If Congress Doesn't Raise the Debt Ceiling

In a letter to Majority Leader Harry Reid, dated January 6, 2011, Secretary of the Treasury Tim Geithner explained the consequences of defaulting on the national debt. Here are the key paragraphs of Geithner's letter:

Reaching the debt limit would mean the Treasury would be prevented by law from borrowing in order to pay obligations the Nation is legally required to pay, an event that has no precedent in American history. Such a default should be understood as distinct from a temporary government shutdown resulting from failure to enact appropriations bills, which occurred in late 1995 and early 1996. Those government shutdowns, which were unwise and highly disruptive, did not have the same long-term negative impact on U.S. creditworthiness as a default would, because there was headroom available under the debt limit at that time.

I am certain you will agree that it is strongly in our national interest for Congress to act well before the debt limit is reached. However, if Congress were to fail to act, the specific consequences would be as follows:

The Treasury would be forced to default on legal obligations of the United States, causing catastrophic damage to the economy, potentially much more harmful than the effects of the financial crisis of 2008 and 2009.

A default would impose a substantial tax on all Americans. Because Treasuries represent the benchmark borrowing rate for all other sectors, default would raise all borrowing costs. Interest rates for state and local government, corporate and consumer borrowing, including home mortgage interest, would all rise sharply. Equity prices and home values would decline, reducing retirement savings and hurting the economic security of all Americans, leading to reductions in spending and investment, which would cause job losses and business failures on a significant scale.

Default would have prolonged and far-reaching negative consequences on the safe-haven status of Treasuries and the dollar’s dominant role in the international financial system, causing further increases in interest rates and reducing the willingness of investors here and around the world to invest in the United States.

Payments on a broad range of benefits and other U.S. obligations would be discontinued, limited, or adversely affected, including:

U.S. military salaries and retirement benefits;

Social Security and Medicare benefits;

federal civil service salaries and retirement benefits;

individual and corporate tax refunds;

unemployment benefits to states;

defense vendor payments;

interest and principal payments on Treasury bonds and other securities;

student loan payments;

Medicaid payments to states; and

payments necessary to keep government facilities open.

For these reasons, any default on the legal debt obligations of the United States is unthinkable and must be avoided. It is critically important that Congress act before the debt limit is reached so that the full faith and credit of the United States is not called into question. The confidence of citizens and investors here and around the world that the United States stands fully behind its legal obligations is a unique national asset. Throughout our history, that confidence has made U.S. government bonds among the best and safest investments available and has allowed us to borrow at very low rates.

Failure to increase the debt limit in a timely manner would threaten this position and compromise America’s creditworthiness in the eyes of the world.  Every Secretary of the Treasury in the modern era, regardless of party, has strongly held this view. Given the gravity of the challenges facing the U.S. and world economies, the world’s confidence in our creditworthiness is even more critical today.

You can read Secretary's Geithner's full letter here.

The Commentariat -- January 7

Lesley Hazleton reads the Koran:

Justin Fox of the Harvard Business Review: "There doesn't have to be a problem with a revolving door between government jobs and non-government jobs. The fact that people in the U.S. can easily pop back and forth between government, academia, and the private sector has for most of the nation's history been more strength than weakness.... The Wall Street connection is something different.... This gap between what ... Wall Street [employees] ... make and the money to be earned in government or other sectors of the economy is huge — and it cannot help but have consequences.... With that kind of pay differential [nearly 3,000 %!], Wall Street inevitably begins to emit a giant sucking sound as it hoovers up smart, self-interested people." ...

... Felix Salmon of Reuters: "Government is perfectly capable, were it so inclined, of shrinking the financial sector and making it much less profitable.... But it’s not going to happen, because the public servants who could enact such a change currently have the ability to earn millions ... when they leave DC....  The real value of a government position, especially in the economic team, is in the marginal net present value of all those juicy future earnings that you’ll be offered.... [Conversely,] people like Hank Paulson or Bill Daley have already made their Wall Street millions.... The problem in these cases is that after so many years on Wall Street these people have internalized the worldview of the financial sector...: what good for Goldman Sachs is good for America."

