Monday, July 25, 2011

Boehner/TP and Obama/Reid play Dueling Banjos; can Obama turn the tables by raising the debt ceiling on his own?

Okay, there are now the “dueling banjos” from the movie Deliverance – that’s what we call the two competing plans by Boehner and Reid.  Remember that scene in the 1972 movie with the knife readied for chest shaving?  This debate is taking on Freudian dimensions.

The Wall Street Journal has an editorial Monday morning suggesting that Congress pass Boehner’s plan, and confront Obama with the chance of being blamed for default (hence, no re-election) if he doesn’t take it. Boehner seems to be putting the president on probation.

That missive is titled“Toying with Default.” The WSJ says that the president isn’t serious about spending cuts. That doesn’t make sense in view of Obama’s recent speech Friday, until you look back to his demands last April. The president seems to have underestimated the extent to which some GOP “anarchists” would take this.

The WSJ link is here

But the New York Times has an interesting piece by University of Chicago professor Eric A. Posner and Adrian Vermeule, “Obama should raise the debt ceiling on his own”.  Bill Clinton has even said this, citing the 14th Amendment. Posner is making an analogy to Lincoln’s actions during the Civil War with habeas corpus.  The Cato Institute has suggested that as a practical matter it would be difficult to find standing to sue to stop him.  The White House denies it has any power to do this. But investors would feel reassured if it did.  If this were possible, then Obama and Reid would have the last card, and could force the GOP to accept extension through 2012.

There are other papers around saying that Obama could still borrow to pay the IOU's to the Social Security Trust Fund and guarantee all Social Security payments (up to a FICA actuarial limit). 

But the real problem then is spending. Ratings agencies and to see details of spending cuts, and fast.  And Republicans and Democrats both have to say who is going to take the hits.

That gets into the “moral values” debate and a WSJ piece by Arthur Brooks (p. A13), which I will discuss in a post on my main blog.

Update: 4: 30 PM

President Obama addresses the nation tonight at 9 PM EDT on "stalemate over avoiding default and the best approach to cutting deficits," (ABC).  Boehner will also speak (pun). 

Update: 10 PM, after the speeches.

The Washington Post has an important story by Zachary A. Goldfarb, "US could avoid default a few days longer", new reports say (link).  Bloomberg has a similar story where a Wells Fargo analyst John Silva says actual default would not happen until September, link

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