Debt Ceiling Could Prove to Be Major Victory for Republican Presidential Candidate

Google Images: Mitt Romney, the GOP front runner

I feel bad for Republican presidential candidates. They've been trying so hard to get attention recently, with a number of televised debates, campaign stops, and television appearances. But the GOP field just can't seem to catch a break. And Mitt Romney is taking it the hardest.

Romney's problems stem largely from the issues I've addressed with the mass media and the way in which it functions. Why report on Romney's serious economic proposals when Herman Cain is saying that he would outlaw any legislation over three pages, or Michelle Bachmann is reportedly having migraine headaches? The average viewer watches the news for short and interesting tidbits of information, not full-scale political analysis of major issues. This is why PBS, with its lack of flair and dramatics, is so unpopular among mainstream Americans. 

But Romney, who many consider to be the front runner of the GOP presidential race, may have caught a major break with the ongoing debt ceiling crisis happening in Washington. And he did not have to do a single thing.

Analysis: GOP Presidential Candidate Could Profit From Debt Talks
With the debt crisis consuming every single part of Washington, Romney and the other serious presidential contenders (I'm looking at you Rick Perry) have two major things going for them:

• Being outside of Washington, away from negotiations, and away from the possibility of having to vote to increase the debt ceiling, is a major advantage right now. While polls show that the American people are starting to understand the seriousness of the situation if we were default on our debts, they are still fairly evenly split on whether or not we should raise the debt ceiling. While everyone in Washington (I would hope) and those who consider themselves politically active know, it is an impossibility to not raise the debt ceiling. It will be raised, it is just a matter of how long it will take to hammer out some kind of compromise between the two parties. But reality does not matter in politics. Politics is solely driven by perception. President Obama is not only directly tied to an increase in the debt ceiling, but he also has to sign the bill into law and waste plenty of resources explaining why the ceiling needs to be raised to a relatively uninformed general populous. Nominees like Romney and Perry, on the other hand, have no such problem. In fact, knowing that their base is strongly opposed to any raising of the debt ceiling under any circumstances, I would be shocked if you don't soon see Romney railing against raising the debt ceiling, saying that if he was in Congress he would have opposed it. Is this the truth? Of course not. For all the flack that Romney takes, I'm the first to admit that he possesses a very high level of intellect, especially for things related to business. And as a businessman, Romney knows that if the debt ceiling is not raised, the United States could face an economic catastrophe. But that doesn't matter, because he will never have to vote on it in Congress or sign legislation that would raise it (at least through the campaign). 

Google Images: President Obama in the White House Briefing Room

• But that's not the only thing that Republican candidates have going for them. While Republicans like Romney are hitting the campaign trail hard, spending hours a day stumping and fundraising with major donors, Obama is stuck in Washington, dealing with anger from both sides, from Republicans who are vehemently against raising taxes and from Democrats who refuse to accept any entitlement cuts. Romney raised $18.4 million last quarter, far surpassing the amount that all other candidates took in combined. However, Romney still loses out to the incumbent president, who took in a record shattering $87 million dollars. But comparing the two numbers ignores the bigger issue. Romney is out campaigning every day, getting his policy positions out there, crusading against the President and his policies. While Obama's grassroots machine has begun to ratchet up, Obama himself has not had the opportunity to really hit the ground running in a number of key battleground states he needs to take to win in 2012. For all those who say that it's too early to even think about the President campaigning, consider this. According to the latest Gallup poll, the president's approval rating sits at 43%, far from the 52.9% that he took in the general election. These poll numbers are worrisome because his approval is down among his own base. If the President wants to rally his base and reassure independents by making sure that they don't just sit out on election day, he needs as early of a start as possible. With the fragile state of the economic recovery, and Republicans doing all they can to make sure that he does not pass a single piece of landmark legislation (or, for that matter, any legislation that would help the president in righting the economy), Obama has some major work to do if he wants to see electoral success again in 2012. 

Google Images: Voter anger with any all incumbents will certainly flair up after the extended and extremely frustrating weeks of debt ceiling negotiations. This is likely to help boost the Republican nominee, who will be able to paint him/herself as an outsider, much like Senator Obama in the run-up to the 2008 election. 

• Furthermore, while Obama may win the battle, he's growing more and more likely by the day to lose the war. Think about it this way: Polls show that if a potential default were to happen, Republicans in Congress would be blamed by 50% of Americans whereas the president would only be blamed by 33%. According to one commentator, the public would view Obama as bad and congressional republicans as even. Obama cannot win and republicans know it. And GOP presidential candidates should be licking their chops at the opportunity to hit Obama hard on the debt ceiling. With Speaker Boehner walking out of a potential bipartisan deal earlier today, this now leave the McConnell compromise as the last real bill on the table. McConnell's plan would essentially grant the president with 100% of the responsibility to raise the debt ceiling, allowing members of Congress to vote no and shifting all the blame for the unpopular action of raising the ceiling squarely on Obama's shoulders. The way in which the debt ceiling negotiations have been handled is likely to cause a rabid anti-incumbent sentiment for Washington politicians. Like it or not, even acting as the most mature man in the room (assuming an almost father like role over his "congressional" children), President Obama is the leader of the "typical, Washington politicians." President Obama will ultimately find it difficult to stave off a well-funded republican candidate who runs as an outsider, just as Senator Obama did in 2008.  

Conclusion

If you ask me, Republican leadership knows exactly what they're doing. By handicapping the President's ability to fund raise, forcing him to engage in seriously unpopular talks, and potentially giving him the sole approval to increase the debt ceiling (allowing Congress to vote no and putting all the responsibility on the shoulders of the President), they are doing all they can to set the president up for failure in 2012. The most telling of quotes comes from Senate  Minority Leader Mitch McConnell:

The single most important thing we want to achieve is for President Obama to be a one-term president.