Ken Terry on B-Net: "Even as congressional Republicans try to repeal the healthcare reform law, and as a federal court in Florida nears a decision on its constitutionality, evidence is emerging that that legislation is benefiting small companies by making health coverage more affordable. Considering that small businesspeople are among the most reliable Republican supporters, this unexpected bonus to small firms is another blow to the GOP’s claim that it has a popular mandate to overturn reform." Terry mentions an underlying Los Angeles Times story by Noam Levey, which is here. ...

... CW: Ezra Klein has better, less dismissive answers to David Brooks' objections to the healthcare bill than I did. ...

... And here's Klein's argument against the irrational Republican Tea Party-bred disdain for public sector workers: "The main argument against the Obama administration is that it hasn't saved enough jobs. But in the public sector, which is obviously where the government has the easiest time savings jobs, the argument is that they've saved too many of them." ...

... Felix Salmon explains the reality behind today's jobs number: "... For those keeping track at home, that’s employment up by 103,000 and unemployment down by a whopping 556,000.... We need to see 150,000 new jobs a month just to keep pace with population growth.... Unemployment is down ... only for those who have been out of work for less than 26 weeks. The ranks of the long-term unemployed are still rising. Meanwhile, the numbers of 'discouraged' people continue to rise very fast." ...

... Michael Powell & Sewell Chan of the New York Times: "The rate of growth — 103,000 jobs in December — is an indication that the unemployment rate will likely remain high through the rest of President Obama’s four-year term."

Constitutional law Prof. David Cole has found a WikeLeaked copy of "The Conservative Constitution of the United States," & has unveiled it to Washington Post readers. The Preamble:

We, the Real Americans, in order to form a more God-Fearing Union, establish Justice as we see it, Defeat Health-Care Reform, and Preserve and Protect our Property, our Guns and our Right Not to Pay Taxes, do ordain and establish this Conservative Constitution for the United States of Real America.

Here's something else that's LOL funny, and it's real. Jonathan Allen of Politico: "In a letter to be distributed Friday night, Reps. Pete Sessions and Mike Fitzpatrick apologize to all 433 of their House colleagues for voting after missing out on taking their official oath of office.... The swearing-in of members of Congress is required by Article 6 of the Constitution, and Republican leaders scrambled to come up with a fix to rectify their invalid votes." ...

... Anthony Weiner has a lot of fun at Republicans' expense. Think Progress reports:

This [Pentagon] budget has basically doubled in the last decade. And my own experience here is in that doubling, we've lost our ability to prioritize, to make hard decisions, to do tough analysis, to make trades. -- Adm. Mike Mullen, Chairman of the Joint Chiefs ...

... Mark Thompson of Time on Mullen's remark: "Such profound truths are rarely heard on-camera inside the Pentagon." Thompson's take on the Pentagon's proposed budget trims is worth reading. Basically, he says the cuts aren't as big as the headlines suggest.

** "The 'Benjamin Button' Congress." Ron Brownstein of the National Journal: "House Republicans' ... agenda revolves almost entirely around reducing Washington’s role.... Politically, their strategy rests on the assumption that Americans who recoiled from the president’s agenda to expand government will welcome Republican efforts to diminish it.... But ... in several respects, this second round of conflicts could allow Obama and Democrats to frame the choices in ways more favorable to them." ...

... Also, Brownstein on "White Flight": "By any standard, white voters’ rejection of Democrats in November’s elections was daunting and even historic. Fully 60 percent of whites nationwide backed Republican candidates for the House of Representatives; only 37 percent supported Democrats.... These results ... could carry profound implications for 2012. They suggest that economic recovery alone may not solve the president’s problems with many of the white voters...."

Steven Pearlstein of the Washington Post: "Republicans these days can't get through a sentence without tossing in their new favorite adjective, 'job-killing.' ... What's so curious is that it's hard to find almost any Republican concern about employment homicide during 2008, when George W. Bush was president and the economy was shedding 4.4 million jobs.' ... There is an unmistakable redbaiting quality to the 'job-killing' rhetoric." What's so ironic about the tactic is that it is Republicans who are proposing job-killing legislation.

