Posts Tagged ‘ Obama ’

Paul Ryan has a debt-reduction plan like Bush had a plan for post-Saddam Iraq

That is to say, Republican Representative Paul Ryan has no debt-reduction plan. He has a wish list, an outline maybe. There are certainly bullet points. But Paul Ryan and his Republican Party have no plan to make a dent in our debt.

So why isn’t Ryan’s much-discussed budgetary “Roadmap” a “plan”? Because it doesn’t actually say how it will achieve the debt-reduction it promises! Like Bush, Ryan will give you all the good stuff up front: “Saddam’s military will be no match for the US” or “We’re giving out big tax cuts!” but when it comes to the next step, they’re both a bit clueless: “Wait, we have to do something with Iraq after Saddam’s dead?” and “Wait, I have to pay for my tax cuts and then find trillions more to reduce the debt?”

Ryan is very specific about how he will increase the debt. He says that he will vastly lower taxes for the richest Americans. For example, Ryan would reduce Mitt Romney’s tax rate to about 0% by getting rid of the taxes on capital gains. Ryan is very detailed and specific about this how to increase debt and income inequality. But when it comes to getting rid of debt, Ryan’s got nothing. Ryan is the Donald Rumsfeld of budgets.

Ryan promises a total of about $5 trillion in tax cuts for the richest Americans over the next decade (in addition to the Bush tax cuts). He says he will pay for this with……. well, he doesn’t actually say how he would pay for it. He says that his plan “eliminates nearly all existing tax deductions, exclusions, and other special provisions” to pay for itself. Really? Which ones? There are a lot of tax breaks that are very near and dear to voters in the country. But of course Ryan won’t say which ones he will eliminate. Its a long road to eliminating an astounding $5 trillion in tax breaks but Ryan won’t say how he plans to get there. Not even a hint.

The weirdest part of Ryan’s budget is his goal to cut spending. Ryan wants to cut spending by $5.3 trillion more than President Obama over the next decade. Only, whenever anyone tries to figure out what, exactly, Ryan is going to cut, Ryan becomes defensive and extremely ambiguous. You see, the trick in Ryan’s budget is that he never actually names programs that he wants to cut. Like with getting rid of tax breaks, Ryan has a broad goal for spending reduction, but few plans to get there.

Turns out, this technicality is a big advantage for Ryan. He can say the popular thing: “I’ll make massive cuts in spending” and whenever anyone asks: “Well wait, will you get rid of my favorite program?” Ryan can respond: “No! We’ll get rid of another program (but I’m not telling you what it is).”

As comical as this sounds, this is actually how Ryan is framing his budget “plans.” Recently, President Obama gave a speech outlining how Ryan’s plan would affect major federal programs saying,

“If this budget became law and the cuts were applied evenly … over 200,000 children would loose their chance to get an early education in the Head Start program,” Obama said. “There would be 45,000 fewer federal grants at the Department of Justice and the FBI” to combat violent crime.

Obama said hundreds of national parks would close.

Predictably, Republicans responded by saying “Where did Obama get these specifics? He imagined them.” Well, yea, what was he supposed to do when handed a plan that makes radical changes to America but contains no specifics? In fact Obama anticipated this come-back and said:

“Republicans may say, well ‘we’ll avoid some of these cuts,’” Obama said. “But they can only avoid some of these cuts if they cut even deeper in other areas.”

Which is exactly right. Eventually the hammer has to fall somewhere or not at all. And for every program you protect, another gets hit twice as hard. Either you’re cutting spending or you’re not. If you are, then real people are going to be hurt and if not, then then you’re not actually reducing the debt. If Paul Ryan is serious about his budget then he needs specifics. For an example of a serious budget with specifics, here’s a good starting point.