Forget compromise, forget the possibility of defaulting on our debts, forget that American voters elect officials to represent them and act and vote in a responsible and grown-up manner. Washington has slowly but surely become a political  circus, a place where the minority party will do anything and everything to ensure that the incumbent does not get re-elected. Republicans have recently mastered this strategy, reaffirming the beliefs of millions of discontent Americans. If the possibility of a market meltdown and rapidly increasing interest rates (among dozens of other things) does not spur this Congress to quickly find compromise, I have absolutely no idea what will. 

Debt Ceiling Drama: Tea Party Republicans vs. Everyone Else

Google Images

Just weeks after the Republican caucus wholly rejected any form of "grand deal" to raise the debt ceiling, rumors are swirling around the Capitol that the possibility for a larger package has been put back on the table, and that progress is being made.

A Quick Update
For those who have not been paying much attention lately, here are the most recent updates:

• House Republicans debated and passed the "Cut, Cap, and Balance Act," with 9 republicans opposing and 5 Democrats supporting the bill. According to the language of the bill, the legislation would cut discretionary spending by around $380 billion in 2012 (although where the cuts come from has not yet been specified), enforce a cap on spending that would make it impossible to spend any more than 18% of GDP, and put a balanced budget amendment on the table which would force all tax increases to be passed by a 2/3 vote instead of a simple majority. Republicans have said that this bill will help to right America's fiscal house and spur job growth by creating certainty in the marketplace. Critics have pounced on the bill for not specifying what cuts would be made. They have also asserted that if the bill became law, the legislation would severely handicap the President in times of economic downturn (as he would be unable to access any type of money that would be intended for stimulus). Either way, the bill is said to be dead in the water in the Senate, as the Senate Democratic Majority would be wholly unlikely to pass such a bill seeing as a balanced budget amendment has very limited support among progressives.

• The Senate Minority Leader, Mitch McConnell, has floated a bill that would cut around $1.5 trillion in spending over 10 years while also giving the President the authority to suggest (but not implement) even more future spending cuts as one of the conditions to raising the debt ceiling. But House Republicans have thrown up major roadblocks to this idea, saying that it does not cut enough over the ten year period and that it gives the President too much discretion and too many opportunities to back out of those cuts in the future. Additionally, the President and his administration have been desperately pushing for a bigger deficit-reduction package, which has led many lawmakers to consider the McConnell deal as being too small and possibly unnecessary. Because of this, the bill is looking less and less likely to be the ultimate solution that is agreed upon by the President and Congress. 

Google Images: Mitch McConnell is working frantically to  create a plan that would cut $1.5 trillion dollars from the budget over 10 years and give the President the authorization to raise the debt ceiling. But commentators say it has very little chance of passing the House with enough Tea-Party Republican support. 

Where Does This Leave Us?

With the two most high-profile bills all but ruled out, where does this leave us? Remember a few weeks ago when Boehner drew major flack from House Majority Leader Cantor and the rest of the Republican caucus for offering them a "grand deal" that he had assisted in conceiving with the President? Well, it appears that that plan is back with a vengeance. Commentators and officials close to the White House are saying that a long-term, large-scale deficit plan is now seeming to be more and more likely of an option. 

According to a number of different sources, the President is still looking for a large-scale deficit deal that would likely save more than $4 trillion dollars over ten years, through discretionary cuts, entitlement reforms, tax increases on wealthy Americans, and the elimination of tax subsidies for big oil companies and a number of other corporations. And with Republicans taking major flack for their no-compromise policy, they may at this point be willing to oblige him. 

What would this possible deal look like? According to the Huffington Post,

It would involve steep reductions in health care spending -- both in Medicare and Medicaid. In previous debt ceiling negotiations, the administration has supported further means-testing elements of Medicare as well as raising the eligibility age of the program. Cuts to Medicare suppliers would also be part of a larger package, as would adjusting the payment structure of Social Security so that a lower level of benefits was paid out over time.

Even if these controversial cuts to medicare were approved by both Democrats and Republicans, the problem of tax revenue is still an issue that seems dishearteningly difficult to find common ground on. Said simply, Democrats want the Bush era tax cuts curtailed and rates to go back up to Clinton era levels, which, it should be noted, was a period in which the government was running surpluses (however, whether or not that had to do with tax rates is disputed). Republicans, on the other hand, do not want any form of tax increase involved in a deal.

But the most outspoken congressional Republicans, the freshman, tea-party backed conservatives, may have to swallow the medicine. While Speaker Boehner has publicly stated that Republicans are solely focused on getting cut, cap, and balance signed into law, according to unconfirmed yet widely circulated reports, Speaker Boehner spoke openly to the Republican caucus in a private meeting and said that some form of a grand deal is still on the table. It has also been reported that he has expressed interest in a large-scale deal with the potential for raises in revenue and has been working on some form of a deal directly with President Obama.

Knowing that Republicans will do all they can to avoid tax increases, the President has offered them an alternative path:

The White House has laid out an alternative suggestion during past negotiations: Lawmakers would be required to find $800 billion in additional revenues over the next decade. If they could not find an agreement, then the Bush-era tax cuts for the high-end earners will expire.

What's more, Grover Norquist, the man behind the "no-new-tax-pledge" which all congressman (with a handful of exceptions) have signed, said explicitly that not continuing the Bush tax cuts would not theoretically be considered a tax increase, and therefore would not violate the pledge that Republicans in Congress signed. According to the Washington Post,

According to Mr. Norquist’s interpretation of the Americans for Tax Reform pledge, lawmakers have the technical leeway to bring in as much as $4 trillion in new tax revenue — the cost of extending President George W. Bush’s tax cuts for another decade — without being accused of breaking their promise. “Not continuing a tax cut is not technically a tax increase,” Mr. Norquist told us. So it doesn’t violate the pledge? “We wouldn’t hold it that way,” he said.

