Kevin Drum - October 2013

The Shutdown in 10 Infuriating Sentences

| Fri Oct. 4, 2013 6:00 AM EDT

At its core, the dispute over the budget and the debt ceiling isn't complicated at all. But it is full of misconceptions and urban myths. Here are the 10 facts worth remembering past all the obfuscation:

1. Democrats have already agreed to fund the government at Republican levels.

2. Despite what you might have heard, there have only been two serious government shutdowns in recent history, and both were the result of Republican ultimatums.

3. Democrats in the Senate have been begging the House to negotiate over the budget for the past six months, but Republicans have refused.

4. That's because Republicans wanted to wait until they had either a government shutdown or a debt ceiling breach as leverage, something they've been very clear about all along.

5. Republicans keep talking about compromise, but they've offered nothing in return for agreeing to their demands—except to keep the government intact if they get their way.

6. The public is very strongly opposed to using a government shutdown to stop Obamacare.

7. Contrary to Republican claims, the deficit is not increasing—it peaked in 2009 and has been dropping ever since, declining by $200 billion last year with another $450 billion drop projected this year.

8. A long government shutdown is likely to seriously hurt economic growth, with a monthlong shutdown projected to slash GDP in the fourth quarter by 1 percentage point and reduce employment by over a million jobs.

9. No, Democrats have not used debt ceiling hostage taking in the past to force presidents to accept their political agenda.

10. This whole dispute is about the Republican Party fighting to make sure the working poor don't have access to affordable health care. 

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Conservatives' Biggest Fear: Being Called Racist

| Thu Oct. 3, 2013 7:57 PM EDT

In Pacific Standard, Tom Jacobs writes about a new study that tries to figure out why so many people love to watch and listen to "outrage-based radio and television programs." After conducting a series of in-depth interviews, their answer, in a nutshell, is that unlike conversations with actual friends and neighbors, these programs provide a safe space where you don't have to worry about saying something that might get you ostracized:

But why is their pull apparently stronger among conservatives, who gravitate to such programming in much greater numbers than liberals? Based on their interviews, the researchers believe the answer lies in the fact those on the right have more to fear in terms of social condemnation for their views.

In conversation with conservatives, liberals risk being called naïve or willfully blind to potential threats—not very pleasant labels, but not especially damaging ones, either. In contrast, conservatives risk accusations of racism—and “being called a racist carries a particular cultural force,” the researchers write.

“The experience of being perceived as racist loomed large in the mind of conservative fans (we interviewed),” they report. Every single conservative respondent raised the issue of being called racist, and did so without even being asked.

“What makes accusations of racism so upsetting for respondents is that racism is socially stigmatized, but also that they feel powerless to defend themselves once the specter is raised,” the researchers add. “We suspect that this heightened social risk increases the appeal of the safe political environs provided by outrage-based programs, and may partially explain the overwhelming conservative dominance of outrage-based political talk media.”

It's worth noting that this is not, plainly, a representative sample of conservatives. It's specifically a sample of conservatives who listen to right-wing radio and TV, where they're barraged daily with affirmations that the entire liberal project is based on unfairly slurring conservatives as racists. So it's no surprise that this is at the top of their minds.

That said, this is still something I struggle with. It's obvious that race infuses a tremendous amount of American discourse. It affects our politics, our culture, and our history. Racial resentment is at the core of many common attitudes toward social welfare programs; our levels of taxation; and the current occupant of the White House. There's no way to write honestly about politics in America without acknowledging all this on a regular basis.

At the same time, it's also obvious that, in many ways, a liberal focus on race and racism is just flatly counterproductive. When I write about, say, the racial obsessions displayed by Fox News (or Drudge or Rush Limbaugh), it's little more than a plain recitation of obvious facts, and liberals applaud. Ditto for posts about the self-described racial attitudes of tea partiers. But conservatives see it as an attack. And why wouldn't they? I'm basically saying that these outlets are engaged in various levels of race-mongering, and by implication, that anyone who listens to them is condoning racism. That's such a uniquely toxic accusation that it makes any real conversation hopeless. Cognitively, the only way to respond is to deny everything, and that in turn forces you to believe that liberals are obviously just lying for their own partisan ends. This feeds the vicious media-dittohead circle, and everyone withdraws one step more.

I know I'm not saying anything new or insightful here. But just as there's no way to not talk about this, I wish there were some way to talk about it that didn't instantly estrange conservatives even further—but that also didn't water the truth down into mush. I imagine I'll be wishing for that for a very long time.

