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Posted at 11:55 AM ET, 12/ 8/2010

The GOP's next hostage: The full faith and credit of the U.S. government

By Ezra Klein


The worst answer of President Obama's news conference yesterday had nothing to do with the left. It had to do with the debt ceiling. The National Journal's Marc Ambinder stood and asked the president whether there was "any attempt by the White House to include raising the debt limit as a part of this package," as if the debt limit doesn't get raised, the GOP has a "significant amount of leverage over the White House."

Obama, who had gotten a bit prickly by this point in the Q&A, responded by questioning Marc's premise. "When you say it would seem they’ll have a significant amount of leverage over the White House," he asked, "what do you mean?"

Sigh. Here's what Marc means: In February, the Treasury Department will have borrowed as much money as the Congress has allowed them to borrow. If it is to keep meeting the government's obligations, Congress will have to raise the debt limit, which it does every few years. If it doesn't, the U.S. government can't fulfill its obligations to its creditors, and we fall into a fiscal crisis the likes of which are very hard to imagine, as it won't just be about immediate borrowing, but also the market's sudden realization that the political system might not be able to meet future obligations, either.

Sound good? Of course not.

At his news conference yesterday, Obama spoke about the GOP's tendency to take hostages. Last week, their hostage was the tax rates paid by most Americans. If they shot the hostage, taxes would go up by a little bit. And the more likely scenario was that their unpopular insistence on tax cuts for the rich would've eventually forced them to buckle.

In this case, the hostage is the entire U.S. economy. And the GOP's position is going to sound much more reasonable: "We just can't raise the debt limit again without imposing serious and drastic spending cuts." Compare that with "we just can't cut taxes for 98 percent of Americans unless we give extremely large tax cuts to the top 2 percent." If Democrats weren't willing to shoot the hostage on the tax cuts, what makes anyone think they'll allow it on the debt ceiling?

Obama's answer was not comforting. "Here’s my expectation," he said, moments after comparing the Republican negotiating strategy to terrorists who shoot hostages, "and I’ll take John Boehner at his word. Nobody, Democrat or Republican, is willing to see the full faith and credit of the United States government collapse, that that would not be a good thing to happen.... Once John Boehner is sworn in as speaker, then he’s going to have responsibilities to govern. You can’t just stand on the sidelines and be a bomb thrower."

No, but you can be a tough negotiator. And when you combine a tough negotiator -- which Obama says the Republicans have proven to be -- with lots of leverage and popular demands, you get, well, a hard bargain. But this isn't going to be a hard bargain Democrats like. Republicans have already stated their intention to use the debt ceiling's leverage to sharply cut spending and roll back health-care reform. That would be bad for the same reason that the tax cut deal is, on the whole, good: It'd hurt working people and the economy.

Happily, this negotiation isn't over. Republicans want a deal that will add hundreds of billions of dollars onto the deficit. That deal should be packaged, as I and others have been arguing for some time, with an increase in the debt limit. That would not only stop Republicans from taking the full faith and credit of the U.S. government hostage in February, but it'd establish the important principle that tax cuts are not free.

Democrats in Congress should insist on this as a condition of any deal, and so should the White House. And if Republicans want to blow up the bargain because they're unwilling to accept the consequences of their own spending? Well, let them. Not all ransoms are worth paying.

Photo credit: Bill O'Leary/The Washington Post.

By Ezra Klein  | December 8, 2010; 11:55 AM ET
Categories:  Budget  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   StumbleUpon   Technorati   Google Buzz   Previous: What the tax deal is likely to do to the economy
Next: Nothing is agreed to until everything is agreed to


I hope you had fun on Lawrence last night. Ambinder asked the question a lot of us are wondering. It seems strategy is not a strong suit in this WH, sadly. It's also by giving in to the hostage-taker was a bad deal, unless there was a lot more to this deal(which there obviously wasn't). It's a shame Obama think Orange Julius' word is worth anything more than a warm bucket of spit.

Posted by: Calvin_Jones_and_the_13th_Apostle | December 8, 2010 12:41 PM | Report abuse

"That would not only stop Republicans from taking the full faith and credit of the U.S. government hostage in February"

Ok, but what about next time, and the time after that, and the time after that.