Republicans are critical of this alternative path, saying that all Democrats would have to do was simply "run out the clock" -- meaning that they would oppose any and all deals knowing that the Bush tax rates on the rich would go up no matter what. Because of this, Democratic officials say they are floating a new, slightly different idea:

In order to try and find agreement on this front, a slight reversal to the administration's original plan has been floated, according to a Democratic official. Rather than write the decoupling of the Bush tax cuts into the debt ceiling legislation, negotiators will simply leave the rates as is.

Lawmakers would still be tasked with finding $800 billion or so in revenues to supplement a deficit-reduction deal. But if that $800 billion didn't materialize, they would no longer have the fallback option of seeing the high-end rates go back to pre-Bush levels when they are set to expire at the end of 2012. Instead, they would have to relive the dramatic legislative showdown that happened in late 2010, when the president and Democrats tried, unsuccessfully, to decouple the top-rates from the middle and lower income rates.  

Google Images: Grover Norquist, The Head of Americans for Tax Reform

 Analysis: Tea Party vs. All 
As demonstrated above, there are a number of different options floating around. But the worry is that none of them are politically viable, by which I mean none of them would be able to get enough support from House Republicans. Even with President Obama compromising on trillions of cuts, including deeply unpopular cuts to medicare and medicaid, and offering an olive branch to Republicans on taxes, Tea Party backed Republicans still refuse to even entertain the idea of increasing taxes a single penny. Instead, House Republicans have taken to the airwaves and the television screens, arguing with political commentators and hosts that cut, cap, and balance has a great chance of passing the Senate. Case and point, Illinois Rep. Joe Walsh got into a heated (and extremely juvenile) argument with Chris Matthews about the plan that Tea Party Republicans have trumpeted:




Through all the bickering (which I have argued is a huge problem with the mass media), Walsh repeatedly asserts that cut, cap, and balance has a good chance of passing the Senate. This is pure posturing. Cut, cap, and balance has absolutely no chance of passing the Senate. It would need a total of 60 Senators to vote in favor and with the chamber being composed of a Democratic majority vehemently opposed to such ideologically driven legislation, it is dead on arrival. Joe Walsh (and more broadly members of the Tea Party Republican caucus) have said that they are in no way posturing, that they want to see a deal done more than anyone else. In fact, they argue that President Obama is the one lying in an attempt to turn the people against the Republican party.

If Tea Party Republicans are not posturing, if they really believe in compromise, why did they push so hard for cut, cap, and balance, legislation that is purely ideologically driven (with a requirement that all tax increases can only be put into law with a 2/3rds majority) and had absolutely no chance of ever becoming law? If they believe in compromise, with less than two weeks before the government begins the process of defaulting on its debts, shouldn't they be working with the President, working with their leadership to try to hammer out a deal in which no one is happy, but everyone is equally unhappy?

A new CNN poll came out today that showed that 64% of Americans believe that any debt ceiling deal should include a mix of both spending cuts and tax increases:

In those discussions, several budget plans have been proposed that would reduce the amount the government owes by trillions of dollars over the next ten years.  If you had to choose, would you rather see Congress and President Obama agree to a budget plan that only includes cuts in government spending, or a budget plan that includes a combination of spending cuts and tax increases on higher-income Americans and some businesses? 

Only spending cuts 34%  

Spending cuts and tax increases 64%

The Republican Party is in trouble on the debt ceiling, and they are being given a huge chance to potentially avoid political catastrophe. President Obama is giving up at least $2.4 trillion in spending cuts, and what does he want in return? For Bush era tax cuts to expire. Just to hammer the point home (I know I just provided the quote), even Grover Norquist, the biggest anti-tax crusader in Washington, is saying that allowing tax cuts to simply expire is not equal to a tax hike and therefore would not draw the ire of Norquist's powerful group, Americans for Tax Reform. But tea party candidates are still clinging on to the wildly imaginative idea that cut, cap, and balance has a chance to pass the Senate.

This should be most troubling for Republicans like John Boehner and Senate Republicans who believe that compromise is necessary to making a deal. Why? Because when the American voter thinks about who they would blame if the government defaults, their opinions are not nuanced. The vast majority do not say "Republicans in the House" or "Tea Party Republicans." No, they say simply Republicans. This is the same phenomenon that happens almost every midterm election after a new president has been elected. Take, for instance, 2008, when President Obama was swept into office with a huge margin of victory and dozens of congressman rode in on his coattails. Then, in 2010, voters got upset with President Obama because they had voted for change and not a whole lot happened. What did the voters do? They did not get upset at just President Obama, no, they blamed the entire Democratic Party, voting out a huge number of House Democrats and hammering away at the Democratic Senate Majority.

A similar situation appears to be manifesting with the debt ceiling talks. While Senate Republicans have showed openness to compromise, the powerful group of freshman tea-party backed republican congressman have maintained their fierce fight against taxes. In fact, many Senate Republicans have showed interest in the so-called "Gang of Six" proposal that was created by 3 Democrats and 3 Republicans. The plan would essentially raise $1.7 trillion of revenue over the next ten years. But the plan drew near-immediate criticism from House Republicans.

Paul Ryan, the head of the House Budget Committee, expressed his dismay with the plan that would raise revenues:

Unfortunately, it [the plan] increases revenues while failing to seriously address exploding federal spending on health care, which is the primary driver of our debt. There are also serious concerns that the proposal’s substance on spending falls far short of what is needed to achieve the savings it claims.