** Matt Yglesias likes Gene Sperling, and here's why.

Matt Bai of the New York Times: "... if anything, this week’s appointments [of Bill Daley & the anticipated appointment of Gene Sperling] would seem to represent a continuation of the ideological course Mr. Obama has been following since before he took the oath of office, rather than any substantive shift in his worldview." CW: Obama was never a liberal, kids. ...

... Dan Balz of the Washington Post: "... in tapping Daley, Obama has begun to reach outside his comfort zone." ...

... Think Daley is a good choice? Well there's this from David Drucker of Roll Call: "Senate Minority Leader Mitch McConnell praised President Barack Obama on Thursday for choosing business executive William Daley to serve as White House chief of staff." ...

... On the other hand, there's this:

With Wall Street reporting record profits while middle class Americans continue to struggle in a deep recession, the announcement that William Daley, who has close ties to Big Banks and Big Business, will now lead the White House staff is troubling and sends the wrong message to the American people. -- Justin Ruben, executive director of MoveOn.org

... Royal Court Gossip. Toby Harnden of the Telegraph: "It’s being reported by John King on CNN right now that [Robert] Gibbs wanted to be a presidential counsellor ... but William Daley, the new chief of staff, nixed this.... So that’s why Gibbs is out. Additionally, King reports that Valerie Jarrett, whose sole qualification to being a senior counsellor seems to be that she’s a long-time Chicago buddy of Barack and Michelle Obama, will have her wings clipped. Daley, not Jarrett, will be the person speaking to the business community." ...

     ... Sam Stein: both Gibbs & Daley deny the story about Gibbs. CW: neither man says anything about Jarrett's "demotion." ...

... This story by Elizabeth Williamson of the Wall Street Journal is receiving a lot of attention today; headline -- "President Revs up Campaign to Make Peace with Business." Very reassuring. Because he was always so anti-business till now.

Oh, here's a surprise. Speaker Boehner can't think of a single military or homeland security program to cut:

Mark Landler & Scott Shane of the New York Times: "The State Department is warning hundreds of human rights activists, foreign government officials and businesspeople identified in leaked diplomatic cables of potential threats to their safety and has moved a handful of them to safer locations, administration officials said Thursday. The operation ... reflects the administration’s fear that the disclosure of cables obtained by the organization WikiLeaks has damaged American interests by exposing foreigners who supply valuable information to the United States." ...

... Intrigue! Kim Severson & Robbie Brown of the New York Times: "Odyssey Marine Exploration, a Tampa, Fla., deep-sea treasure hunting company, is using classified cables from the State Department [released by WikiLeaks] in its legal battle with Spain over who owns $500 million of gold and silver retrieved in 2007 from the wreckage of a Spanish galleon off the coast of Portugal.... Odyssey says [the cables] show that the [American] ambassador [to Spain] offered to assist Spain in the fight over the sunken treasure." A stolen Pissarro figures in! Nazis! Eric Holder is implicated! Congressmen are blaming Hillary Clinton!

Jon Stewart seems to disapprove of the Goldman Sachs-Facebook deal:

Bill Vlasic of the New York Times: "The Big Three automakers have made strides in fuel economy but still rely on light trucks and S.U.V.’s for profits."

State of the States

Paul Krugman: the conservative governor and legislators in Texas have left the state in a fiscal mess even after Gov. Rick Perry boasted/lied about the state's having a huge surplus. Oh, and they're not of a mind to make things right. Krugman sees Texas as an omen of what to expect in every state where conservatives reign. ...

... Kim Severson of the New York Times: A Georgia state Hope program, "the largest merit-based college scholarship program in the United States..., offers any Georgia high school student with a B-average four years of free college tuition. But the Hope scholarship program is about to be cut by a new governor and Legislature facing staggering financial troubles."