(For a overview of Obama’s a Ryan’s budgets, look here)

(Here’s more on Ryan’s spending cuts conundrum from Ezra Klein)

Obama, regulations and the economy

Republicans have been hammering President Obama over “regulations” lately, saying that they have been hurting the economy and are partially responsible for our slow growth. Its a fairly powerful claim. The Obama administration has gotten a reputation as a prolific regulator since their health care reform and financial reform bills  passed, so this claim seems to stick. But this accusation is also extremely vague. What regulations have been hurting the economy? How? Are there more regulations than usual? How does this compare to other countries? Are there other beneficial effects of the regulations passed?

In short, simply making the claim that “regulatory burdens are hindering job growth” leaves a lot of  information out of the picture.

Obama recently has been fighting the Republican-derived moniker of “regulator-in-chief.” Earlier this year, he ordered a government-wide review of all regulations on the books. As a result, the administration “produced reform plans from 26 agencies. A mere fraction of the initiatives described in the plans will save more than $10 billion over the next 5 years; as progress continues, we expect to be able to deliver savings far in excess of that figure.” In addition, the President just nixed a proposed regulation that would have reduced ground-level smog, because of the complaints of his critics. So, the White House has made  a concerted effort to reduce regulations on businesses.

The White House also noted this interesting tidbit: “‘the costs of final, economically significant rules reviewed by the Office of Information and Regulatory Affairs were actually higher in 2007 and 2008 than in the first 2 years of my Administration.’ He also argued that in 2009 and 2010, the benefits of those rules ‘exceeded the costs by tens of billions of dollars.'” There were  more costly regulations coming out of the Bush White House than out of the Obama White House? How can anyone complain about Obama’s regulations when they have been no more taxing than those under his regulation-averse predecessor?

Now for the international picture. Is the business environment in the US making us less competitive in the global economy? The answer would appear to be no. Conservative stalwarts The Wall Street Journal and the Heritage Foundation put together a list every year called the “index on Economic Freedom. This year’s Index (scaled to 100) puts “business freedom” in the US at a 91 (the world average was 64). This ranks the US ahead of comparable countries like France and Germany and light-years ahead of the  Brazilians and Chinese on that measure. The US also had an almost perfect “labor freedom” score of 95.7. These good scores  indicate that, in the big picture, regulations are a very small burden on US companies. Even using conservative measurements, regulations are not making the US significantly less competitive in the world economy.

Its  also important to note that the Obama administration is only currently considering six proposed regulations that would have an impact of $1 billion or more. A billion is a lot of money, don’t get me wrong, but it doesn’t really matter in the grand scheme of a $14 trillion economy.

This debate is especially important  now as Obama is  about to make a huge speech outlining ways to improve the economy and put people back to work. His speech will likely advocate spending money on programs that boost consumption and put people to work repairing our crumbling infrastructure. Doing this would be an opportunity we can’t afford to miss. But Republicans will likely counter that cutting spending and de-regulating are the best ways to employ people. They are wrong  on spending while the Obama administration is already aggressively targeting costly regulations. Not that it matters much anyway, because regulations just don’t have very much effect on the economy. “Getting rid of regulations” makes a great tag-line, but it just won’t lead to that many more people getting jobs (though it may harm public health).

Why Obama won’t use the “Constitutional Option” for the Debt Ceiling

Talks over increasing the nation’s debt limit have gotten shaky over the past week. Faced with Republican demands for $2 trillion in spending cuts and absolutely no tax increases before Republicans will agree to raise the debt limit, many liberals, law professors, and even a top Democratic senator have begun popularizing the notion that the debt limit is unconstitutional. They argue that President Obama can just ignore this man-made crisis and continue to pay for the US’s fiscal obligations without a raise in the debt ceiling. Their rationale comes from section 4 of the fourteenth amendment, which reads:

 The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. (emphasis mine)

It would seem that they have a good case. Our country has legally incurred a large amount of public debt and by not raising the debt ceiling, Congress would be saying that it never intends to repay its legally incurred debts. That seems to be the exact action this amendment was designed to prevent. Also, it is unlikely that anyone would have the standing to sue the treasury in court for ignoring the debt limit.