Destroying the full faith and credit of the United States is an important part of the Republican's apparent plan to turn us into a third world country.

The American people may have to really see this kind of crisis, full blown, first hand to really appreciate it and either force the Republicans to back down, or hopefully, if the press doesn't act disgracefully, expose them to the public for what they really are.

Posted by: RichardHSerlin | December 8, 2010 12:55 PM | Report abuse

"Sure, they took hostages this time, and last time, and the time before that. But next time they will have become responsible members of the government and will no longer do that."

I don't really know what to say.

Posted by: pj_camp | December 8, 2010 1:04 PM | Report abuse

The Republicans are not going to the wall on
the debt ceiling. The preference for reducing spending is not stronger than the preference for having an economy in the US. There will also be no cuts proposed that really impact 2011 anyway. I might as a Republican think I can benefit if the economy goes to pieces and the President gets blamed. However, my donors universally will not want chaos now in exchange for a better President (maybe) in 2013. This is especially true if this deal goes through. This deal puts the Republicans on the side of deficits to improve the economy.

Posted by: windshouter | December 8, 2010 1:14 PM | Report abuse

They won't actually push the US into default, as that would harm their wealthy backers. However, they could threaten to do so and see what they get. They might also vote against raising the debt ceiling as a negotiating tactic, realizing they'll get another chance to change their vote if Obama and the Dems don't blink.

Posted by: fuse | December 8, 2010 1:20 PM | Report abuse

John Boener and McConnell both said they want the Obama Administration to fail and for him to be a one term President.

How Patriotic is that?

Tax cuts paid for by China will weaken the U.S. and baloon the deficit. That will cause people to vote against President Obama.

Republicans created this mess and are now making matters worse.

Posted by: gthornton2 | December 8, 2010 1:20 PM | Report abuse

Is there nothing Obama can do to threaten the Republicans in return?

Couldn't he say he will put a good chunk of the pain on Republican priorities (e.g. war on terror) in the event of a shutdown?

Posted by: justin84 | December 8, 2010 1:29 PM | Report abuse

The difference is simple: Holding the debt ceiling hostage hurts the top 10% a lot. What happens to Rush's bank account if the U.S. defaults?

Posted by: DavidCEisen | December 8, 2010 1:29 PM | Report abuse

Agree with your overall point, however the "hostage" in Obama's scenario was not tax rates, but unemployment insurance to millions of Americans out of work.

In terms of the "full faith and credit" argument, I'm far more concerned they'll ultimately renege on paying all those "IOU's" they've written against Social Security (which are also backed by the "Full Faith and Credit" of the government) than not honoring overseas holders of Treasurys.

Posted by: Hieronymous | December 8, 2010 1:29 PM | Report abuse

The idea that the Republicans will have the gonads to stand face to face with default by the US government and the colossal kind of market collapse this would cause just to one up Barack Obama is cartoonishly silly.

Thats what Obama should have said to answer Ambinder yesterday.

Posted by: zeppelin003 | December 8, 2010 1:38 PM | Report abuse

Ezra Klein, weathervane? Liked the deal until its obvious implications became clear to people with political as opposed to policy imagination, then jumped to the other side?

Posted by: janinsanfran | December 8, 2010 1:50 PM | Report abuse


President Obama has proven again and again that if he wants to go it alone -- he's going it alone. He did not consult and conference with the Democratic leadership when he made the famous "Let's Make A Deal" yesterday. The Democratic base is in an uproar. In more severe words -- they are pissed!

The president and the Republicans have to go to their base and sell this "toxic" agreed package before the end of 2010. Good luck. Adding more deficts at a tune of $190 billion with the rich getting a windfall that would make Donald Trump more money than Joe "the Plumber." How can the Republicans justify $190 billion to the top 2 percent of our society and there is no pay-as-you go rules being applied. Who pays for the billionaire's Christmas Party if this "toxic" agreement is passed by Congress? The American Middle Class of course.

President Obama and the Republicans are continuing the "kick-the-can down the road" once again. Excessive government spending and waste in the all sectors of federal programs are why we're in this mess. Both, Democrats and Republicans are complicit in placing us in this abysmal pit of mounting debt.