And Tea-party freshman have also been chiming in against the plan, frustrated with the proposed tax increases. What House Republicans fail to realize is this: The President has expressed a willingness to compromise on trillions of cuts in discretionary and entitlement spending, a willingness that most Democrats are visibly frustrated with. Cuts to Medicare are angering for any Democrat.

But if President Obama's final deal with Speaker Boehner includes cuts to medicare, I would be outright shocked if Democrats did not swallow the bitter pill and vote for the plan anyways, despite their public outcries. This is the main difference between congressional Democrats and Republicans. Putting all the rhetoric aside, Democrats in Congress have shown a willingness to take politics out of the equation and put the country first. Will Democrats take major flack for increasing the debt limit and agreeing to cuts to medicare? Absolutely. They may even lose some wealthy fundraisers. But they understand that if the debt limit is not raised, this country is in grave danger of an even more calamitous economic collapse than 2008.

Tea-party Republicans (this does not include Senate Republicans or Speaker Boehner) say they want to move the nation forward, get our fiscal house in order, and create jobs. But the legislation they're supporting (like cut, cap, and balance) and the roadblocks that they are constantly throwing at the President and at Speaker Boehner suggest the opposite.

Google Images: Tea Party Republicans are sticking to their guns on cut, cap, and balance

And the voters have had enough of it. A recent CNN poll indicated that that 51% of Americans would blame the Republican Congress if the deal is not reached, whereas only 30% would blame Obama. President Obama has positioned himself and the Democratic Party as compromisers, centrists whose main goal is to fix the economy without harming the middle class. Republicans have no response. Worse, Tea Party Republicans have unsuccessfully attempted to paint Obama as a liar and a radical and have worked as hard as possible to derail a possible compromise.

Tea Party House Representatives were elected to Washington in 2010 to cut spending and restore America's fiscal responsibility. But if they don't quickly realize the implications of their actions, and understand that a vast majority of Americans are demanding compromise, come 2012, those "newly elected representatives" will be voted out just as swiftly as they were voted in.

The Rise of Elizabeth Warren

Google Images

As the months passed, it became increasingly clear that Elizabeth Warren would never pass through a Senate nomination process. Her polarizing testimony in front on Congress, coupled with her “hero status” among liberals and the President all but assured that she would never be able to head the agency she spent so many years of her life working for.

Warren was brought on to the Obama Administration in a position that did not require confirmation, her main goal being to get a fledgling new agency, the Consumer Financial Protection Bureau, up and running.

Progressives knew that Warren would never be confirmed through a staunchly conservative Senate, a Senate that does not even recognize the existence of the Consumer Financial Protection Bureau. According to Politico,

When Obama authorized Warren to get the bureau up and running a year ago, “I asked Elizabeth to find the best possible choice to lead the bureau,” he said in a brief Rose Garden statement, flanked by Warren, Cordray and Treasury Secretary Timothy Geithner. “And that’s what we’ve found in Richard Cordray.”

So, just three days before the CFPB is set to open its doors, President Obama nominated Richard Corday to head the agency. The president said Cordray, currently serving as the CFPB’s director of enforcement, has been a staunch consumer advocate in Ohio, helping to step up enforcement of the state’s consumer fraud laws and identifying what eventually became the national mortgage foreclosure crisis. “He took this job, which meant being away from his wife and 12-year-old twins in Ohio, because he believed so deeply in the mission of the bureau,” Obama said.

Despite his solidly liberal status, and his work as the director of enforcement at the CFPB, liberals saw the nomination as a major let-down: It had championed Warren — a plain-spoken Harvard Law professor and a folk hero to the left — to head the bureau that she had built up from nothing.

Who is Elizabeth Warren?

Supporters of Warren will often tout her as a 62-year-old Grandmother from Oklahoma. This is technically true, but it’s also what many might call “posturing.” Warren is a Harvard professor and one of the country’s foremost experts on bankruptcy law. Over the past four years, Warren has stoked an intense, largely partisan debate over the government’s role in protecting its citizens from overly zealous lenders, banks, and financial institutions. While doing this, she also strategically positioned herself to oversee the new federal agency that she dreamed of creating in hopes of rewriting the rules of lending. Businessweek provides perhaps the best analogy, saying that

“Warren is a grandma from Oklahoma the same way Ralph Nader is a pensioner with a thing about cars.”

She has also become an extremely polarizing figure in the political arena. Warren has a way of always putting herself smack dab in the middle of polarizing arguments. She has testified in front of Congress more than half a dozen times (her testimony always riddled with sarcastic retorts to overly aggressive questions with congressman) and has come to be revered by progressives and despised by conservatives.

Warren has often said that she had a precise moment of clarity in which she realized that changing the way the banks lend was going to require a new federal bureaucracy – and that it was solely on her shoulder to build support, create, and establish the rules with which it worked. That agency became known as the Consumer Financial Protection Bureau, or CFPB, and it was finally created as a part of the Dodd-Frank financial reform bill that passed in the wake of the 2008 financial crisis.

What is the CFPB?

According to the organization’s website,

The Bureau of Consumer Financial Protection (CFPB) is a new federal regulator created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (PL 111-203) that President Obama signed into law on July 21st, 2010. It is an independent Bureau housed in the Federal Reserve (the Fed) that will be charged with regulating consumer financial products. In large part, the authorities granted to existing federal regulators to regulate consumer financial products will be transferred (although not necessarily consolidated) to the CFPB.