This seems to be the easy way for Obama to both get out of dealing with an increasingly implacable and uncompromising GOP and to save the economy from a near-certain economic implosion. So why did he appear to rule it out yesterday?

Any expert who seriously discusses the US  budget agrees: the debt ceiling must absolutely be raised. If not, the economy will go into a tailspin and innocent people will suffer as they lose their jobs, Social Security checks and medical coverage. The only problem is polls show that raising the debt ceiling is unpopular. Even when pollsters include the caveat that failing to raise the debt ceiling would be severely damaging to the economy, a plurality still opposes the increase.

Even if the debt limit is unconstitutional, Obama would pay a huge political price for unilaterally declaring it so. Sure, by doing so he would save the economy from a catastrophic collapse (assuming no agreement on debt is made by Aug 2), but he would pay a large political price for getting rid of the debt limit. His numbers on his handling of the debt are already very low and this would just add fuel to Republicans claims that he is a high-spending politician who is out of touch with the American public.

But what about the fact that getting rid of the debt limit would save the economy from a double-dip recession? Wouldn’t Obama be rewarded for protecting the economy from foolhardy and crazed Republicans who would do anything to prevent a tax increase on the richest Americans? In a word, no.

If there is anything Obama has learned in the past 2 and a half years, its that you can’t campaign on what might have been. Republicans can hammer Obama on the economy and his stimulus bill even though independent experts agree that things would have been much worse without Obama’s actions to prop up the economy. We might have had unemployment at 12% without the stimulus, but might-haves don’t run in elections. The banking system might have completely collapsed without TARP, but the fact that we could be in a full-blown depression right now doesn’t make people feel any better about the bailouts. People vote off their current situation and their current impressions. Might-haves or near misses will rarely impact the electorate’s votes.

So, for Obama to get any credit for saving the economy from ruin, or to pin any blame on the Republicans for leading the economy to the abyss, the country actually has to cross the threshold of a default and begin to feel the pain of a government working with only half of its limbs. Otherwise, Obama will be the bad guy. The Obama team seems to see these dynamics at work, and because they seem to be unwilling to let the country default in order to score political points, Obama has offered the Republicans a deal that’s 83% spending cuts and 17% tax hikes. Or in other words, its a plan that’s 83% what Republicans want and 17%  what Democrats would prefer.

Obama has bent over backwards to give Republicans a dream-like deal because he A) does not want the country to default on its debt and B) knows that he can gain nothing from declaring the debt limit unconstitutional. Obama seems to have decided that it would be better to give  the Republicans almost everything they want, rather than to take either of the other two options open to him.

How Obama wants to bring down our debt.

Everyone in Washington has released their own plan on how to close down our debt over the next 10-12 years. Progressives, conservatives, Paul Ryan, the Democratic caucus (due to release today) and the President. Throw all those plans out the window because none of them will likely ever become law. Big plans put out by partisan interests have very little chance of going anywhere and mostly serve as talking points and political footballs for debate. The plans that actually get passed are generally determined by the politics of the moment, deals worked out, and compromises made to placate special interests. You think it would be awesome to replace our  payroll taxes with a carbon tax? So do a lot of people, but it isn’t gonna happen. The two big events that will shape our debt debate will be the fight over the debt ceiling and the fight over the Bush tax cuts in Dec. 2012.

Most thinkers agree that the US needs to enact a plan that cuts $4 trillion in debt over the next decade or so. Let’s see how Obama is probably angling to get there, keeping in mind the two critical junctures we have coming up.