The American people should be outraged that the President and Republican leaders can say this is a "good deal for all Americans." This is not a good deal -- matter of fact -- it's a trojan horse of money going to special interest groups who eventually will bankrupt this country.

No sensible minded Democrat or Republican should sign off on this "toxic agreement." Congress needs to go back to home-base and start over again. I would rather sacrifice a little now than to be awaken one morning and find out that CHINA HAS TAKEN OVER OUR GOVERNMENT BY CASHING IN ON ALL THOSE $1.8 TRILLION U.S. TREASURY BILLS THEY HAVE.

Posted by: djoh1226 | December 8, 2010 1:59 PM | Report abuse

Back in the 90s, Newt Gingrich and the Republican clowns of those days shut down the government for a week or so. Today's Republicans are probably even more nuts. Blocking any effort to raise the debt ceiling seems just like a trick they'd pull.

Posted by: John991 | December 8, 2010 2:27 PM | Report abuse

So? Obama turns out to be a superb orator and family man and basketball player . . . and little else. Yes, my wife and I worked hard to get him elected. No more, once burned is enough.

And Boehner, McConnell and their solid GOP ditto-heads? One word accurately describes those corporate owned millionaires . . .

"AMORAL" !!!! Irony?? The GOP claims ownership of Flag and Jesus. "AMORAL"!

Posted by: lufrank1 | December 8, 2010 2:31 PM | Report abuse

This might be worth considering: as the price for raising the debt ceiling, the Democrats should demand even lower taxes for the richest 2 or 3%...the real job creators. This much incentive ought to have job creation take off like a rocket!! Senator McConnell ought to be afforded every opportunity to explain why it hasn't.

Posted by: jaallenj | December 8, 2010 2:35 PM | Report abuse

Klein, you're just really dumb, aren't you?

Posted by: georges2 | December 8, 2010 2:40 PM | Report abuse

For those on the left, in regards to the tax cut issue, it seems hostage seems to be a euphemism for "voters who knew where each party stood on tax cuts and elected to throw Democrats out in numbers not seen in over six decades".

The notion that the Republicans are holding anyone "hostage" is ludicrous. To quote what used to be a favorite phrase of Democrats: elections matter.

Posted by: Bob65 | December 8, 2010 2:42 PM | Report abuse

Yes, who would think a Republican House Speaker would do something irresponsible like default on the national debt? That's as crazy as shutting down the government or impeaching a President over some petty sex scandal!

Posted by: AxelDC | December 8, 2010 2:49 PM | Report abuse

For those on the left, in regards to the tax cut issue, it seems hostage seems to be a euphemism for "voters who knew where each party stood on tax cuts and elected to throw Democrats out in numbers not seen in over six decades".

The notion that the Republicans are holding anyone "hostage" is ludicrous. To quote what used to be a favorite phrase of Democrats: elections matter.

Posted by: Bob65
You are completely wrong on both counts. The American people overwhelmingly favor letting the tax cuts for the rich expire and the Republicans absolutely are holding unemployed Americans hostage for their tax cuts for the rich.

Why do Republicans hate average Americans?

Posted by: Observer001 | December 8, 2010 2:51 PM | Report abuse

'"When you say it would seem they’ll have a significant amount of leverage over the White House," he asked, "what do you mean?"'

It seemed clear to me that Obama was asking this rhetorically. "They don't have any leverage" is just the right way for him to start the next showdown.

Posted by: dwarren01 | December 8, 2010 2:55 PM | Report abuse

"And the more likely scenario was that their unpopular insistence on tax cuts for the rich would've eventually forced them to buckle."

I would submit that the most likely scenario would be that the Republicans let the tax cuts expire, and then pass them retroactively in the new Congress while blaming the previous Democratic Congress and Obama for raising taxes.

Since the election already happened and the Republicans won, they don't view their position as unpopular.

Posted by: jnc4p | December 8, 2010 3:11 PM | Report abuse

"And the GOP's position is going to sound much more reasonable: 'We just can't raise the debt limit again without imposing serious and drastic spending cuts.'"

Oh, God, please, yes, make it happen.

