Politics: Congress' game of Budget Chicken. Does it matter? Yes!!!



Bill Clinton and Newt Gingrich before closing the government in 1995.

 
Remember how they played "chicken" back in the 1950s?  Two guys in hot-rod cars drove toward a cliff.  The first to jump out was Chicken.  His friends all laughed.  Click here to see how it played out in the classic film Rebel Without a Cause.   Notice how the winner got to celebrate by being killed while his friends drank beer.  



James Dean with Corey Allen before
Allen drives off a cliff in Rebel Without a Cause.


What a perfect game for politicians: pointless, self-destructive, with big headlines.  Not surprisingly, playing chicken with American finance has become a favorite sport of the US Congress.  And  2011 seems destined for a spectacular crash, with a choice of two on-rushing cliffs to drive off:

• First, on March 4, the Continuing Resolution (CR), the law that funds most of the US federal government, expires.  This is no accident: Republicans last December insisted on the short fuse. Unless the CR is extended or replaced, the government must shut down that day.  

• Second, in late March, the Debt Ceiling, which limits the total amount of money the Federal Treasury can borrow -- set last year at $14.3 trillion -- is scheduled to be reached.  Since Treasury borrowing is needed not just to fund the government but also to replace expiring bonds and pay interest, failure to raise the ceiling could cause the US government to default on its bills.  

Government shut downs?  Defaults?   The last time Washington shut down was in 1995 when then-House Speaker Newt Ginrgich insisted then-President Bill Clinton accept a list of spending cuts, which Clinton refused.   For a full week as the polticians jockeyed, offices closed, benefit checks froze, and national parks and monuments went dark.  The public cringed at the whole futile exercise.  As for defaulting on bonds, the US government has never done this in its entire 213-year history (with a partial exception in 1933 when FDR eliminated the "gold clause" in US obligations, allowing debt paid in paper currency.( Click here to see Alex Pollock's take on this from the American Spectator. )

US "full faith and credit" -- its commitment to pay bills -- is enshrined in the Constitution as the basis of our national ability to borrow.  It is as close to sacrosanct as anything in finance, and the only thing that separates us from Greece and Ireland in the eyes of lenders.

So why are Congressmen and Senators -- particularly Republicans of the Tea Party stripe -- threatening once again today to play chicken with America's global fiscal standing by refusing the raise the debt ceiling or extend the CR?   Is it really just simple, self-serving, annoying politics-as-usual?   

Take a look at this chart:  It shows the US national debt since 1940, in constant dollars.  Notice the explosions starting in 1980 (Reagan tax cuts), in 2002 (Bush tax cuts plus two wars), and the near-vertical climb since 2007 (Wall Street financial melt-down).  Today, US debt is nearly 80 percent of our gross domestic product.   Almost nodoby disagrees that, unless reversed soon and sharply, this trend threatens to swamp our economy, our national security, and our future. 

For years,  politicians have gabbed about cutting the debt, but almost never do anything about it.  Just last month, President Obama and Senate Republican leader Mitch McConnell negotiated a tax cut deal increasing the debt by a projected $900 billion in two years, while solemnly promising to "get serious" about the debt "next year."  The fact is, nothing can be done to save money in Washington -- not spending cuts, not taxes increases -- unless some politician on one side or the other agrees to surrender. 

He or she has to agree to jump out of his car and be called "chicken."  And unless the car is careening toward a cliff, nobody will jump.

This is why, as much as I hate to admit it, the Tea Party crowd has a point.  IF the goal really is to force Washington to do something serious about the debt, then playing chicken with the CR and Debt Ceiling is a bold way to do it.  Presumably, the Republicans will refuse to relent until Obama agrees to big spending cuts. And then, their egos protected, a few of them will jump from the car and let everyone avoid the crash.

If Obama refuses, the government will close or default on its bonds.  Or, if Obama reciprocates, using the Tea Party gambit as an excuse to put forward his own set of perhaps-more-reasonable cuts and modest revenue enhancers, all sides could walk away with a victory.