Republicans May Be Cynical, But Democrats Need Better Answers

| Thu Oct. 3, 2013 3:54 PM EDT

As you know, the latest Republican ploy on the budget is to pass mini-CRs that fund a tiny handful of high-visibility programs: national parks, cancer treatment for kids, and keeping Washington DC running. This is all breathtakingly cynical, based on the idea that maybe the public won't get too mad about what Republicans are doing as long as all the damage from the budget impasse is behind the scenes.

Still, the optics of the Republican ploy are pretty obvious, and it's a little unnerving that Harry Reid could have been so unprepared to respond:

CNN's Dana Bash asked Senate Democratic leaders if they'd back the new piecemeal bill.

"What right do they have to pick and choose what parts of government can be funded?" asked Reid.

"But if you can help one child with cancer, why wouldn't you?" asked Bash.

...."Why would we want to do that?" asked Reid, keying off Bash. "I have 1100 people at Nellis Air Force base that are sitting home." He concluded by asking why someone of Bash's "intelligence" would ask something so silly. The video below reveals the gobsmacked faces of reporters.

Ugh. It's irksome that reporters like Bash are so eager to play gotcha with obvious Republican talking points, but them's the breaks. That stuff happens. Democrats need to have better answers, and they need to explain just why the Republican CRs are such contemptuous exercises in trying to gull the American public.

UPDATE: Commenters are upset about my interpretation here. There are two parts to this.

First, just as Reid started to say "Why would we want to do that?" Chuck Schumer interjected "Why pit one against the other?" A lot of you think Reid was keying off Schumer's statement, not Bash's question. That's possible, though the video isn't clear about this, and it's not how I initially read it.

But here's the second part: that's not what I meant to criticize anyway. Honestly, I just took it for granted that Reid wasn't literally saying "why would we want to help kids with cancer?" That's Sean Hannity crap. I was objecting to his comment about Nellis Air Force base. He sounds as though he's comparing some furloughed civilian workers in his home state with kids who have cancer. Fair or not, that's going to sound bad.

Reid also needs to learn to stay on message. He began his statement with a decent enough response to the CRs, but before he finished he wandered off into an aside about Republicans being obsessed with Obamacare. That may be true, but it was completely nonresponsive and stepped all over the point he needed to make.

President Obama Has Had Enough

| Thu Oct. 3, 2013 2:00 PM EDT

I like this Ezra Klein analysis of where we are in the budget/debt ceiling crisis. It picks up after the White House spent several fruitless months trying to negotiate with Republicans and eventually giving in completely to their spending demands. But even that didn't do any good:

As the White House sees it, Speaker John Boehner has begun playing politics as game of Calvinball, in which Republicans invent new rules on the fly and then demand the media and the Democrats accept them as reality and find a way to work around them.

....The White House has decided that they can't govern effectively if the House Republicans can keep playing Calvinball. The rules and promises Boehner makes are not their problem, they've decided. They're not going to save him. And that also rules out unusual solutions like minting a platinum coin or declaring the debt limit unconstitutional. The White House doesn't want to break the law (and possibly spark a financial crisis) in order to save Boehner from breaking a promise he never should have made.

Top administration officials say that President Obama feels as strongly about this fight as he has about anything in his presidency. He believes that he will be handing his successor a fatally weakened office, and handing the American people an unacceptable risk of future financial crises, if he breaks, or even bends, in the face of Republican demands. And so the White House says that their position is simple, and it will not change: They will not negotiate over substantive policy issues until Republicans end the shutdown and raise the debt ceiling.

I think Obama is right. Conservatives are basically trying to invent a new Constitution because they don't like the way the current one works, and they're doing it by threatening the equivalent of nuclear war if they don't get their way. There's simply no way that any president can give in to that.

I Am Now Very Confused by John Boehner

| Thu Oct. 3, 2013 1:26 PM EDT

I do not understand this:

With a budget deal still elusive and a deadline approaching on raising the debt ceiling, Speaker John A. Boehner has told colleagues that he is determined to prevent a federal default and is willing to pass a measure through a combination of Republican and Democratic votes, according to one House Republican.

The lawmaker, who spoke on the condition of not being named, said Mr. Boehner indicated he would be willing to violate the so-called Hastert rule if necessary to pass a debt limit increase. The informal rule refers to a policy of not bringing to the floor any measure that does not have a majority of Republican votes.

Other Republicans also said Thursday that they got the sense that Mr. Boehner, who held two meetings Wednesday with groups of House moderates, would do whatever was necessary to ensure that the country did not default on its debt.

