Tag Archives: Ronald Reagan

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Congress: Debt Limit Blackmail


The United States officially hit its statutory debt limit yesterday, preventing the government from borrowing any more money, as Republicans continue to demagogue the issue but refuse to act. Since a large portion of federal spending is borrowed money, the Treasury Department has been forced to take extraordinary measures to allow the government to continue meeting its obligations, including tapping into government employee pension funds to free up cash. These measures and others should keep cash flow adequate until approximatly August 2, but if lawmakers have still failed to raise the debt limit by then, the effect could be “catastrophic,” as Treasury Secretary Timothy Geithner said yesterday in a letter to congressional leaders. In its 235-year history, the U.S. government has never defaulted, so the exact consequences are impossible to predict, but all experts agree that defaulting on our financial obligations would be disastrous for the global economy, shattering investors’ confidence in the American government and economy while increasing the cost of borrowing and possibly shutting down the government. Geithner has said defaulting on our obligations would almost certainly cause a double-dip recession, where a second dip could be worse than the Great Recession of 2008. Moreover, as Nobel Prize winning economist Paul Krugman noted, failing to raise the debt limit would “act as a terrible signal about the US political system,” telling the world “we’re a banana republic, with crazy extremists having so much blocking power that we can’t get our house in order.” Indeed, fueled by far-right tea party anti-debt dogma, Republican leaders have taken the debt ceiling — and thus the entire global economy — hostage, refusing to raise the ceiling unless they are allowed to enact their partisan agenda of radical spending cuts. Many conservative lawmakers have said they will not vote to raise the limit under any circumstance, while others have demanded extraordinary concessions.

HOSTAGE TAKING: Hate radio host Rush Limbaugh said yesterday that the debt limit is a “manufactured crisis,” and in a way, he’s right — but not in the way he intended. The debt ceiling is an entirely arbitrary cap Congress sets on the amount of money the federal government can borrow. There is no real reason for having a statutory debt ceiling, which didn’t exist until 1917. The amoung of debt the government takes on should be determined by budgetary needs, through the normal Congressional budgeting process, not some arbitrary redline that offers politicians a perennial issue on which to grandstand. But even with some empty grandstanding, Congress has routinely raised the debt ceiling for decades, increasing the limit 100 times since 1940. Ths limit was raised seven times under President Bush, with hardly any real opposition from Republicans. “[I]t has been a regular, even routine matter. In fact, for many years, it was just rolled right into the budget process, and they didn’t have a separate vote to raise the debt limit,” NPR noted. But this year, Republicans have seen a convenient opportunity to score political points and advance their partisan agenda, even it means risking the American and global economies. Republican leaders, including House Speaker John Boehner (R-OH) and Senate Minority Leader Mitch McConnell (R-KY) have made it clear they understand the consequences of not raising the debt limit and have said publicly that the limit must be raised.Yet these same leaders have threatened to vote against any increase in the debt limit if their demands aren’t met — and their demands are huge: “We should be talking about cuts of trillions, not just billions,” Boehner said. “This is a hostage situation…blackmail,” Krugan wrote. “In effect, they will have ripped up the Constitution and given control over America’s government to a party that only controls one house of Congress, but claims to be willing to bring down the economy unless it gets what it wants.” Indeed, for their demands to be effective, Republicans have to be willing to “shoot the hostage” and let the U.S. government hit the debt ceiling and default on its financial obligations.

DOWNPLAYING THE THREAT: Meanwhile, a growing number of Republican lawmakers, especially Tea Party freshmen, have tried to downplay the threat of hitting the debt limit or defaulting. “The case has not been made that this is an absolute necessity,” Rep. Bill Huizenga (R-MI) said last week. “The debt ceiling really doesn’t matter,” the conservative blog Red State wrote recently. But these claims ignore a danger that even former President Reagan, the great conservative icon, recognized. Arguing for raising the ceiling in 1983, Reagan said, “the risks, the costs, the disruptions, and the incalculable damage” of not doing so demanded the ceiling be increased. More reasonable conservatives today have come to the same conclusion. “Let me tell you what’s involved if we don’t lift the debt ceiling: financial collapse and calamity throughout the world,” Sen. Lindsey Graham (R-SC) told CNN. Even Boehner warned of “financial disaster, not only for our country but for the worldwide economy.” Rep. Frank Lucas (R-OK) said, “I won’t throw the country into the street” by not raising the debt limit. Conservative Washington Post columnist George Will said it could be “suicidal” for Republicans actually block an increase in the debt ceiling.

THE ‘PAY CHINA FIRST’ PLAN: Rep. Jim Jordan (R-OH), chairman of the important Republican Study Committee, suggested yesterday that hitting the debt limit could be a good thing. “Keeping the debt ceiling at its current level would force Congress to prioritize spending , but it would not force a default on our debt.” Jordon’s claim that U.S. would not default is based on the assumption that the government would be able to cover all of its expenses through tax revenue alone. Sen. Pat Toomey (R-PA) has made the same argument and even proposed a bill to implement this plan. But while they are technically correct, tax revenue contributes only around 60 percent of every dollar spent, so this plan would force the government to cut about 40 percent of its activities literally overnight to keep spending in line with revenues. Moreover, as CAP fellow Matt Yglesias points out, this approach doesn’t actually prevent a default from occurring. Deputy Treasury Secretary Neil Wolin said much the same thing, calling Toomey’s plan “unworkable.” Others have appropriately dubbed Toomey’s plan the “Pay China First” plan because it would prioritize payments to our debtors, including China, over paying for critical services Americans rely on. “This wouldn’t avert a potential global economic catastrophe, but it would make sure the United States wrote checks to foreign governments before anyone else,” the Washington Monthly’s Steve Benen wrote