This is a dangerous game.  Remember James Dean in Rebel Without A Cause.  His rival, Corey Allen, got his sleeve jammed in the car door and, as a result, when he needed to jump, he couldn't.  Off the cliff he flew.  So too could Obama or the Tea Party if they play this wrong, and the big loser will be the US economy.  Knowing when to jump, when to refuse, and how to open the door, are key.

Have we really come to this?  I've given up on trying to find the adults.  Let's just hope the children don't burn down the house.

Is this Obama's "Read my Lips" Moment?

Way back in the last Century, in 1988, 22 years ago (Gasp! Am I really that old?), George H. W. Bush convinced the voters of America to elect him President, defeating Democrat Michael Dukakis in an electoral college landslide, 426 to 111. Central to Bush's campaign, however, was a single memorable promise that made him a hero with conservatives coast to coast: that he would never, ever, ever raise taxes.

Bush immortalized this pledge in his acceptance speech to that year's Republican Convention in New Orleans, uttering his most-ever-cited statement, as follows: "Read my lips! No New taxes!" -- taken from the Clint Eastwood tough-guy movie "Dirty Harry." Here's the video in case you've never seen it. It's a beauty: Click here.

The irony, of course, is that in 1990, just two years later, Bush broke that pledge. Facing soaring deficits and a sinking economy, Bush decided to compromise with Democrats and sign a deal cutting Washington government deficits by $500 billion over ten years. Though it contained many spending cuts painful to Democrats, it also raised many key taxes, including the Federal gas tax.


The photo above shows Bush as President siging the 1990 deal. Not much of a smile on his face.

Not surprisingly, conservatives erupted in anger. "Read my lips. I Lied!" headlined the New York Post. The Cato Institute called it the "Crime of the Century," and the Heritage Foundation quickly tagged it a failure. Most Republicans in Congress voted no (or Hell No!!) on the package; Bush had to rely on Democratic votes. Then, in 1992, when Bush stood for re-election, the pigeons came home to roost. Despite his widely-admired leadership during the 1991 Persian Gulf War that sent his popularity soaring to near 90 %, Bush's budget deal and a worsening recession soured his prospects. Television pundit and former Nixon speech-writer Pat Buchanan managed to embarrass him by winning 40% of the vote in the New Hampshire Primary, running largely on Bush's violation of his tax pledge. In the general election, Democrat Bill Clinton cited it too, and won a comfortable victory in a three-way contest that also included businessman Ross Perot. (click here for 1992 election results.) By the next January, George H.W. Bush was out of a job.

All of which brings us to today's president, Barack Obama, and his decision this week to join in a deal with Congressional Republicans to extend the large, due-to-expire, Bush Junior-era tax cuts for the wealthiest Americans. The deal contains other things, but none more important. As with Bush Senior in 1990, this too violated a position central to Obama's candidacy and presidency. Obama has made his opposition to continuing the Bush tax cuts for Americans with incomes above $250,000 per year a matter of basic principle, one widely shared with his supporters. Already, many Democrats are calling it a betrayal or worse.

Will this be the beginning of the end of the Obama presidency, just as the 1990 budget deal marked the beginning of the end for George H.W. Bush? Obviously, it is way too soon to say. Obama still has time to win back his critics, and perhaps even win on the tax-cuts-for-the-wealthy issue itself when it comes up again in two years. Still, the parallel is hard to ignore. Stay tuned. This will be very good drama.

Prez Clinton Versus Violent Wingnuts and Blowhard Limbaugh

From Denny: With the 15th year anniversary of McVeigh's heinous crime of domestic terrorism, killing 19 children along with another another 149 adults, President Clinton is speaking out. He gave a number of interviews and the video clips here are from ABC and CNN.

