Thursday, August 1, 2013

Debt and Budget Hijinks

Booman asked a good question on his blog today:

"Will Obama really be willing to watch our credit rating be destroyed and the global economy collapse (i.e., by refusing to negotiate over the debt ceiling)?"

My response in Comments:

Booman's question was would the President risk our credit standing in the world by going to or over the brink?

My answer: He will hold firm. As we cross over the brink, he will order his Treasury Secretary to keep paying the bills, citing the 14th Amendment. There is a much smaller possibility that he will have Treasury mint a Trillion Dollar Coin and deposit it in Treasury's General Account at the Fed. The Fed is obligated to fund such deposits at the value claimed by the Secretary. Tricky, but possible. For Obama, who doesn't like tricks, unlikely.

Will the GOP go to the brink? That's the real question. GOP thought leaders are utterly convinced Obama will fold, and when he doesn't, they will offer a clean bill, since there won't be time to negotiate. They (the GOP) will not take us over the edge, unless they miscalculate.

 Another reason the brink may not be hit is that the September 30 deadline likely will come before the debt ceiling drop dead date. If the GOP shuts down the Government and gets humiliated in the aftermath, they will be in no mood for another fight.

The battle will be in September over the CR. To increase the pressure, Obama and Lew may work to have the debt limit reached at about the same time. If this happens, I predict we will see a cave on the debt ceiling (clean bill) and a temporary CR, which will just move the budget talks closer to the 2014 elections and well into Obamacare's successful roll out.

In this case, there will, I predict, be a shutdown, and the GOP will lose the House in 2014.

No comments:

Post a Comment