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HEALTH CARE:An Activist Decision


Yesterday, a conservative district court judge appointed by President Ronald Reagan ruled that the individual mandate in the Affordable Care Act is unconstitutional, arguing further that, since he believes the mandate is “inextricably linked” to the rest of the measure, the entire law must be unconstitutional. “The act, like a defectively designed watch, needs to be redesigned and reconstructed by the watchmaker,” Judge Roger Vinson wrote. The ruling, however, contradicts 14 other court decisions, the opinion of over 100 law professors, not to mention recent polling showing that Americans want the law to be either protected or expanded. There is also a distinctly political aspect to the ruling. Vinson acknowledged borrowing heavily in his opinion from a brief written by the right-wing group Family Research Council, and he seemed to give a shout-out to the Tea Party in his ruling, which has long targeted health care reforms as “economic Marxism.”

THE RULING: Vinson ruled that, “[i]f Congress can penalize a passive individual for failing to engage in commerce, the enumeration of powers in the Constitution would have been in vain.” However, as the Center for American Progress’ Ian Millhiser writes, “there is a long line of Supreme Court decisions holding that Congress has broad power to enact laws that substantially affect prices, marketplaces, or other economic transactions. Because health care comprises approximately 17 percent of the national economy, it is impossible to argue that a bill regulating the national health care market does not fit within Congress’s power to regulate commerce.” The Supreme Court has long held that Congress can exercise its constitutional power to regulate interstate commerce to regulate insurance, which the Court has stated “touches the home, the family, and the occupation or the business of almost every person in the United States.” A group of 35 economists — including three Nobel Prize winners — argue that the minimum coverage provision is “necessary to achieving Congress’ goal of reforming the national health insurance market and making quality medical care available to millions of Americans.” After finding the law unconstitutional, Vinson did not issue an injunction to halt the law’s implementation, but wrote that “the federal government should adhere to his declaratory judgment as the functional equivalent of an injunction.” This is quite confusing. It would be wise for states to wait for a Supreme Court ruling, but also under the Affordable Care Act, 12.5 million Americans are eligible to receive benefits right now — for example, three million seniors have already gotten checks to help make prescription drugs more affordable, and 1.8 million young adults who previously did not have insurance are able to get health coverage through their parents’ plan. Should these people immediately surrender their benefits because of Vinson’s ruling?

RED MEAT FOR THE RIGHT: There is undoubtedly a political context to Vinson’s ruling. Almost immediately following passage of the Affordable Care Act, Republicans began agitating for a full repeal. It was a major, stated goal of Republican and Tea Party candidates in the midterm elections, and the House of Representatives passed a repeal as soon as the GOP took control of the chamber. In the Senate, every Republican Senator has signed onto a repeal bill authored by Tea Party favorite Sen. Jim DeMint (R-SC). In his ruling, Vinson seemed to offer several nods to this far-right political movement. He referenced the “opposition to a British mandate giving the East India Company a monopoly and imposing a nominal tax on all tea sold in America,” which spoke directly to Tea Party activists across the country. “It’s very exciting. He’s invoking the tea party movement,” noted Mark Meckler, co-founder and national coordinator of the Tea Party Patriots, one of the largest tea party organizing groups. Vinson also “borrowed heavily” from the ultra-conservative Family Research Council in his ruling, which has been labeled a hate group by the Southern Poverty Law Center because of its extensive history of “defaming gays and lesbians.” Conservative media outlets were quick to amplify Vinson’s ruling. On Fox News this morning, Fox & Friends anchor Steve Doocy triumphantly noted for his audience that “we’ve argued on this program” that the individual mandate is “against the law.” Bill O’Reilly led his program last night with the news, and confidently predicted the Supreme Court would agree with Vinson: “say goodbye to Obamacare,” O’Reilly crowed.

A BUMP IN THE ROAD: Though Vinson’s reasoning seems to be faulty, there is potential for further rulings that would reinforce his view. The Department of Justice will appeal Vinson’s ruling, but the case will likely head to the Eleventh Circuit in Atlanta, “considered one of the country’s most conservative appellate benches.” (Hudson’s ruling in Virginia “is already with another conservative court, the United States Court of Appeals for the Fourth Circuit in Richmond.”) This is likely to ultimately reach the Supreme Court. However, Vinson’s reasoning seems to go against the findings of even conservative Supreme Court justices like Antonin Scalia. And while Vinson and Hudson issued high-profile rulings overturning health care reform, two other district court judges have upheld the law, and a total of 14 courts have found challenges to the individual mandate to be either without standing, or baseless. Also, more than 100 law professors recently signed a letter explaining that “the current challenges to the constitutionality of this legislation seek to jettison nearly two centuries of settled constitutional law.” In the past, when Congress has passed historic legislation, there have often been challenges — and victories for the challengers — in lower courts. But these have almost always been overturned by the Supreme Court. In United States v. Darby, the Supreme Court upheld a federal minimum wage and overruled a district court decision striking down federal child labor laws. In Helvering v. Davis, the Supreme Court reversed a Court of Appeals decision declaring Social Security unconstitutional. In Katzenbach v. McClung, the Supreme Court upheld the federal ban on whites-only lunch counters — reversing a district court’s decision striking down this law. In Katzenbach v. Morgan, the Supreme Court reversed a district court decision striking down a portion of the Voting Rights Act. “Luckily, as Millhiser writes, Vinson’s decision is “heavy on rhetoric, light on actual legal reasoning and all but certain to be ignored by higher-court judges who understand their duty to follow the Constitution. … When Vinson is remembered 50 years from now — if anyone remembers him at all — he will be remembered as one of the long line of activist judges who stood athwart history and got run over by it.”