Essentially, Warren argues that the agency is created to be a watchdog against banks and other financial institutions that have regularly promoted predatory lending in the past. Warren has long said that predatory lending was the main cause of the economic crisis in 2008 (in fact, it is what caused the housing crisis). So, Warren wanted to create an agency that had the power to reign in those types of overly greedy bankers. Republicans have argued that this type of "burdensome" regulation would put a strain on small businesses and kill thousands of jobs in the process. You be the judge on that one.

Google Images: Progressives are lining up to "draft" Elizabeth Warren to run against Scott Brown in 2012. 

Analysis: Warren For Senate? 

While Warren has been leading the fledgling CFPB, a number of political commentators have insinuated that Warren herself knew that she had very little chance of being nominated to head the agency. Thus, many have speculated that Warren has been exploring option B, which would be to run against Senator Scott Brown in her home state of Massachusetts (she is being urged to run by a number of high-profile Democratic officials).

The prospect of a Warren run terrifies Republicans, who have, at least in public, carefully attempted to tone down their cushy relationship with Wall Street in a calculated move to reassure independents that Republicans are working for Middle America. But Warren has taken to calling out Republicans every chance she gets, saying that they are figureheads controlled by powerful Wall Street billionaires. Robert Kuttner at the American Prospect explains,

Warren has been a particular bete noir for the right, because she has been so effective in reminding the public that Republicans, despite their posturing, are shills for the financial industry that caused the collapse. For this, she gets termed in news coverage as a “polarizer.” Presumably, anybody who wants to rein in the excesses that caused the collapse and cost consumers trillions of dollars is a polarizer. Score one for the right’s capture of media language. 

In Massachusetts, the Democratic field right now is stunningly weak, and Warren is the one candidate who can galvanize voters and take back the seat formerly held by Ted Kennedy. The two most visible contenders in the race, Seti Warren, mayor of suburban Newton, and Alan Khazei, a good-government reformer associated with City Year, who finished a distant third in the Democratic primary pack last time. Neither would stand a prayer against Scott Brown.

Warren also has the political strategy on her side. A large group of wealthy progressives have held back from endorsing anyone thus far in the campaign. Many have said that they are waiting to see if Warren will declare; if she does, it seems extremely like that she would have their strong support. Even more important, a number of the state’s most experienced and strong campaign operatives have not yet committed to any campaign, and in all likelihood would back Warren. Warren definitely has the resources on her side – she is sure to raise hundreds of thousands of dollars from donors all across America (her cult status among progressives will help with fundraising and name recognition) and a number of top political strategists have held out waiting for her.

Warren is also the only viable candidate at this point to beat Scott Brown. Brown, surprisingly popular in a state that was once home to the original progressive icon, Ted Kennedy, has become an extremely powerful member of the Senate, being courted by both the left and the right on decisive and key legislation. But Democrats think that, with the right candidate, they have a really positive chance to beat him in 2012. 

While many liberals are extremely excited about the prospects of Warren running for elected office, progressives need to be realistic in their assessment: Warren has not decided to run yet, and while many signs point towards go, if Warren decides not to run, this could spell disaster for Democrats in Massachusetts from the very start. Hear me out: The Senate seat in Massachusetts, a seat that Democrats believe that they have fairly good prospects of winning, is vital to Democrats maintaining and possibly extending their slim advantage in the Senate. With key political strategists watching from the sidelines, if Warren does not run, any future candidate who will ultimately run against Brown will be severely handicapped from the beginning, with a core group of lackluster donors and an unloyal group of strategists. If Warren decides not to run for the Senate seat, victory for Scott Brown is all but guaranteed.

But hey, here’s to hoping!

A Missed Opportunity: Republicans Are Quickly Losing Their Momentum

Google Images: Eric Cantor

With their fervent anti-tax ideology, and their inability to entertain any of tax increases despite the fact that President Obama has offered huge cuts in a number of politically unpopular areas of the government, Republicans have lost a potentially monumental opportunity to permanently turn this country center-right.

David Brooks said it best,

It could be that this has been a glorious moment in Republican history. It could be that having persuaded independents that they are a prudent party, Republicans will sweep the next election. Controlling the White House and Congress, perhaps they will have the guts to cut Medicare unilaterally, reform the welfare state and herald in an era of conservative greatness.

Republicans had a huge chance here. I said it in my last post and I will say it again: There was a Democratic president who saw it fit and necessary to move his policies and this country towards the political center, floating ideas that were extremely unpopular in the Democratic Caucus in Congress. Liberal activists were (and still are somewhat) furious and stunned by Obama’s talk about potentially raising the Medicare enrollment age, cutting Social Security by changing the inflation index, and offering offering to work with congressional Republicans on broad-based tax reform. 

The Democratic Party was one step away from truly fracturing, with congressional Democrats unified in their full opposition to entitlement reform while President Obama spent long nights talking about that very topic with Speaker Boehner. Republicans were one step away from really solidifying and even strengthening their 2010 gains. Democrats would have stayed home in large numbers in 2012 and the Republican nominee would have had a huge opportunity to take the White House.

But then something happened. Republicans pulled back. Eric Cantor stormed out of debt talks. He then rebuked Speaker Boehner’s potential deal with President Obama that would have cut around $3 trillion in spending while eliminating tax loopholes and making minor cuts to Medicare. To avoid a “grand deal” was a mistake, but it’s understandable that Republicans pull back from such a large deal. 

But Republicans in the House did not just reject the plan being crafted by Speaker Boehner and President Obama. No, it then went to an even greater extreme. Today, House Republicans introduced the “Cut. Cap, and Balance Act,” which is the most ideologically driven, partisan debt ceiling legislation that we have seen yet. As the August 2^nd default date creeps eerily closer, and both parties frantically attempt to convince independents that they are the ones working for their values, Republicans have astonishingly made a hard-right turn.