Former President Clinton acknowledges he made his mistakes in office like every new President - aside from his personal life mess. By his own estimation his biggest mistake was not to institute stronger financial regulation of Wall Street. All these years later he recognizes the lack of wisdom on that decision.

However, Clinton did not back up or back down from his stance on the dangers of overheated political rhetoric and its effect upon people who are easily influenced to do violent acts. He counters blowhard conservative talk radio host Rush Limbaugh's mangled accusation that it is Clinton who "set the stage for violence" with a recent speech on the subject "doesn't make any sense." As usual, it's Limbaugh who doesn't make any sense, running his usual mouth version of the shell game, always moving the truth around so much that people get so confused they can't find it. Read that statement as Limbaugh lies: all over the place and constantly.

Clinton reflected upon the recent health care reform bill passing, saying it made him "feel like Teddy Roosevelt to Obama's FDR." Clinton being Clinton, always thinking about the issues and ever ready to offer his thoughts, he considered the issues facing the current President: Supreme Court nomination to replace retiring 89 year old Justice Stevens, the Middle East peace process and the ever worrisome midterm elections because of a restless America watching their comfortable lifestyles plummet from the rocky economy.

Clinton's' speech about the 15th anniversary of the Oklahoma City bombing was heavily criticized by Limbaugh. It's no wonder Limbaugh attacked Clinton's admonitions because it is Limbaugh who is behaving anti-American. He is working feverishly to turn American against American. Just how patriotic is that?

What did Clinton advise in that speech that set off the Republican War of Words machine? Clinton warned that "the words we use really do matter, because there's this vast echo chamber, and they go across space and they fall on the serious and delirious alike. They fall on the connected and the unhinged alike." So, the inciting, violent and unhinged started howling at the top of their lungs, screaming it wasn't fair to speak against them.

Clinton clarified his statements yet again to the reading and politically hearing challenged, "The only point I tried to make was that we ought to have a lot of political dissent -- a lot of political argument. Nobody is right all the time. But we also have to take responsibility for the possible consequences of what we say."

He is worried about the constantly increasing death threats against too many member of Congress and President Obama. Clinton is concerned "about more careless language ... some of which we've seen against the Republican governor in New Jersey, Gov. Christie." Talk about depraved and alarming, there is a teacher in New Jersey, writing in a memo, who thought it was funny to joke about Gov. Christie dying. These are the kind of no account jerks you want teaching your kids in public or private schools? It's no wonder we have such a toxic political atmosphere in America.

Clinton believes "we all have to be careful. We ought to remember that after Oklahoma City we learned something about the difference in disagreement and demonization."

Another revelation from Clinton about the financial sector is how badly he was advised by Treasury secretaries Robert Rubin and Larry Summers. Clinton laments he ever listened to them. They actually told him to not regulate derivatives, basically a fast and loose gambler's market of supposedly complex financial instruments. Read that as Wall Street found an easy way to steal and do it legally, without accountability, regulation restraints or retribution.

"On derivatives, yeah, I think they were wrong and I think I was wrong to take [their advice]," Clinton said, "because the argument on derivatives was that these things are expensive and sophisticated and only a handful of investors will buy them, and they don't need any extra protection and any extra transparency. The money they're putting up guarantees them transparency.

"The flaw in that argument," Clinton added, "was that first of all sometimes people with a lot of money make stupid decisions and make it without transparency."

Clinton also acknowledges his thinking was wrong about how the economy would be affected if the derivative market collapsed.

"The most important flaw," he said, "was even if less than 1 percent of the total investment community is involved in derivative exchanges, so much money was involved that if they went bad, they could affect 100 percent of the investments, and indeed 100 percent of the citizens in countries, not investors. And I was wrong about that."

In retrospect, Clinton would have liked to at least try to regulate derivatives during his tenure. As to his success at taming the financial sector in this area, he doubts it would ever have become law since the Republicans had a stranglehold on Congress.