That's good to hear. But it doesn't make sense. For months now, Boehner has been telling his caucus not to use a government shutdown as leverage to cut spending or defund Obamacare, but instead to use the debt ceiling as leverage. That's been his consistent strategy since March.

But now he's telling them that, in fact, the debt ceiling can't be used as a hostage after all? That's weird. Of course, at the same time that he's been begging his caucus to use the debt ceiling as leverage, he's also been promising that he will never "risk the full faith and credit of the United States." So this has been confusing all along.

I don't know what's going on anymore. In the meantime, however, here's a video of brave, brave Rep. Randy Neugebauer (R-Texas) publicly berating some poor park ranger for being stuck doing a terrible job that Rep. Randy Neugebauer (R-Texas) has forced her to do. Kinda makes you want to puke.

A Long Shutdown Would Seriously Hurt Economic Growth

| Thu Oct. 3, 2013 11:49 AM EDT

Via Dylan Matthews, here's a chart that summarizes some of the leading estimates of the cost of a government shutdown. A brief shutdown (in blue) wouldn't do too much damage. But a longer shutdown (in green) would. The average of the five estimates is that it would reduce fourth quarter GDP by about 1 percentage point. As CRFB points out, estimates of fourth quarter growth are only a little above 2 percent right now, so this would be a big hit.

Think about this. Without any headwinds, fourth quarter GDP growth would probably clock in around 3 percent or so. The sequester has already cut that down to about 2.3 percent. A long shutdown could cut it further to 1.3 percent. If this happens, it means that Republican economic folly will have reduced economic growth in the fourth quarter by half or more. Thanks, Republicans!

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Does the Government Shutdown Delay the Debt Ceiling Indefinitely?

| Thu Oct. 3, 2013 11:05 AM EDT

The government is shut down. Since Social Security, Medicare, and other mandatory programs make up the bulk of federal spending, this doesn't mean we're no longer spending money. But we're spending a lot less. At least a third less, I think, and that should put us pretty close to balanced budget levels of spending. We might even be under that.

So....does this mean that we're no longer running up new debt? And does that in turn mean that we're not going to hit the debt ceiling as long as the government remains shut down? Have we gotten any kind of estimate from the Treasury Department about this?

POSTSCRIPT: Just to make this clear, I'm aware that once the shutdown is resolved all the money not being spent now will be disbursed. (Assuming that Congress approves back pay for furloughed workers, which I'm not sure I'd bet on.) But that's only after the shutdown is resolved. In the meantime, we're no longer barreling toward a breach of the debt ceiling, are we?

Don't Blame John Roberts for the Medicaid Mess

| Thu Oct. 3, 2013 10:48 AM EDT

The New York Times notes today that lots of poor people won't benefit from Obamacare because the states they live in have rejected the Medicaid expansion that was part of the law. Matt Yglesias comments:

Something that's worth noting here more prominently than they do is that this is not an oversight of the law or of the Obama administration. It's due to the actions of Chief Justice John Roberts and then to a number of Republican Party state and local elected officials....The authors of the law decided to make state governments an offer they couldn't refuse—on the one hand, expansion would be nearly 100% paid for by the federal government while on the other hand failure to expand would come with significant financial penalties.

Then came Roberts. In his landmark ruling upholding the constitutionality of the individual mandate, he burnished his conservative cred by striking down the penalties portion of the Medicaid expansion.

I think this is unfair. In fact, there were only two justices who upheld the Medicaid expansion (Ginsburg and Sotomayor). All the rest, including the liberals Breyer and Kagan, struck it down. So it wasn't even a close call. The vote against the Medicaid provision was 7-2.

And as much as I dislike the result, I can't find a lot of fault with this. The basic holding was simple: given our federalist structure, states can't be forced to help fund new federal programs like Obamacare's Medicaid expansion. They have to be given a genuine choice. If rejecting the program merely means losing the benefits even though your state's income tax dollars are helping to fund it, that's a tough choice, but still a real one. Conversely, if you're threatened with losing not just the funds for the expansion, but your entire existing Medicaid program, it's not a real choice at all. Nobody could even dream of doing that. In practical terms, you're being forced to accept the expansion and you're being forced to pay for it with state dollars.

I can't find a problem with that logic. I don't like it, since my personal preference is for more federal control over national policies, but given our laws and constitutional structure, it's hard to argue with. If Congress really wanted Medicaid to apply universally, they should have federalized the program and funded it completely out of federal dollars. That would have been unquestionably constitutional. But they didn't.