And while Republicans believe that their opinions are currently in line with those of the American people (and they are for the most part true), those views are quickly shifting. While just one week ago, a huge majority of Americans disagreed with raising the debt ceiling, those numbers are now much more hazy, with at least one poll out today saying that 55% of Americans are now very concerned about what would happen if the debt ceiling was not raised. 

Furthermore, a new Gallup poll released today shows that 66% of Americans agree that some type of compromise plan is necessary for the debt ceiling, even if it is a plan that the person who was polled personally disagreed with. Just 27% of Americans polled believe that their party should hold out for the exact plan that they want, even if the debt ceiling was not raised by August 2nd. Furthermore, 57% of Republicans believe that a compromise is necessary even if they disagree with the plan and an astounding 72% of independents agree.

Republican and Democratic voters are decided on this issue. Republicans believe that we need to cut, cap, and balance without any tax hikes while Democrats believe that deficit reduction should involve a more balanced approach of spending cuts and tax increases. The fight is over the center. And the ability to relate to the independent center voters (those that are absolutely imperative for election/re-election) is quickly slipping away from Republicans in the House. 

Google Image: Tea Party Patriots Banner

As the tea party continues to radicalize a republican party that no longer has a moderate wing, republican lawmakers are increasingly left pandering and reassuring their own voters. This can be seen with cut, cap, an balance. Republicans know that this bill has no chance of becoming law but that's not what's important. What is important is that the act reassures tea party donors and super conservatives, which keeps money flowing in to republican coffers.

The problem with this approach is that Republicans are now ostracizing independent voters, allowing President Obama, who had consistently attempted (and mostly succeeded) in painting himself as compromiser-in-chief, to swoop in and snatch up independent voters with his centrist and pragmatic policies. While liberal democrats have become rather frustrated with Obama, there is no doubt that they will still vote for him in the end (however begrudgingly they may do it). What has always mattered (and especially matters now) is who can control the middle ground. And with Republicans moving farther and farther right, passing their latest cut, cap. and balance bill by more than 30 votes, they are moving themselves away from what is really important: the political center.

Google Images

While Republicans in the House celebrate their victory tonight, the American people are worried, worried that political posturing and risky lies could make it so they no longer have access to credit and are at risk of losing their job. The debt ceiling is not something to play with, it should never be used as a political tool to inspire fear or as an excuse to lie through one's teeth. 

Republicans are happy tonight; but rest assured, political commentators, historians, and politicians will look back on this past month and say that the Republican's handling of the debt ceiling situation was one of the biggest political blunders in the history of the Republican Party. 

The radicalization of the republican party continues, and with it goes a missed, golden opportunity. 

Congressman Allen West Goes on Tirade Against DNC Chair in Email

Google Images: Allen West

What a fun day to be interested in politics! Yesterday, the House debated the "Cut, Cap, and Balance Act" that Republicans have been touting for the last couple of days. The mood on the floor was, to say the least, very tense. At one point, House Majority Leader Eric Cantor started yelling at Rep. Chris Van Hollen and on numerous occasions the congresswoman presiding over the debate had to gently remind the congressman delivering remarks that all speeches should be addressed to her and not at each other. 

This sets the background for what happened later in the day. After freshman tea-party darling Allen West delivered his remarks and left the House floor, Congresswoman and DNC Chairman Debbie Wasserman-Schultz delivered some tough rhetoric direction specifically towards West:

"The gentleman from Florida. who represents thousands of Medicare beneficiaries, as do I, is supportive of this plan that would increase costs for Medicare beneficiaries, unbelievable from a Member from South Florida," Wasserman Schultz said, saying the legislation "slashes Medicaid and critical investments essential to winning the future in favor of protecting tax breaks for Big Oil, millionaires, and companies who ship American jobs overseas."

This fairly routine statement from Schultz, based largely off of the same talking points that Democrats had been delivering for the entire four hour discussion, apparently incensed Congressman West and drew a reprehensible email that was subsequently leaked to the press. 

The full text of the email:

From: Z112 West, Allen
Sent: Tuesday, July 19, 2011 04:48 PM
To: Wasserman Schultz, Debbie
Cc: McCarthy, Kevin; Blyth, Jonathan; Pelosi, Nancy; Cantor, Eric
Subject: Unprofessional and Inappropriate Sophomoric Behavior from Wasserman-Schultz

"Look, Debbie, I understand that after I departed the House floor you directed your floor speech comments directly towards me. Let me make myself perfectly clear, you want a personal fight, I am happy to oblige. You are the most vile, unprofessional ,and despicable member of the US House of Representatives. If you have something to say to me, stop being a coward and say it to my face, otherwise, shut the heck up. Focus on your own congressional district!

I am bringing your actions today to our Majority Leader and Majority Whip and from this time forward, understand that I shall defend myself forthright against your heinous characterless behavior……which dates back to the disgusting protest you ordered at my campaign hqs, October 2010 in Deerfield Beach.

You have proven repeatedly that you are not a Lady, therefore, shall not be afforded due respect from me!"

Steadfast and Loyal
Congressman Allen B West (R-FL)

This is not the first time that West has made controversial remarks. Along with criticizing liberals as pot-smoking buffoons, he has enraged muslims through his blatant anti-muslim comments:

Speaking at a rally in Fort Lauderdale, Allen West said: "Every time we give them land, they want more.  Every commission decision, from the 1937 Peel Commission all the way to the Oslo Accords.  And just recently, when Benjamin Netanyahu said 'We will suspend for ten months,' they said it's still not enough. You're dealing with an enemy that only wants one thing and that is, a return of the Holocaust.  