Posted by: ostap666 | December 8, 2010 3:21 PM | Report abuse

Not to mention RepuBPlicans in lock step with big corporations holding American jobs and money circulation hostage to get rid of Obama at any cost to the rest of us including the current middle-class Depression.

Posted by: areyousaying | December 8, 2010 3:22 PM | Report abuse

The question is what will the GOP demand in return for the raised debt limit? How about a total ban on abortions - how about an executive order designating Christianity as the official state religion - how about a federal law allowing us all to carry concealed weapons - how about even more tax cuts for corporate America - how about returning GITMO trials to military tribunals - how about cutting the Department of Education's budget in half - how about making water boarding the next Olympic event - I could go on and on. And you know what? I would not be a bit surprised if they got it all. The debt ceiling is a bigger hostage than tax cuts for the middle class. Pres. O and the Dems have given in once to political terrorists' demands and the now the whole kit and kaboodle is on the table. So, Mr. Pres? please tell us how ya' gonna get tough about the debt ceiling?

Posted by: bobwhite1 | December 8, 2010 3:41 PM | Report abuse

annabeth: "why would the treasury want the president to read over a twenty page memo on a one sentence bill?"

toby: "they like to run a worst-case scenario."

annabeth: "in case it doesnt pass?"

toby: "yeah, you know the immediate collapse of the u.s. economy, followed by japan sinking into the sea, followed by a worldwide depression the likes of which no mortal can imagine . . . followed by week two."

annabeth: "so this debt ceiling thing is routine? or the end of the world?"

toby: "both."

Posted by: MadIrishFrog | December 8, 2010 3:41 PM | Report abuse

Unfortunately, elections have consequences; and this is one of them.

The truly amazing thing is the stunning bold-face hypocrisy of the Republicans, who ran on fiscal responsibility, to further run up the debt.

Posted by: koygdb | December 8, 2010 3:42 PM | Report abuse

You know, we should really just do away with having to extend the debt limit entirely.

Seriously, it's like every two years having a vote: "are you SURE you don't want to destroy the global economy?" -- and then requiring 60 votes to pass it.

It's insane.

Posted by: adamiani | December 8, 2010 3:50 PM | Report abuse

Ezra has made some very good points. However, the typical rightwinger will not understand that the Republicans just made the case for increasing the debt ceiling. If they play hardball with the debt ceiling, a pox on all of their houses.

Posted by: EarlC | December 8, 2010 4:16 PM | Report abuse

Let's see:

1. Reagan tripled the debt;
2. Republicans want to be like Reagan;
3. Cheney kept saying 'Reagan proved deficits don't matter' and NO Republican objected;
4. Bush doubled the debt;
5. Republicans kept 2 wars off the budget;
6. Republicans passed a $1trillion unfunded MediCare benefit;
7. Republicans passed a $1trillion reduction in tax rates;
8. Republicans insisted on a $1trillion 'temporary' extension of tax rates;

Yes, of course Republicans are ready to deal with the tough issues!

(Actually I am not so stupid that I believe that, but far too many of my fellow countrymen are!)

Posted by: AMviennaVA | December 8, 2010 4:18 PM | Report abuse

Let all of the tax cuts expire, we can't afford them anyway!

Republicans are already on record voting against the middle class tax cuts (i.e. tax cuts for everyone). So, screw'em! Let them own it!


Posted by: DrainYou | December 8, 2010 4:32 PM | Report abuse

You can't play poker by committee. And you can't play a hand where the cards have not been dealt yet. I am going to on a limb here and suggest that the President probably has thought about the upcoming fight on the debt ceiling. It serves no purpose to suggest that the cards the President holds now are the only ones he is going to have when the debt ceiling fight begins. Again Ezra is moving the goal post on Obama. First, Ezra advises that the Dems should abandon a fight on the extension of the Bush tax cuts in order to make sure that unemployment benefits are extended. Then he reverses himself and suggest that Obama should fight despite the fact that it would kill any hope of an extension of unemployment benefits. Then once a deal was brokered, he acknowledged what Obama had gained in the deal but still called it a Republican victory. Now Ezra makes the debt ceiling the issue that should have been the focus of the White House negotiations with the Republicans. It is almost as if Ezra wanted all the foreseeable issues of 2012 negotiated in this current conflict over the Bush tax cuts and the extension of unemployment benefits. Which again, Ezra considered a reasonable trade off less than a month ago.