In Syria, We Don't Want Rebels to Lose, But We Don't Want Them to Win Either

| Thu Oct. 3, 2013 12:28 AM EDT

I've written a couple of times before about the apparent policy of the Obama administration in Syria: to arm the rebels just enough to produce a stalemate. Why? Because we don't really have anyone we like in this fight. "In a nutshell," I wrote in June, "the idea here is that we want both sides to be evenly matched so the fighting continues as long as possible. That will weaken pretty much everyone we hate: Assad, Hezbollah, Iran, and the Al Qaeda groups among the rebels. As long as these folks continue killing each other, we're happy."

Until now, there's been some evidence that this was Obama's strategy, but nothing conclusive. Today, however, Greg Miller reports that this really is what Obama is doing:

The CIA’s mission, officials said, has been defined by the White House’s desire to seek a political settlement, a scenario that relies on an eventual stalemate among the warring factions rather than a clear victor. As a result, officials said, limits on the agency’s authorities enable it to provide enough support to help ensure that politically moderate, U.S.-supported militias don’t lose but not enough for them to win.

....U.S. officials said the classified program has been constrained by limits on CIA resources, the reluctance of rebel fighters to leave Syria for U.S. instruction and Jordan’s restrictions on the CIA’s paramilitary presence there. But the limited scope also reflects a deeper tension in the Obama administration’s strategy on Syria, one that has sought to advance U.S. interests but avoid being drawn more deeply into a conflict that the United Nations estimates has killed more than 100,000 people since it began in 2011.

This is something of a moral nightmare, no? However, the alternatives aren't much more appealing:

The Obama administration has explored the idea of using the U.S. military to expand the training program to what some officials have described as “industrial strength.” But Defense Department officials said there has been no decision to do so and cited significant obstacles.

It is unclear whether Jordan would welcome such a large U.S. military footprint, which would mean converting a covert program into one officially acknowledged by the United States. There are also legal impediments, including a measure known as the Leahy Law that would require a determination that no recipients of U.S. military assistance had committed human rights abuses.

No thanks. Aside from John McCain, not many people like the idea of seriously ramping up US aid and starting up another Afghanistan. At the same time, there's also not much support for a policy of doing nothing at all. (That would be my preference, but I'm in a distinct minority.) Like it or not, then, the stalemate strategy is what we're left with. Boo yah.

Chart of the Day: Wall Street Is Starting to Get Nervous About the Debt Ceiling

| Wed Oct. 2, 2013 6:33 PM EDT

James Pethokoukis passes along the chart on the right from Goldman Sachs, which shows the yield curve on treasury bills maturing at various dates. The curve on September 16 was pretty flat. The curve on September 30 showed a bit of an uptick for bonds maturing in the second half of October. A day later, on October 1, the yield curve went nuts. Bonds maturing in the second half of October—which are at risk of delayed payment if the debt ceiling is reached—cratered in value, which means they're now sporting big yields. If you buy a bond that matures on October 31, you can expect a return of more than 8 percent.

Treasury bonds aren't at any risk of genuine default, so what explains this? Two things. First, there's apparently some genuine risk that bond coupons might not get paid if we hit the debt ceiling on October 18. This has to do with the fact that the Treasury's computer systems can't easily prioritize payments, which means that, willy nilly, maybe some bond coupons will be missed. Among large investors, there's also a worry that Wall Street systems can't easily distinguish between bonds that are in technical default and those that aren't, and this could cause bonds maturing within the danger zone to be rejected on the repo market if you try to use them as collateral. I don't know if either of these fears is really reasonable, but that's the chatter right now.

I'll defer to anyone who knows more about this than me—a very large class of people, I imagine—but if I'm reading this right, market fears are taking the following form:

  • Bonds maturing after October 18 might end up in technical default, which reduces their usefulness as collateral in the repo market and thus their value.
  • In addition, these bonds might also get paid late, and with maturity dates only a few weeks away, even a few weeks of delay has a big effect on their value.
  • Bonds maturing after October 31 are safer, since everyone is assuming that things will be settled one way or another by mid-November at the latest.

I've mentioned before my theory that the now-combined budget/debt ceiling crisis could end up being resolved only by some kind of market crash. Pleading from the business community may be falling on deaf ears at the moment, but the one thing that really does seem to get the attention of even tea party Republicans is a market catastrophe. I don't know if we'll get to that point, but this chart seems to suggest that if the budget/debt ceiling standoff continues for another couple of weeks, that's what will finally put an end to it. Even John Boehner will finally tell the tea partiers that enough is enough if the repo market has seized up and U.S. treasury bonds are selling at about the same premium as those from Greece.