your windows. Here, on the fields of Wrong, the crab apple, birch, and tulip trees are losing their leaves. The deer visit the crab apples several times a day to eat the fruit that falls to the ground.

Now, wearing your Bluetooth headphones, listen to trumpeter Chris Botti and violinist Lucia Micarelli perform “Emmanuel” live in Boston as part of Botti’s 2009 PBS special. The music was written by Michel Colombier, and released in 1971. Emmanuel was written to honor the memory of Colombier’s son, who died when he was only 5 years old. This piece will help you forget about Trump, Kavanaugh, and the Russians for a while:

Those who read the Wrongologist in email can view the video here.

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Saturday Soother – February 10, 2018

The Daily Escape:

Lighting the Olympic torch – photo by Chang W. Lee

Did anybody see the bus that ran over Wrongo’s 401k?? It was a tough week on the retirement savings front for anyone who uses the capital markets to bolster their net worth. Retail investors are trapped – they can’t sell their holdings quickly, and there doesn’t seem to be a safe haven for their cash if they manage to get out of the markets only slightly bruised. Fear seems to be guiding Mr. Market.

Also, Washington finally passed a bi-partisan budget deal, but only after a brief shutdown. Sadly, it adds more than $1 Trillion to the national debt. It’s hard to square the Republicans’ deficit hawk ideology with their sudden willingness to spend whatever it takes to give the military whatever it wants.

During the recession, (Obamatime) the Republicans argued that responsible people tighten their belts when times are bad, just like people do with their household expenses. Now, we really shouldn’t use that argument for governments who can create their own currency. Despite that, if you really think the government should be run like a household, wouldn’t a responsible family increase their savings and pay down their debts when times are good? That would give them a “rainy day” fund that they could dip into when times were bad. Or, they could then go back into debt to get through the rough patch.

But today’s Republicans are saying: “Times are great! Let’s max out the credit card”. This will soon be followed by: “Oh shit, now I have to starve the kid so I can make the payments on my student loans”.

They won’t even follow their own dumb rules.

That was the week that was. A stomach-churning, no sleeping, hot steaming pile of anxiety. You need a real break.

To help you forget about your financial losses and your government’s foolishness, settle into a comfortable chair with a Vente cup of Volcanica Coffee’s Blue Mountain Peaberry coffee from the Clydesdale estate in Jamaica (only $89.88/lb.). You can’t afford it after what happened on Wall Street, but like Congress, you have a credit card. So go for it!

The Clydesdale coffee region is near the center of Jamaica’s Blue Mountain coffee area. The Clydesdale Estate was founded in the 1700’s.

Now, listen to a throwback to the 2012 Olympics in London. Here is the London Symphony Orchestra conducted by Sir Simon Rattle with a performance of “Chariots of Fire”. The performance includes physical comedy by Mr. Bean (the British comedian Rowan Atkinson):

This isn’t high art, but it is fun, and tangentially relevant to the Olympics.

Those who read the Wrongologist in email can view the video here.

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Saturday Soother – August 26, 2017

The Daily Escape:

Depression Bread Line by George Segal, 1999, at the NJ Grounds for Sculpture – 2017 photo by Wrongo

There are two political imperatives facing America by the end of September: The House, Senate and the president must extend the Federal borrowing limit, and pass a budget. When Obama was president, extension of the borrowing limit was a dicey thing, as was passing a budget. From 2008-2016, we largely avoided government shutdowns, we passed spending bills, but not an entire budget.

And we never even considered tax reform, but it’s the third item on the GOP’s 2017 to-do list.

In some sense, everything except increasing the debt ceiling is optional. As of now, there are only twelve days in September when the House and Senate are jointly in session. The Senate has a few more legislative days on their schedule than the House, but it’s unclear how they’ll use them.

Republicans and Wall Street used to have concerns about the consequences for America if we didn’t get our finances under control. They said that the growing federal debt could eventually drag down the economy, burden future generations, and even threaten national security. CEOs of corporations and the biggest banks joined a campaign called Fix the Debt, arguing that the size of our debt was our most pressing issue.

But now these same people are all in on Trump’s plan to cut taxes for corporations and high earners, saying it is the way to fuel economic growth. That, despite estimates that Trump’s plan could reduce federal revenue by $3.9 trillion over 10 years, thereby increasing the debt that CEOs used to hate. From Bloomberg:

Goldman Sachs Group Inc. CEO Lloyd Blankfein, a Fix the Debt supporter…in 2012 told CNBC he’d be for higher taxes if they helped mend the fiscal gap. After the 2016 election, Blankfein told colleagues…that Trump’s proposals, including tax reform, ‘will be good for growth and, therefore, will be good for our clients and for our firm.’

Hmmm. Aren’t Treasury Secretary Steve Mnuchin and Trump’s Economic Adviser Gary Cohn both from Goldman?

Dean Baker, co-director of the Center for Economic and Policy Research sees the policy shift clearly: (brackets by the Wrongologist)

They [CEOs] were yelling, Deficits, deficits, deficits… [and] as soon as George W. Bush gets in the White House? Oh, we’ll have a big tax cut.

The same thing is happening now. Bloomberg reports that according to Seth Waugh, chairman of wealth adviser Alex. Brown, many in finance have moved on from the debt: (brackets and emphasis by the Wrongologist)

It’s not a fun, sexy thing to talk about…Waugh, another Fix the Debt member, recalls playing golf with a private equity executive…Waugh told his friend it would be nice if Congress addressed deficits… [but]…The private equity executive said nobody was talking about that. It was a dead issue, and they should take the good news: Paying less in taxes, the friend reminded him, means getting richer.

It’s probably a distant dream. The GOPs plan for tax reform involves using the budget reconciliation process, which allows them to pass it with just 51 votes, that is, without Democrats. Otherwise, they face a filibuster. Reconciliation starts with passing a budget resolution for the coming fiscal year. In that budget resolution, they need to include special budget directives or instructions:

To start the reconciliation process, the House and Senate must agree on a budget resolution that includes “reconciliation directives” for specified committees. Under the Congressional Budget Act, the House and Senate are supposed to adopt a budget resolution each year to establish an overall budget plan and set guidelines for action on spending and revenue.

So they need to pass a budget, but before that, Republicans need to vote to raise the borrowing authority of the government. That may be impossible without support from Democrats.

We’ll know very soon if Dems are willing to get on board with Paul Ryan and Mitch McConnell on any of this.

It’s Saturday again, and despite the brief three-minute respite from politics brought by the solar eclipse, Trump had another successful week. (If success is his continued destruction of what remains of America’s psyche).

We are now in desperate need of something soothing to kick off next week’s war for truth. So grab a couple of Trader Joe’s Cold Brew Latte Dessert Bars (40 calories and 7 grams of sugar each), put on your best Bluetooth headphones, and listen to the late guitarist John Abercrombie, who died this week. Here is Abercrombie with Dave Holland on bass, and Jack DeJohnette on drums doing “Homecoming” live in 1995. Let’s hope it’s not the best few minutes of your week:

Pay attention to Abercrombie’s remarkable and airy technique.

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