Posted by: richarddyoung | December 8, 2010 4:34 PM | Report abuse

Obama is blowing it. The Dems need to stop Obama on this terrible extension of the Bush temporary tax cuts for the rich.

The better choice given what Obama has come up with....let all the Bush tax cuts expire.

Take on unemployment extensions separately and with real Presidential leadership and pressure!

If we need a 2nd stimulus, then tax cuts for the rich is not the answer....we have 7 years of proof from Bush. This makes no sense!

Obama caved to the Republicans and he's blowing it for the nation!

Posted by: go2goal | December 8, 2010 4:40 PM | Report abuse

Don't be naive, Ezra. This would be the "train wreck" for which the GOP has been praying. All the leading conservative intellectuals--Drug Limbaugh, Sarah Palin, Huckabee, Coulter, Hannity, Malikin, to name just a few--want this.

They WANT the President to go on TV and tell the Nation that Social Security is dead and all you geezers had better start selling apples.

Posted by: Garak | December 8, 2010 5:47 PM | Report abuse

Bless you, Ezra, but you've been allowing others to play the tax-deal game. Now you're playing the game.

Anyone – Democratic legislator, economist, commenter – can play the tax-deal game. It goes like this: "here's how I would improve the tax deal. Yadda, yadda, yadda. See how smart I am?"

But the game shouldn't end there. It should end with this question: Do you have 60 Senate votes for your changes to the deal that has been struck? If the answer isn't "yes" and if no evidence is provided to back up that assertion then she/he should be disqualified, and she/he should not be given valuable space on your invaluable blog.

Your yadda, yadda, yadda is to insert the debt ceiling into the deal. And if Republicans don't yield? Why, blame them, you say, as you step over the bodies of the cash-poor unemployed, while strolling through the reignited wreckage of the smoldering economy.

It's great NOT to be president because you're spared all accountability, and you can play make-believe president in the pundit paradise of hypotheticals.

Posted by: fredbrack | December 9, 2010 12:37 AM | Report abuse

I love being a fly on the wall, and watch the wailing and gnashing of teeth of the lefties. LOL. Ezra and his lefty pals at JOURNOLIST helped put this piece together. No one lefty has the brain power to write this much incoherent crap. The Journos forgot one minor point-they've just been hit by a train in the largest sweep of congress since 1948 and they're still partying like it 1999 or 2008.

Posted by: adamstyle | December 9, 2010 2:52 AM | Report abuse

If we had gone into Afghanistan and completed the job of killing or capturing Osama bin Laden along with NOT invading Iraq and allowing the UN inspectors to keep searching for weapons, we could have save over $1.3 trillion dollars.

It also may have kept our country out of the depression it's currently suffering which would have saved us from another few trillion before it's all over, in TARP, stimulus, unemployment, government investing in corporations and lost American productivity.

How's that for savings?

Posted by: helloisanyoneoutthere | December 9, 2010 9:34 AM | Report abuse

What bothers me about many of the comments here is that it appears people don't know that the new set of GOP Tea Partiers have vowed to not support or will filibuster a raise in the debt ceiling.

They've already vowed to stop it...and be damned the economy, jobs, the works. Their ideology, right now, is more important than the worst world-wide depression and economic havoc since man chose to live in communities as being a problem.

BTW, I'd have included in the deal not only raising the debt ceiling but also a written promise by the GOP to rewrite the entire tax code along the lines of the Wyden-Gregg plan and definitely not Ryan's Roadmap which shifts more of the tax burden onto the middle class while reducing it even further on the wealthy.

Posted by: valkayec | December 9, 2010 1:34 PM | Report abuse

I'm confused at this article. Shouldn't the columnist that writes about economic policy have some basic grasp of economic principles? There are no tax "cuts", simply an extension of current tax policy. The problem with having any discussion with liberals is that they lack a basic understanding of anything they're actually trying to discuss...

Posted by: rdamurphy | December 9, 2010 2:11 PM | Report abuse

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