Republicans have forced a political crisis over raising the nation’s debt ceiling. Their demands are for about $2 trillion in spending cuts before they will agree to do what has  to be done anyway and raise the debt ceiling. This provides us with a political situation where debt reduction seems to be required. Obama has accepted Republicans’ terms on the condition that there also be $400 billion in revenue increases gained by getting rid of tax loopholes and tax breaks for the richest of the rich. Its obviously Obama’s intention for this plan to go through- $2 trillion in spending cuts and $400 billion in revenue increases for a total of $2.4 trillion in debt reduction this year.

So if that plan passes (which is far from certain) Obama is over halfway to his goal. The next test comes when the Bush tax cuts are up for renewal in December 2012. Note: this analysis assumes (as Obama certainly does) that Obama will be re-elected in 2012. Obama has all the power in December 2012 to say that he will not agree to renew Bush’s tax cuts for the top 2% and will veto any bill that tries to do that. That is what his base wants him to do and is likely what he will campaign on. At that point, Republicans have a choice- allow tax rates to rise on the top 2% or allow income tax rates to rise on everyone else. If they pick the first option, as is Obama’s intention, then there is another $830 billion in debt reduction, bringing Obama’s total to about $3.2 trillion in debt reduction. If the Republicans decide that everyone else’s rate should go up if they can’t get their precious tax cuts for the rich extended, then that would be $2.4 trillion in debt savings (we’ll call it 2.8 trillion including interest). $2.8 trillion would solve our debt problems by bringing Obama debt-reduction total to $5.2 trillion.

Even if only the cuts for the rich are ended, Obama can come up with an extra $800 billion in deficit savings by various methods like simplifying the tax code, enacting a public health insurance option, encouraging greater-than-expected economic growth, cutting down on tax cheats, cutting the military, etc.  He will work out a deal with Congress to save a bit more money. It will be a tough compromise and will burnish the President’s image as a compromiser and neutral arbiter. It would be small beans at that point.

Republicans seem to know that if Obama is re-elected, the scale beings to tilt in his favor, which is probably why they are pushing so hard right now for a completely one-sided debt deal. Its also no coincidence that a huge debt deal right now will hurt our economic prospects over the next few years. A weak economy makes  it harder for Obama to win re-election and if he doesn’t win re-election, the Republicans can basically dictate whatever “debt-reduction” deal they like.

The Debt Limit Talking Points we will be Hearing for the Next Month

The negotiations over how to raise  the debt ceiling have failed. Over the next month, both parties will try to rally their bases around the policies they prefer, while moving no closer to a deal on preventing the economic catastrophe that will occur if we do not raise the debt limit, reports Ezra Klein. After walking away from the negotiating table, Republicans are set to raise their demands from $2 trillion in spending cuts up to a balanced budget amendment in an attempt to rally their base. Democrats typically look at the very strict design of the BBA and dismiss it out of hand as a nonstarter. Meanwhile, Democrats are about to release a budget that will probably cut the debt using about 50% spending cuts and 50% tax increases. This probably means the Democratic budget won’t cut Medicare or Medicaid much, if at all (those cuts are extremely unpopular with Democrats and the general public). Republican Congressmen have balked at a deal that raises any revenue whatsoever, making a package that relies 50% on tax increases a nonstarter if negotiations were to resume.

I’ve laid out the parties’ strategy on the debt limit here, now here are the talking points both sides will be using to win the public over. Continue reading

Is Obama to Blame for our Deficits?

Today I will tackle the question: How much of the debt accumulated since Obama became President can be “blamed” on him? Obviously, one of the harshest criticisms Republicans level against the President is that he is to blame for the large deficits that have characterized our budget under his presidency, but is this deserved? For the moment, we will leave aside the question of whether it was wise to sign into law the tax cuts and spending programs that he did, and just focus on getting a number on the amount of the debt he is responsible for. Rep Michelle Bachmann (who is running for President)  has famously used this chart to pin blame for our recent deficits on Obama:

Its a bit hard to read, but the deficit in 2009 was $1.41 trillion and according to the most recent graph on her website, the deficit in 2010 was $1.29  trillion. The projected deficit for this year is 1.5 trillion and since we’re almost exactly halfway through the year, we’ll call it $.75 trillion for a total of 3.45 trillion in debt accumulated since Obama took office.