West's comment are reprehensible. Wasserman-Schultz has been in public service since 1995 and has been in Congress since 2005. Allen West, on the other hand, was swept into office in 2010 solely because of a wave election in which anti-incumbent fever raged high. I usually can respect almost all congressman, even if I disagree with their ideology. Congress is a hollowed place, a place where smart and pragmatic thinkers hash out their differences and attempt to do what's best for the country. Even if I may disagree with what many congressman say, I recognize their genuineness in trying to solve America's problems.

I cannot say the same for West. West has consistently gone on the offensive against anyone who criticizes him. But instead of sticking to the issues, like Wasserman-Schultz did in her rebuke of his ideology, West immediately insults the other person in a much more harmful, person, and reprehensible manner. West is a crybaby, who cannot take it but loves dishing it out. 
He is the epitome of everything that is wrong about the tea party movement: a loudmouth, overly ambitious congressman who badmouths other's and attacks them personally but is unable to handle even the slightest criticism against his ideology. 

After watching both speeches and reading the completely unnecessary email presented above, I'm pretty sure I can tell you which one of these two is "vile, unprofessional, and  despicable" and needs to "shut the heck up" (Hint: It sure as heck isn't Wasserman-Schultz).

David Brooks At It Again: My Thoughts

Google Images: David Brooks

David Brooks  has published a brand-new article, once again tearing the Republican position on the debt ceiling apart.

Over the past months, Republicans enjoyed enormous advantages. Opinion polls showed that voters are eager to reduce the federal debt, and they want to do it mostly but not entirely through spending cuts.

The gist of Brooks argument?? Republicans had an unprecedented chance to work with the President in moving this country center-right. According to Brooks,

There was a Democratic president eager to move to the center. He floated certain ideas that would be normally unheard of from a Democrat. According to widespread reports, White House officials talked about raising the Medicare eligibility age, cutting Social Security by changing the inflation index, freezing domestic discretionary spending and offering to pre-empt the end of the Bush tax cuts in exchange for a broad tax-reform process.

Not only could they have moved the country to the right, but they could have completely fractured the Democratic Party. Imagine if you will, a president elected largely because of mass liberal support, working with conservative Republicans in Congress to raise the Medicare enrollment age and freeze all discretionary spending. Democrats in Congress and Democratic supporters would flip and be forced to assess who they liked more, their congressmen or their president. Either way, the rift would most likely have caused many Democratic voters to stay home in 2012 and open up a path for Rick Perry (Yep, I said it) to win the White House in 2012. But this is not what happened.

Instead, Republicans have decided to completely bypass the above scenario, opting instead to attempt to pass a balanced budget amendment that has absolutely no chance of ever being signed into law. Moreover, the vital time they’re spending with this bill means that compromise in the House is all but out of the question. House Republicans will be forced to cling to a Senate compromise between McConnell and Reid, eliminating any and all leverage that they had with the president and with the American public.

Brooks concludes,

Fortunately, there are still practical conservatives in the G.O.P., who believe in results, who believe in intelligent compromise. If people someday decide the events of the past weeks have been a debacle, then practical conservatives may regain control. 

Instead of being seen as a great moment in conservative history, where republican principles permanently became a part of mainstream America, Republicans will always look back to this debt ceiling debate as a horrible, missed opportunity.

Read the whole article here.

The Question No One Wants to Ask: What Would Happen if the US Government Defaults on Its Debts?

Getty Images

Remember this headline?

Dow falls 777 points, biggest one-day drop ever

With debt ceiling talks completely stalled and neither side wanting to give up political ground, the United States faces a true possibility of default for the first time ever. And the news coming out of Washington is less than stellar. In fact, its downright scary.

Stan Collender, budget expert at Qorvis, spoke to Ezra Klein in Sunday’s Washington Post. He ominously explained,

 “[There is] less than 50-50 [chance of a deal before Aug. 2]..." 

And David Cote, chairman and CEO of Honeywell, on the “Meet the Press” roundtable commented,

 “[I]t's like both parties have a grip on each other's throat and they're more focused on simultaneous asphyxiation than they are on actually resolving the problem.”  

Finally, The New Yorker’s George Packer:

“Obama and Congress are engaged in high-drama brinksmanship, like members of an ordnance-disposal unit arguing about how to defuse a huge ticking bomb.” 

Hearing these types of words form high-level officials and commentators this late into the debt ceiling discussions is extremely disheartening and worrisome for the economic fate of the nation. Remember, while the Obama Administration has said that we will begin the process of defaulting on our obligations August 2nd, it takes time for a bill to be drafted, debated, and passed in both the House and the Senate. If we are going to reach a deal before the deadline, it will have to come this week.

Google Images: On September 29, 2008, the Dow Jones Industrial fell 777 points, the largest single-day drop in history. Analysts are speculating that if a deal is not reached by August 2nd, we could see something comparable, if not worse, to the economic collapse of 2008.

The Current Situation 
Let's face some unfortunate facts:

• The President of the United States and high level treasury officials say that we have until August 2nd at the latest to increase the debt ceiling
• Republicans in Congress are refusing to accept any form of tax hike on any person or corporation (this includes eliminating loopholes for big oil, timber, and corporate jet owners)
• Democrats in Congress are refusing to vote for any debt increase if the deal includes cuts to medicare and/or social security
• To make matters worse, Republican have made a far-right turn, pushing a radically partisan "cut, cap, and balance" plan instead of compromising just two weeks away from a possible default. 
• Debt talks have stalled, with neither side ceding any ground; in fact, both sides have apparently dug in

Politicians in Washington are certainly playing with fire when it comes to the debt ceiling. But the American public is not making it any better. Still, despite all the dire warnings, a plurality of Americans believe that the debt should not be raised. As I have previously said, Republicans see a political victory out of this, attempting to come down on the side of the people since they know that strict opposition to the debt ceiling increase could score them political points now and mean campaign contribution for their 2012 war chest. But maybe, just maybe, if I can explain what would happen if we did default, I can begin to change some minds.