Aflockalypse. Seth Borenstein of the AP: "First, the blackbirds fell out of the sky on New Year's Eve in Arkansas. In recent days, wildlife have mysteriously died in big numbers: 2 million fish in the Chesapeake Bay, 150 tons of red tilapia in Vietnam, 40,000 crabs in Britain and other places across the world. Blogs connected the deadly dots, joking about the "aflockalypse" while others saw real signs of something sinister, either biblical or environmental. The reality, say biologists, is that these mass die-offs happen all the time and usually are unrelated."

Update on Ted Williams. JoAnne Viviano of the AP: "A homeless man whose silky announcing voice has catapulted him to national fame reunited Thursday with his mother, recorded a commercial for Kraft Macaroni & Cheese and agreed to do voiceover work for MSNBC." CW: I sure hope this guy is getting some high-quality help.

The Commentariat -- January 6

This is a strong appointment. Bill Daley is a man of stature and extraordinary experience in government, business, trade negotiations and global affairs. -- Thomas Donohue, President of the Chamber of Commerce

As the chief of staff, he is the gatekeeper, and that means real power in Washington. Just about any way you look at it, it creates a huge potential for a conflict of interest. -- Ellen Miller, Sunlight Foundation

This was a real mistake by the White House. Bill Daley consistently urges the Democratic Party to pursue a corporate agenda that alienates both Independent and Democratic voters. If President Obama listens to that kind of political advice from Bill Daley, Democrats will suffer a disastrous 2012. -- Adam Green, Progressive Change Campaign

President Obama names William Daley his new chief of staff:

... Eric Lipton of the New York Times: "The recruitment of Mr. Daley ... is seen as a savvy step by some in Washington.... But the choice is causing alarm among some in Mr. Obama’s liberal base, who argue that bringing Mr. Daley to the White House violates a commitment by the president to curtail the sway of special interests in Washington." ...

... Howard Fineman: "Bill Daley is double Rahm, double calm. Daley, not his protégé Rahm Emanuel, is the preeminent Chicago Democratic insider -- with twice the history and contacts, and twice the serenity, confidence and maturity in wielding power." ...

... Greg Sargent: "The Daley pick will inevitably reinforce a faulty interpretation of Obama's first two years: That Obama governed from the far left.

Quote of the Week: No. -- Harry Reid, in response to a reporter who asked if he will bring the repeal to the Senate floor if and when it passes the House

As a result of changes in direct spending and revenues, CBO expects that enacting H.R. 2 [-- repeal of the Affordable Care Law --] would probably increase federal budget deficits over the 2012–2019 period by a total of roughly $145 billion (on the basis of the original estimate), plus or minus the effects of technical and economic changes that CBO and JCT will include in the forthcoming estimate. Adding two more years (through 2021) brings the projected increase in deficits to something in the vicinity of $230 billion. -- Doug Elmendorf, Director of the Congressional Budget Office (emphasis added) ...

... Update. Brian Montopoli of CBS News: "House Speaker John Boehner said today that the Congressional Budget Office is 'entitled to their own opinion' -- a striking statement in light of the deference usually shown information from the nonpartisan CBO from lawmakers on both sides of the aisle. Boehner was objecting to a preliminary CBO finding that repealing the health care reform legislation ... would cost the government roughly $230 billion over ten years.... In a report (PDF) Boehner's office released to buttress that argument, Republicans argued the health care law 'relies on accounting gimmicks,' double-counts cost savings from Medicare and requires additional government spending for implementation." ...

... Jonathan Cohn of The New Republic sums up the results of the CBO analysis: "repealing the Affordable Care Act would mean higher deficits plus insurance that is less comprehensive, less available, and in many cases more expensive." ...

... Jonathan Bernstein, also of TNR, on Boehner's double-talk response to the CBO report: "How do the supposedly deficit-opposing Republicans deal with it? Two ways: by simply refusing to believe it, and by trotting out misdirection and long-disproved junk from the original debate." ...

... Update. Point-by-point, Ezra Klein rebuts Boehner's claim the CBO "relie[d] on accounting gimmicks." ...

... Update. Michael Shear of the New York Times: "Democratic leaders in Washington plan to spend the next week doing what they all but refused to do in the 2010 midterm elections: mount a vigorous defense of President Obama’s health care legislation."

