President Obama's debt ceiling negotiations and his re-election plans...

[steve2470]

Please help me understand something. From my limited knowledge of economics, the only debt ceiling deal worth considering is a clean bill to raise the debt ceiling and nothing else. I'm not sure if a package of cuts and revenue increases would help unemployment, does anyone know ?

Here is my point: We all know that unemployment will be a major factor in his re-election prospects next year. Why would he even consider any debt deal that might INCREASE unemployment, as Krugman points out recently ?

[Autumn]

1. He is fine with being a one term President.

Want Palin?

I agree with him, I am fine with that too.

[CakeGrrl]

10. Yes, that's why he's cranking up OFA and the re-election machine.

Just for shits and giggles.

It's all a big Kabuki Theater show because the President's bored and just playing with all of us!

:eyes:

[Autumn]

13. Get real. I never said that he's just playing with us

I know he's cranking up OFA and the re-election machine. He said it and I agreed with it.:shrug:

[robinlynne]

2. This will make our economy tank even more.

[Cleita]

3. This is the way it should have been and has been

in the past mostly. Spending cuts and revenue increases should be done separately. Removing the debt ceiling altogether, as Moody's suggested would be even better. Why they want to return to policies that have been known to fail in the past and are very right wing is beyond me. We elected a majority of Democrats in 2008 to change this and to use Keynesian economics to bring us back from the mess Bush created and yet we are sinking further and further into Friedman, Chicago Boys, style economics, which don't work.

[mzmolly]

4. Because he can't put forward an aggressive jobs program

unless we tackle the debt.

Krugman suggested that if we cut X now, it can impact jobs. To my understanding any cuts are to future spending?

[starroute]

7. It's the other way round -- we can't tackle the debt until more people have jobs

Recession and unemployment are among the biggest factors causing the deficit to soar (along with the wars and the Bush tax cuts, of course). Simply putting more people back to work would make a big difference.

On the other hand, austerity that cripples the economy and puts more people out of work will further decrease federal revenues, making the deficit worse. Read Krugman -- he's been warning in a very serious way about a Japanese-style lost decade.

Trying to cut your way out of recession is like a store-owner trying to improve the bottom line by carrying fewer items. That's a good way of putting yourself out of business but not much else. A far better approach is to borrow money to improve sales -- and right now, interest rates are low and the government has no problem borrowing.

[texshelters]

8. Ditto and rec'd

Peace,
Tex Shelters

[Name removed]

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[hfojvt]

6. as an econ major, I can say with certainty that cuts will increase unemployment

Revenue increases really do not matter, except as they impact the size of the cuts. That is, if, for example, you were gonna make $1 trillion in cuts, it would be better for the economy to make $700 billion in cuts and get another $300 billion in revenue. It still would have a negative impact, but a slightly smaller one in the latter case.

As to why Obama would do it. I can think of several reasons, but it is mostly just speculation and observation.

1. The negative impact of cuts is smaller than the negative impact of a default
2. He gets to campaign as somebody who is serious about the deficit
3. He has advisers who don't care about the unemployed
4. He's a putz.

Okay, that last one just seems like an Occam's razor cop-out. I kinda quit making excuses for the guy after the surrender in December, which I think was another reason why Obama could not demand a clean bill. Because Republicans were posturing to say "we will not increase the debt ceiling until we deal with the deficit problem" and Obama had already punted on the most obvious way to deal with the debt problem, not by cutting $2.4 trillion in spending, but by eliminating $2 trillion in tax cuts for the rich.

Unfortunately, the latter was never on his table to begin with.

[texshelters]

9. I really can't think of any reason

to vote for Obama now.

Peace,
Tex Shelters

[ProSense]

11. Isn't it obvious:

The pundits say he's doing this to help his re-election chances, even though the pundits also say if he does this it will hurt his re-election chances.

The pundits are always right!

[AndyTiedye]

12. Because the Republicans are Holding Us All Hostage

The cuts that would follow a default would a lot bigger than anything that has been proposed so far.