From CNBC:
U.S. House of Representatives Speaker John Boehner told fellow Republicans on Sunday that he is considering a balanced-budget amendment to the Constitution as part of a bill that would raise the debt ceiling, a source who heard his message said.
That could be a sign that the Republican-controlled House and the Democratic-controlled Senate remain far apart in tense negotiations to avoid an Aug. 2 default.
A balanced-budget amendment is popular with conservatives and was a central element of a bill that failed in the Senate after passing the House last week…
The bottom line here is that Boehner must bring home something in the nature of genuine cuts and/or a reform in spending which promises to balance the budget in a realistic amount of time. Failure to carry at least this minimum risks a wipe out of the GOP in 2012 – not that GOPers would vote Democrat, but it would almost ensure a third party emerging to carry the fiscally conservative banner in to 2012. This is key – this is central; this is the non-negotiable thing.
On the other side are the Democrats. For them it is a matter of preserving the spending they enacted 2009-10. This must become the “new normal”. They know full well that they won’t regain the House in 2012 and stand to lose control of the Senate – the loss of the White House must also be envisioned but for the Democrats this is a secondary thing. Keeping the spending is vital – because it is only via government spending that they retain any power. Only, that is, if they can keep dispensing lavish amounts of taxpayer dollars on favored groups can the Democrat coalition sustain itself. Even if they lose in 2012, if they can retain the 2010 level of spending, Democrats feel confident that by 2014 or 2016 they can regain power…and then expand their power via spending from today’s current levels. Whatever Democrats do, they won’t agree to any substantial cuts in spending. Not for real – promises of trillions in cuts over the years they’ll give with wild abandon…counting on never having to actually produce the cuts. We can debate whether they don’t care we’re going broke, or don’t realize it – but the effect is the same: come what may, they are determined to preserve their spending (my view is that they don’t care – if we do eventually default, they’ll have no problem with that, figuring it would just allow them to go on another borrowed money spending spree once the dust settles…and, of course, a default would be a strong argument for higher taxes).
So, how do we get past the impasse? Mostly, we put it off until 2013 – hoping that in 2012 we win so big that we’ll have sufficient political power to impose a fiscally conservative settlement of the issue. The way to get from here to there is, at the end of the day, agree to an increase in the debt ceiling (a totally un-necessary and, indeed, regressive thing to do…but Democrats have their heart set on it and as they control the White House and the Senate, we really can’t get ’round it). But if we are to agree to increase the debt ceiling, we need something concrete out of it – some sort of real cut to spending next year, along with some real budgetary reform. A balanced budget amendment, sent to the States, would be ideal.
We’ll see now if it can be done. Democrats have hyped up the August 2nd deadline as if it means something…but when powerfull people start talking like that, the sheep who man the financial markets start to take it seriously. Thus we’ve seen the tremors roiling through the global markets. They should be worried about the fact that the global economy is heading in to recession…but what they are worried about is whether the government will approve the ability to go further in to debt (ie, further on the road to economic ruin). Still, in all this, Democrats might have shot themselves in the foot…it is fake crisis, but even a fake crisis can become real if enough people are suckered by it (see Global Warming for a prime example). Democrats are behind the 8 ball – having said that something must be done by August 2nd to avoid catastrophe, they’d better come up with some thing by August 2nd. If Boehner can craft a good bill and get it through the House, Democrats may be forced to go along with it.
It could be a very interesting week.
You must be logged in to post a comment.