... Kate Pickert has a long, fact-filled article in Time on the status of the Affordable Care Act. She doesn't say so directly, but it's mostly about Republican Hypocrites on Parade. ...

"Huck-Finning the Constitution." Adam Serwer: "Earlier this week, there was an uproar over a publisher's plans to release an edition of Mark Twain's The Adventures of Huckleberry Finn that would replace the N-word with the word "slave" in order to make the book more 'appropriate' for schoolchildren.... Republicans, intending to make a big symbolic show of their reading of the Constitution, have now taken a similarly sanitized approach to our founding document. Yesterday they announced that they will be leaving out the superceded text in their reading of the Constitution on the House floor this morning, avoiding the awkwardness of having to read aloud the 'three fifths compromise,' which counted slaves as only three-fifths of a person for the purposes of taxation and apportionment." ...

[... FYI, here's Michiko Kakutani's review: "A new effort to sanitize 'Huckleberry Finn' comes from Alan Gribben, a professor of English at Auburn University, at Montgomery, Ala., who has produced a new edition of Twain’s novel that replaces the word 'nigger' with 'slave.' ... Authors’ original texts should be sacrosanct intellectual property....”] ...

... Danny Yadron of the Wall Street Journal: "In doing the reading..., when House Majority Leader Eric Cantor (R., Va.) got to the passage on how to count the U.S. population ('adding to the whole Number of free Persons, including those bound to Service for a Term of Years, and excluding Indians not taxed, three fifths of all other Persons') he skipped it.

When Congressmen-elect Pete Sessions and Mike Fitzpatrick participated in reading parts of the U.S. Constitution on the House floor, Speaker Boehner should have given them Article 6 which requires Members of Congress to be sworn in.  -- Jennifer Crider, spokesperson for the Democratic Congressional Campaign Committee ...

... Ryan Grim of the Huffington Post: "Two House Republicans have cast votes as members of the 112th Congress, but were not sworn in on Wednesday, a violation of the Constitution on the same day that the GOP had the document read from the podium.... Pete Sessions of Texas and freshman Mike Fitzpatrick missed the swearing in because they were at a fundraiser." CW: Fitzpatrick defeated Democrat Patrick Murphy, whom we love, in November. ...

... Same Story, Different Angle. Jonathan Allen of Politico: "Two Republicans, including a member of the GOP leadership, voted on the House floor several times despite not having been sworn in, throwing the House into parliamentary turmoil Thursday — the same day the Constitution was read aloud on the floor." ...

... More on the Same. Matthew Jaffe & John Parkinson of ABC News: "Sessions helped preside over a hearing of the House Rules Committee on the GOP’s push to repeal the health care law. But once GOP leaders learned that two of their members weren’t yet legitimate members of Congress, they abruptly stopped the Rules hearing on the health care law."

Filibuster Reform. Greg Sargent runs down the main elements of the Democratic proposal to reform the filibuster: (1) Clear Path to Debate: Eliminate the Filibuster on Motions to Proceed; (2) Eliminates Secret Holds; (3) Right to Amend: Guarantees Consideration of Amendments for both Majority and Minority; (4) Talking Filibuster: Ensures Real Debate; (5) Expedite Nominations: Reduce Post-Cloture Time. Sargent includes some brief explanations of each of the points. A pdf of the resolution is here. ...

... Sargent has more information -- and speculation -- about how Harry Reid is likely to proceed with the resolution. Needless to say, it's complicated.

It’s the first day, and they’ve violated everything they said they were going to do. -- Rep. Louise Slaughter (D-NY)

Backpedaling as Fast as They Can. Jake Sherman of Politico: "Just hours after taking control of the House, Republicans passed a sweeping set of rules promising transparency and reform.... After calling for bills to go through a regular committee process, the bill that would repeal the health care law will not go through a single committee. Despite promising a more open amendment process for bills, amendments for the health care repeal will be all but shut down. After calling for a strict committee attendance list to be posted online, Republicans backpedaled and ditched that from the rules. They promised constitutional citations for every bill but have yet to add that language to early bills."

