Monday, January 14, 2013

Audacious Plan of President Obama

This is where Liberal Blogsphere sees President Obama in the Debt Ceiling Drama:

"This kind of thing is too clever by at least half. It’s the sort of lawyerly hair-splitting that makes Republicans think the White House will, in the end, figure out some complicated rationale for negotiating with them. If the White House wants to solve their credibility problem on the debt ceiling, they need to cut it out. Negotiate, or do not negotiate. There is no clever way to split the difference. "
-- Ezra Klein, Wonkblog, Washington Post

"Meanwhile, I get calls. The White House insists that it is absolutely, positively not going to cave or indeed even negotiate over the debt ceiling — that it rejected the coin option as a gesture of strength, as a way to put the onus for avoiding default entirely on the GOP.

Truth or famous last words? I guess we’ll find out."
-- Paul Krugman, The Conscience of a Liberal, New York Times

"Why Nobody Believes Obama on the Debt Ceiling"
-- Matthew Yglesias, Moneybox, Slate

"Many of us have questioned whether Obama will actually follow through on his stated intention. In these games of chicken, he always seems ready to swerve at the last moment. What’s different here is that Obama seems so determined and explicit not to pay a ransom that he is leaving himself no room to backslide. If he pays the ransom, he’ll leave himself humiliated and exposed in a way he never has."
-- Jonathan Chait, Daily Intelligencer, New York 

Needless to say we are heading towards possibly the final showdown between Tea Party and Obama. Tea Party members of House clearly see it as their historic duty to force America into Default and even risk global economic turmoil rather than acquiescence to President Obama. So given that, we have possible two paths:

- House passes a bill to increase debt ceiling based on draconian spending cuts voted by GOP members only, the bill goes to Senate which strips 'spending part' and sends it back to the House. At that point House either opts for Default / Government Shutdown or Speaker Boehner opts for Dem backing while breaking the GOP caucus in response to Market and Public Pressure - the same why the final fiscal cliff bill was passed. 

- However, if House GOP Leadership fails to persuade rank and file Tea Party (or fails itself to see what they are doing) it will force Default / Government Shutdown; President Obama will have to walk the talk at that point: he would have to stop Social Security checks, Medicare disbursement and practically close more than half the government. There are reasoned voices who argue the impossibility of such a task from execution perspective even if President Obama intends to stick to his tall claim - 'no ransom to GOP for increasing Debt Ceiling'. But President Obama will have to plough through all such difficulties; that will be some 'jaw dropping feat' he is claiming to undertake. He did not opt for any such tough choices in the First Debt Ceiling Drama.

In the eventuality of stopping Social Security Checks, Tea Party is going to say "look this is how much we are living beyond our means and President refused to come clean all along!" and "we offered help to President Obama by negotiating a deal which would have allowed at least part of Social Security Checks to come; but he turned us down". Tea Party will try to spin the global economic shock as their kind of some new Turther Movement.

The only response President Obama could have at that point is:
- Tea Party cares for 'no further revenue increase' more than tanking of global economy (presuming President Obama continues his line of balanced budget plan through out this saga) and
- there is always a way to get through these deficits if only Tea Party had listened to what President has been saying all along (and that is the reason why President Obama wants to keep alive the negotiation track for 2014 Budget and Sequester Cuts). 

After all the chaos and ensuing recession, if President Obama is still able to retain some political upper-hand; resolution of Default / Government Shutdown will primarily happen for the same reasons as it happened during Clinton-Gingrich fight - Republicans find diminishing returns with increasing political cost in continuing the shutdown.

President Obama's current posture is - he is willing to drag this whole process up to that point and more important he has the confidence to prevail in the final inning. If GOP blinks and realizes the enormous political price which they have to pay, it may give up and President Obama will not have to use his political nuclear weapons.

Yes, an American President sure can do this 'whipping of the Congress' for the good of Americans; which is  definitely needed here. We will see if President Obama wants to be that 'life changing' chief executive or fears of Liberals as mentioned above turn out to be true.

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