"Now, I think if I had tried to regulate them, because the Republicans were the majority in the Congress, they would have stopped it," he said. "But I wish I should have been caught trying. I mean, that was a mistake I made."













*** THANKS for visiting, feel welcome to drop a comment or opinion, enjoy bookmarking this post on your favorite social site, a big shout out to awesome current subscribers – and if you are new to this blog, please subscribe in a reader or by email updates!

Updates: Celebrities, Clinton and Bush, Help Raise Donations for Haiti

From Denny: Hope for Haiti telethon where $57 million raised already. HopeForHaitiNow.org still taking donations for the next 90 days. To date, as of this posting, over $385 million has been raised from the generosity of donors worldwide. It's wonderful how well the world has responded to Haiti's plight. Celebrities have donated their time and their passion to raising funds from Hollywood to the political spectrum of past Presidents: www.clintonbushhaitifund.org.

Visit msnbc.com for breaking news, world news, and news about the economy

$355 million in donations raised by various world organizations to help the people of Haiti to rebuild their lives:

Visit msnbc.com for breaking news, world news, and news about the economy

In one telethon on CNN's Larry King Live they raised $8 million.

Visit msnbc.com for breaking news, world news, and news about the economy

Interview with former Presidents Bill Clinton and George Bush at the White House where they had just previously met with President Obama soon after the disaster struck Haiti:



*** THANKS for visiting, come back often, a big thank you to current subscribers - and if you are new to this blog, please subscribe in a reader or by email!

Videos: Jailed U.S. Journalists Speak, All Gore Thanks, Obama Comments, Hillary's Role in Diplomatic Mission

First: from Al Gore who thanks Bill Clinton and teams who successfully concluded this humanitarian mission

Visit msnbc.com for Breaking News, World News, and News about the Economy

Second: from journalist Ling who recounts her reaction upon meeting Bill Clinton in North Korea. Thanks everyone for their prayers as they felt those prayers while in captivity and it kept them going through their ordeal.

Visit msnbc.com for Breaking News, World News, and News about the Economy

President Obama comments upon their release:

Visit msnbc.com for Breaking News, World News, and News about the Economy

Hillary Clinton's role in the diplomatic mission as reported by Andrea Mitchell who is traveling with the Secretary of State in Kenya:

Visit msnbc.com for Breaking News, World News, and News about the Economy

Video: Bill Clinton Retrieves 2 Jailed U.S. Journalists From North Korea

From Denny: For weeks now the State Department has been acting like a real State Department and been quietly negotiating for the release of the U.S. journalists North Korea sentenced to prison for years of hard labor because they were caught sneaking into the country to do a story. Anyone with a brain would know better than to try and deceive a paranoid deceptive government and they paid a high price for their gamble.

Former President Bill Clinton was sent to retrieve the women. All Clinton had to do was publicly reap the fruits of the many background diplomats who did the heavy lifting to achieve this political coup. The former President is the high level status of attention and interaction the North Koreans were seeking. Clinton is known for both his charm and his knowledge of how best to handle difficult situations.

These journalists should count themselves extremely lucky that President Obama was willing to seek their freedom. Under a Republican administration they would have been considered expendable and left to rot in prison for their full terms.

Moral of the story? As an American don't get jailed in a foreign country unless you have lots of friends in high places to pay for your release or there is a Democrat in the White House.

Now the real questions remain: What did Clinton privately promise North Korea? Was it enough to extract a public apology from a heavy weight powerful country? Will North Korea power down on their nuclear ambitions?

For now, North Korea threw a temper tantrum and got the international attention it was seeking by stepping on the faces of two women. Fortunately, Clinton and Obama are class acts and retrieved them.

This video is from early this morning before Clinton's plane had taken off and was in the air. Smart move from the White House not to crow about it until they knew all parties were out of North Korean air space.




This is the video hours later after confirmation from the White House the jailed reporters and Clinton were on their way home to America.



Analysis from CNN Asia correspondent on how this is perceived in North Korea