Where the Jobs Are. Andrew Cutraro writes the Time cover story: "... this job recovery ... will be cruelly uneven. It will favor, more than ever, the college educated over blue collar workers. It will favor cities that have developed industry clusters in which skills match demand. It will favor the Dakotas over states such as Florida, Nevada and California. It will favor those who work in the private sector over those who work in the public ector."

Budget! Taxes!

 E. J. Dionne of the Washington Post: Republican "rhetoric is nearly devoid of talk about solving practical problems.... Instead, we hear about ... highly general principles divorced from their impact on everyday life..... During the campaign, they put out a nice round $100 billion in spending cuts from which they're now backing away. It is far easier to float a big number than to describe reductions for student loans, bridges, national parks or medical research." ...

... John McKinnon & Elizabeth Williamson of the Wall Street Journal: "Specific proposals for retooling the complex corporate-tax system aren't on the table and the debate over the issue is sure to be lengthy and difficult. But President Barack Obama and Republican congressional leaders are separately sounding the same broad theme that corporate tax rates should be lower." ...

... David Kocieniewski of the New York Times: Nina E. Olson, the national tax advocate who acts as an ombudsman for the I.R.S., issued a sweeping criticism of federal tax policy in her annual report to Congress. Ms. Olson found that the volume of the tax code had nearly tripled in size during the last decade.... The byzantine tax regulations also deprived the government of revenue by causing accidental underpayments and encouraging cheating, the report concluded, stating that the most practical remedy would be for Congress to scrap the existing code, which was last overhauled in 1986."

Rick Hertzberg loves Ron Chernow's 900-page George Washington: A Life. Based on some of Chernow's evidence, Hertzberg writes, "Nobody today is the exact equivalent of anybody in 1789, of course, but Tea Party Republicans more closely resemble those who denounced the Constitution than those who advocated it." ...

... AND if you missed it the first time around, read Caleb Crain's New Yorker essay/book review on the original Boston tea party, with its unmistakable parallels to today's mob of ignoramuses & their smuggler-merchant puppeteers.

Whither Democrats? Jeffrey M. Jones of Gallup: "In 2010, 31% of Americans identified as Democrats, down five percentage points from just two years ago and tied for the lowest annual average Gallup has measured in the last 22 years. While Democrats still outnumber Republicans by two points, the percentage identifying as independents increased to 38%, on the high end of what Gallup has measured in the last two decades."

Whither Compassion? Lawrence O'Donnell blames President Clinton for the recent dearth of presidential pardons:

Bethany McLean, the co-author of a well-reviewed book on the financial crisis, explains in a New York Times op-ed why the government is not going to get out of the home mortgage-guarantee business -- the main reason: no politician is going to demand a remake of Fannie Mae & Freddie Mac that further depresses the depressed housing market.

... Duke Helfand of the Los Angeles Times: "Blue Shield of California [is] seeking cumulative hikes [in healthinsurance premiums] of as much as 59% for tens of thousands of [individual] customers March 1. Blue Shield's action comes less than a year after Anthem Blue Cross tried and failed to raise rates as much as 39% for about 700,000 California customers."

Robert Reich: the right is attacking public-sector employees with lies. The facts: "Matched by education, public sector workers actually earn less than their private-sector counterparts.... Most public employees don’t have generous pensions.... There’s no relationship between states whose employees have bargaining rights and states with big deficits.... Isn’t it curious that when it comes to sacrifice, Republicans don’t include the richest people in America?"

John Cassidy of the New Yorker reviews opinions of whether or not the Goldman Sachs-Facebook deal is legal. One thing observers agree on: the SEC will certainly look into it.

Lew Sichelman of the Los Angeles Times: "The White House..., like many of the country's houses, it's not worth what it was once. Over the last three years the president's home and home office has lost nearly a quarter of its value. In the last month alone the value dropped almost $4 million."

Update: Ted Williams, the homeless man with the golden voice, opens the NBC "Today" show:

     ... Alison Schwartz of People has the story & the "Today" show interview of Williams.