The Obama administration is now warning that the President will veto House Speaker John Boehner’s two-step plan to raise the U.S. debt ceiling and cut $3 trillion in government spending.
President Barack Obama’s Office of Management and Budget has announced that it “strongly opposes” the measure, which the House is set to vote on tomorrow, and would recommend a veto if it were passed by Congress.
Boehner is trying to round up the votes to pass the measure in the Republican-controlled House, but some conservative Republicans are refusing to sign on to the plan—either because they think that the cuts Boehner is recommending don’t go far enough, or because they oppose the whole idea of lifting the debt ceiling.
Meanwhile, Senate Majority Leader Harry Reid is seeking support for his alternative that would provide a $2.4 trillion increase, enough to get through the 2012 elections. Liberals argue that Boehner’s two-step plan won’t give financial markets the assurance they need. Bloomberg reports that Reid is now saying that the Senate will vote on his proposal “soon.”
Yesterday Wall Street remained sanguine, confident that politicians would make a deal, and avoid default. But today, Reuters reports, the Street is getting nervous: “Wall Street banks are preparing for the real possibility that the United States will lose its top credit rating, which they say will cost the country $100 billion in additional interest payments and hurt both consumers and the economy.”
It’s now likely that at least one of Wall Street’s three credit rating agencies will downgrade U.S. debt. But a downgrade would be minor compared to an outright default that, as Reuters notes, “would catapult the United States to the top of the list of sovereign states whose political dysfunction supersedes sound economic management — above countries like Argentina, Ecuador and Russia.”
It is difficult to imagine that this could happen. But in his televised speech yesterday, Harry Reid voiced his concern that conservatives might be more interested in “embarrassing the president” than in “doing what is right for the country. And today, the Washington Post’s Ezra Klein warned that “Many elected members of the GOP really are willing to let Treasury exhaust its borrowing authority. Very few elected Democrats can say the same. For that reason, Republicans always had the leverage on this issue . . .”
I think veto power is an undemocratic practice in a democracy such as USA and by a democrat president. It is going against popular opinion.
This is really getting scary.
Congress has lost its collective mind.
Panacea, & HealthBlog
Panacea–I agree. Congress already has damaged the economy; probably at least one of the credit rating agencies will downgrade our credit rating.
China (which is our biggest lender) is very upset at what it sees as “reckless” behavior by our politicians. If they start selling and at some point may begin selling Treasuries (as some of their officials think they should). If they do that, interest rates in the U.S. would go up. (Though China would be hesitant to sell too many Treasuries because when interest rates on Treasuries go up, prices go down, and since they have a huge amount of their reserves invested in our Treasuries, they wouldn’t want to see prices drop sharply.)
Health Blog– the polls show that the public is with the President on this one. The public does not trust the far-right Republicans. Most voters favor higher taxes for those earning over $200,000 and most voters do not want to see Medicare or Social Security cut.
The Tea Party Extremists represent a small minority, and they are doing great damage to the Republican party which will probably lose votes as a result of what has been going on this week.
A short term rise in the debt ceiling is unacceptable because it would cause uncertainty. Funny that never seemed to happen the other THIRTY EIGHT times it was raised for less than 6 months. It’s unacceptable cause it might hurt Obama politically. Call a spade a spade. I guess trying to set the stage for your reelection trumps a rise in the debt ceiling. Again THIRTY EIGHT times.
I don’t have any faith in what these credit rating agencies banter about. They also gave subprime securities a AAA rating for a little history.
A CNN poll show Americans support cut cap and balance by a 2 to 1 margin as well, added to your data it proves Americans don’t know what they want.
Jenga, a short-term raise in the debt ceiling allows the GOP to put a gun to the head of the economy again and threaten to pull the trigger if they don’t get what they want. And what they want is bad for the economy, bad for the country.
Thank you Steve. Bottom-line, It’s bad politically. Game. Set. Match.