What I will count into law are spending programs that Obama signed into law. So, to start we have the stimulus program which, to date has cost $654 billion.

The next big ticket item is the Affordable Care Act, the president’s healthcare reform measure. Contrary to popular belief, It is entirely paid for, and will even give us a surplus of over the next decade. The original bill was supposed to save $138 billion over a decade, but I believe that’s been downgraded to about $114 billion over 10 years. It was signed a little over a year ago so we’ll say that the Affordable Care Act gives a debt surplus of +$11.5 billion. 

Pres. Obama passed a budget for fiscal year 2010 and FY 2011 (fiscal year 2009 was signed into law by President Bush). Using the spending in Bush’s final budget as a baseline, Obama signed an increase in discretionary spending of $168 billion in FY 2010 and the continuing resolutions covering most of FY 2011 followed the same trajectory as FY 2010, so we’ll say he increased the deficit by $126 billion during the first 9 months of this fiscal year. Note: these include the costs of the wars, using Bush’s last budget as a baseline. That gives us a grand total of -$294 billion in spending as part of the normal, discretionary budget process.

Money for the bailouts of Fannie Mae and Freddie Mac as well as for Wall Street and the auto companies was approved and signed by Pres. Bush, though some of  it was disbursed by Pres. Obama. Because we are dealing with money signed into law by Pres. Obama and not money simply spent under his presidency (which would be unfair and would open up a huge can of worms I am not prepared to go into) we will not count their costs against Obama.

There have also been several other measures that were passed in order to aid the economic recovery. These totaled (table 1) $93 billion in 2010 and in 2011 they will total $270 billion. The recovery measures for 2011 were passed as part of a tax cut package extending the Bush tax cuts, which were set to expire at the end of 2010. Now, Obama worked out this deal with the Republican Congressional leaders who provided many of the votes for the package, so its not really fair for Republicans to brandish this package as a weapon against Obama on the deficit, but in looking at the package from a non-partisan stance, its clear that it has Obama’s signature on it, so it will count against him. Extending the Bush tax cuts will cost $375 billion in 2011.  After slicing the appropriations for 2011 in half (the year is half over) Obama signed into law -415.5 billion in tax cuts and government spending to aid the recovery.

In total, the stimulus program has cost -$654 billion, the Affordable Care Act has gained us +$11.5 billion, Obama has raised discretionary spending by -$294 billion and extra measures to aid the recovery have cost us -$415.5 billion to date, for a grand total of $1.352 trillion in spending signed into law by President Obama to date. That means Obama is “responsible” for, at most, 39 percent of the $3.45 trillion in debt accumulated since he took office. So, perhaps the lines on Michelle Bachmann’s famous graph should only be two-fifths as tall as they are.

But, (I’m sure some of you are thinking) how is  this possible? How has our deficit  gone up so much in the past two years, but yet Obama  has signed bills accounting for less than half of the balance? The thing about recessions is that during recessions, people start paying less in taxes because they have less money total, so they have less taxable income. There are also more people who rely on government programs like unemployment checks, food stamps and Medicaid during recessions. (As Paul Krugman explains) Drawing in less in taxes and giving out more in automatic government aid obviously increases the deficit, but since these changes happen automatically (Obama didn’t sign them into law) and we can’t blame the recession on Obama, he cannot be blamed for their effect on the deficit. (Note: All expansions of unemployment assistance beyond the usual 26-week period are counted against Obama, even though in the past all Presidents have expanded unemployment during recessions)

*Fair disclaimer: This analysis does not measure the cost of interest on the borrowing initiated  by Obama, which would tend to raise his total. Nor does it take into account the increased economic activity that undeniably resulted from the spending and tax breaks he signed into law, which would tend to lower his total.*

For a final primer on how our debt happened and what will drive it in the future, here’s Ezra Klein.