What Is A Default?

Default is a relatively simple concept: It occurs when a debtor (in this case the United States) has not met its legal obligations according to a debt contract. This may mean not making a scheduled payment, violating some condition of the contract, or being unable to pay back the loaned money. Default occurs if the debtor is unwilling or unable to pay their debt.

Google Images: Rioting in Greece

If the United States Defaults...

widespread panic would ensue. No country the size of the United States has ever defaulted on its debt. Think about this: The financial markets lost tremendous amounts of value when Greece was seen as a major threat to default in 2010. Greece has a GDP of $329.9 billion. The United States? Our GDP is almost 43 times bigger than that, valued at an astounding $14.12. A number of economists believed that the world economy was in danger of collapsing had Greece defaulted. Now, can you possibly imagine what would happen if the United States defaulted on its debt? 

One thing that is important to remember is that the debt is not just simply a bunch of numbers; it is real money that has been lent to us by foreign countries with the actual expectation that we return that payment plus interest. The debt is owed to foreign countries, multinational banks, and many Americans through the buying of treasury bonds (which are rated as AAA, the safest type of investment money can buy). If, for example, I overspend and am forced to default on my debts that I owe, that money that I owed does not just magically vanish into thin air. The bank is forced to take the loss. The same can be said for the United States of America. If the US was to default on its debt, the rest of the world would suddenly be left with $14 trillion of unpaid liabilities. One can only imagine the catastrophic collapse that would ensue. While we do not know exactly what would happen (since we have never actually been through and never should have to go through it), it is fairly easy to make some well-supported assumptions:

skiddish and more worried. However, if previous experience serves as a guide, we will not see any type of collapse until August 2nd if a deal had not been reached. That being said, if wall street spent months expecting a late-term deal and no deal ultimately gets done, the markets reaction will be uncharacteristically harsh and never-before-seen. Collender explains it best:

[R]emember the general idea on Wall Street right now is that there will be a deal because there’s always a deal. But Wall Street works off of expectations. So if the market realizes they got this wrong, the reaction could be larger than expected. 

The only positive to a market collapse would be that it would most likely force lawmakers to pass a debt increase as quickly as possible. The AP speculates,

The widespread selloff that might trigger could have one benefit, Briggs and others say. Panic-selling might force Washington to quickly agree to raise the debt limit. Think back to September 2008 for some historical perspective. After the House of Representatives voted down the bailout bill to create the Troubled Asset Relief Program on Sept. 29, the Dow Jones industrial average nosedived 777 points. Congress made an about face and four days later passed the TARP bill. President George W. Bush quickly signed it into law.

But even then, one day past August 2nd is one day too many. A deal is easily reachable if both sides share the sacrifice. In the end, no one will be happy with the deal that is reached. Ultimately it is about making sure that both sides feel equally bad about the bill that they end up passing.

2. Many of the world's largest banks, who have still not fully recovered from the 2008 financial meltdown, would be forced to go bankrupt to their exposure to United States debt. Subsequently, credit for necessary things like homes, cars, etc., would become almost completely unavailable. Additionally, since many large corporations rely on short-term credit to pay their employees and that credit would all but disappear, many workers would be unable to collect their paychecks. 

Moreover, the credit rating agencies like Moody's and S&P have threatened to downgrade treasury bonds from their AAA rating if a deal is not reached. This would mean that treasury bonds would no longer be considered as safe an investment as they once were and countries like China (who are the biggest buyer of US treasury bonds) would pull out its money and look for a safer investment. This could not only cause short-term economic pain, but have grave, long-term consequences for the United States and the rest of the world.

3. To go along with that point, businesses would begin laying off more workers since they have no access to credit and no way to advance their own growth. With no access to capital, companies would start shedding workers at an alarming rate. This would of course only make matters worse, resulting in at  best a deep recession and at worst another Great Depression. 

4. The dollar would also likely become almost worthless since the "full faith and credit" of the United States is the only real thing holding up the value of the dollar. When that disappears as access to credit vanishes, it is hard to imagine the dollar being able to retain any of its value.

5. The government would also be potentially unable to send out checks for medicare and social security, leaving hundreds of thousands of seniors who rely on medicare for their medications and prescriptions paying extremely high prices.

**There are a whole lot of other things that I could list off, like rising oil prices and subsequently, skyrocketing gas prices. But I think that the above four are the most significant and vital to understand. 

Google Images: Unemployment Could Skyrocket to Numbers Not Seen Since the Great Depression

Conclusion
So will the United States default on August 2nd? Most likely not. While the Treasury has said that August 2 is the drop-dead date for default, economists are saying that if lawmakers were to shut down a large percentage of government agencies and shuffle some money around, a full out default could likely be avoided for a few weeks. Regardless, the prospect of living with 20+% unemployment, no access to credit, a withering stock and mutual fund portfolio, and a global meltdown, is something that no person wants to see.

There is something that every American needs to realize: At this moment, the United States can still easily meet its debt obligations. Ignore the hype, those who say that America is broke and/or out of money are lying to you. 

If the United States goes into default, it will most certainly not be because of the economics. If the US defaults on its own debt obligations, it will be solely due to the politics behind the issue. The unintended consequences of political pandering to pick up votes in 2012 would have such grave economic repercussions that America would be left reeling for years to come.