Debt Limit Strategy

The United States debt limit has to be raised. There is no question about that. The way appropriations in the US work is that Congress first passes a budget, and then if  the budget is not balanced, they approve an increase in the US’s debt ceiling (they authorize the treasury to lend money) to cover  the debt they just signed into law in their budget. This makes many budgets a 2-step process. Earlier this year, Congress (Republicans and Democrats) signed a budget that busts the debt limit and no one has produced an alternate that will keep us from hitting the debt ceiling on Aug 2. That means that all these negotiations leading up to a signing of the debt limit increase are just a prelude to the inevitable. So what’s all the fuss about?

(Its a long post, so skip this section and the next if you’re up-to-date on the debt limit negotiations)

Republicans are currently threatening not to increase the debt limit and thereby render all the new debt they voted into law null and void. If Aug 2 comes along and the debt limit is not raised, the Treasury will not be able to issue any more debt and so will have to stop paying for things. This would amount to a partial default by the United States and would mean that the US would have to immediately stop paying for some of the major things it does. Specifically,  it would have to completely cut 2 of its 5 major spending areas (or significant portions of all 5):

  1. The Defense Department
  2. Social Security
  3. Medicare
  4. Medicaid
  5. All other domestic spending (Education, EPA, National Parks, Homeland Security, etc )

Needless to say, stopping all payment for anyone of these programs would withdraw billions from the economy. Soldiers, doctors and government employees could go without pay or the elderly could stop getting their social security checks from the government. This would plunge the US back into a recession. That’s not to mention the harm this would do to our ability to lend and borrow money in the future. I wrote a  post  talking about how we are essentially borrowing money for free right now (its a bit of an over-simplification, but bear with me). As you probably have heard, US government debt is backed by “the full faith and credit of the United  States.” Not raising the debt limit would violate  the full faith and credit of the US for the first time in history and would convince many creditors that they should not lend to us (or at least not lend to us at such good rates) in the future. And just like that, our days of cheap borrowing are gone and the debt skyrockets because suddenly we have HUGE interest payments on all of our once cheap, cheap debt.

Now for the interesting stuff…

The Republican leadership knows very well the calamity that would ensue if the debt limit is not increased, however,  they see this as an opportunity to force Obama and the Democrats in the Senate to agree to drastically cut government spending.  If the economy gets wrecked because  the government defaults on its debt, it is very unlikely that Pres. Obama will be re-elected. Republicans are betting that if that happens, the American people will blame the man at the top (Obama)  instead of them for causing the nation’s economy to implode. Even if both Congressional Republicans and Pres. Obama get blamed, that’s still good for the Republican Party because they get to install a Republican president in 2013. So, Republicans are betting that Democrats will stop at almost nothing to get a deal worked out on the debt limit. And, since Republican votes are needed for any debt limit increase (the Republicans control the House of Representatives), that deal will have to be worked out on the Republicans’ terms.

Republicans’ demands are for $2 trillion in spending cuts over the next 10 years. Note: they are not asking for $2 trillion in debt-reduction over the next 10 years, they want $2 trillion in spending cuts.  Well, that’s kind of the same thing, right? No. Lots of time spending cuts can increase the deficit. For instance, cutting money from the IRS leads to more people cheating on their taxes, which increases the debt while lowering spending on preventive medical care can increase costs on acute care down the road. Focusing on spending cuts as opposed to debt reduction also leaves increasing taxes out of the equation and in a world where debt=revenue-spending, leaving out one side of  the equation  is a pretty big omission. Predictably, that’s where the sticking point is now.

Democrats have insisted, quite wisely I think, that this be a debt-reduction package and that it also be a compromise between the two parties. Democrats have argued that since the Republicans insist on cutting programs that benefit the poor and middle class (like Medicare and Medicaid) some tax breaks should be ended for the very rich, so that the pain from this deal is spread to everyone. You would expect a deficit-reduction “grand bargain” to be 50% tax increases (which are favored by Democrats) and 50% spending cuts (which are favored by Republicans).  Here, Democrats have come all the way down to asking that 17% of the package be revenue increases (showing their weak bargaining position).  Ezra Klein explains what specifically the Democrats have asked for: (more info here)

Specifically, the Obama administration was looking at a rule that lets businesses value their inventory at less than they bought it for in order to lower their tax burden, a loophole that lets hedge-fund managers count their income as capital gains and pay a 15 percent marginal tax rate, the tax treatment of private jets, oil and gas subsidies, and a limit on itemized deductions for the wealthy.

So, the Democrats want a compromise where the ultra-rich (hedge-fund managers, owners of private jets and oil companies)  pay 1 dollar more in taxes for every 5 dollars cut from programs that benefit the poor and the middle class. Republicans have rejected ANY plan that attempts to draw ANY extra revenue from ANY source. Note that the “tax increases” outlined above  aren’t even really tax increases at all because they don’t actually raise anyone’s tax rates. All they do is close a few different loopholes that the rich and some corporations use to get out of paying taxes. But that doesn’t matter to Republicans because ANY additional revenue for the federal government is unacceptable.

See, the debate here is not “let’s Democrats and Republicans come together to hash out a deal to reduce our debt and then raise the debt ceiling,” it is Republicans saying: “give us what we want and we will help you to raise the debt ceiling and keep the economy from imploding.” Republicans are saying that if they don’t get  their way, they will destroy the US economy. In this they are making a bet that the Democrats care more about the economy than they do, and so will be willing to agree to whatever demands  they make in order to keep the economy afloat.

The Republican Political Calculus

In an earlier post, I argued that the government should increase the money it is putting into the economy in order to help us get out of this low-growth funk. This is the view advocated by many economists and many liberals in Congress. Well, if the government putting money into the economy would help us out short term, then obviously taking money out of the economy will hurt the economy in the short term. This is part of the Republican calculus.

At the very least, Republicans expect to get a deal out of the President that will slowly sap our economic strength by removing hundreds of billions of government dollars from the economy over the next few years. Republicans are hoping that this will hurt the economy enough to deny Pres. Obama re-election next year. It is widely acknowledged that unless the economy improves, the voters will punish Obama in November 2012, so the Republicans do want a weak economy between now and then.

Republicans also hope that cutting this deal with them will alienate Obama from his liberal political base. Republicans only need Obama and a handful of moderate Democratic Senators to pass their spending cuts and increase the debt limit. If they can get Obama to agree to a plan full of painful cuts to Medicaid and Medicare and nothing in return (except their agreement not to destroy the economy), liberals will be infuriated. Especially if the plan passes with only token Democratic support in Congress, Obama will risk disenchanting his strongest supporters in advance of the coming election.

Republicans are also being so demanding because  they know that if Obama wins re-election, then come January 2013, the Bush tax cuts are up again for renewal. Obama has promised to veto any attempt at renewing Bush’s tax cuts for the richest 2% of the population. Republicans want the tax breaks for the rich to be renewed more than almost anything. At that point the dynamic will be reversed. Republicans will have to play on Obama’s terms and will have to decide whether they want to agree to Obama’s demands and let the tax cuts for the rich expire, or whether they want to let taxes rise on the other 98% of people in America in a PR nightmare. Of course, if  Obama doesn’t get re-elected they don’t have to worry about that. If  he still does get re-elected and the tax cuts for the rich expire, well then Republicans will say that it was a good thing they held the line against higher taxes on the rich when they had  the upper-hand in the debt ceiling negotiations. Because the worst thing in the world would be for the rich to have their taxes raised twice.

In conclusion, there is a good chance the debt limit is unconstitutional.