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  • An Explanation for Obama’s actions

    Posted by Michael Kennedy on July 23rd, 2011 (All posts by )

    The debt ceiling debate has dragged on creating frustration and some anxiety about the economic consequences of default. President Obama has even threatened to withhold Social Security checks, claiming there would be no money for payment. Through most of this he has seemed to me to be unserious about the matter and using it chiefly to try to improve his chances for re-election. Fred Barnes has now come up with what I consider a good explanation for his behavior, including the last moment maneuvers yesterday.

    First, the trade treaties:

    The path to ratification by Congress was greased after President Obama renegotiated trade treaties with South Korea, Colombia, and Panama. Obama would supply Democratic votes. Republicans were already on board, President Bush having put together the treaties in the first place. It had the look of a done deal.

    It wasn’t. In May, the White House suddenly insisted the treaties be accompanied by roughly $1 billion in Trade Adjustment Assistance, or TAA as it’s known in Washington. Organized labor was demanding TAA funds be set aside for workers whose jobs might be lost as a result of the treaties. Obama took up the cause.

    Then there was the oil pipeline from Canada:

    The Keystone XL pipeline from the oil sands in Canada to refineries on the Gulf Coast is another win-win issue for Obama, if only he’d embrace it. Canada is America’s leading foreign supplier of oil. The more Canada exports to the United States, the less we’re forced to rely on unfriendly folks in the Middle East and on Latin American countries (Mexico, Venezuela) whose oil production is declining. With the new pipeline, Canada would increase its exports by as much as 700,000 barrels a day. (The United States consumes 10-11 million barrels daily.)

    A permit to build the pipeline was requested nearly three years ago by TransCanada. Because it would cross an international border, approval must be granted by the State Department. This was expected to be a snap, particularly after gasoline prices reached $4 a gallon. White House aides thought so, and Secretary of State Hillary Clinton indicated she was ready to approve it.

    Then the environmental lobby, led by the Natural Resources Defense Council, began a campaign against approval, and the Environmental Protection Agency joined in. It criticized the State Department’s first environmental impact statement, which found the pipeline would have little effect on the environment. Clinton buckled, and a second impact statement was ordered. Last month, EPA said the new study was “inadequate.”

    Both of these initiatives promised thousands of new jobs and would seem to be helpful to Obama in his quest for a second term. In both cases, a left wing member of his base intervened and his support collapsed.

    Now, the debt ceiling:

    The Speaker and the President had nearly agreed on a plan that included $800 billion in “revenue enhancements” but did not raise rates. What happened ?

    House Speaker John Boehner’s (R., Ohio) office is pushing back against White House claims that the new revenue in the “framework” being discussed in the now defunct negotiations would have been generated by letting current tax rates expire. “That is simply false,” writes Boehner spokesman Michael Steel.

    In reality, Steel writes, the White House offered a “ceiling” of $800 billion in new revenue over 10 years that would be achieved through comprehensive tax reform (e.g., eliminating loopholes, credits and deductions) in a way that would stimulate economic growth. This would not constitute a tax increase.

    Following the release of the Gang of Six proposal, however, the White House then insisted on an additional $400 billion in actual tax increases, for a total of $1.2 trillion in revenue that would become the new “floor” for revenues. Additionally, the administration backed away from several aspects of the tax reform package they had already agreed to, including a protection against tax hikes on small businesses and a guarantee that they would only be three tiers of tax rates, the highest of which would be below 35 percent.

    In regard to Social Security, the two sides had agreed on a change in the way the government calculates inflation (the so-called “chain CPI”) that would extend the program’s solvency. However, the White House reneged on a previously agreed-upon solvency target and offered a weaker target that would yield 25 percent less in savings.

    What had happened was that the “Gang of Six” report was released and the revenue (tax) increases there looked better to Obama so he reneged on the pending deal with Boehner. There was also considerable discussion that Democrats were furious with him because he had not insisted on tax increases. Revenue from loophole closing was not enough.

    No. I think what happened is Congressional Democrats got a whiff of a possible deal where you get entitlement cuts and tax reform, say, next year — which might increase revenue or might not — and they panicked because a) they have a religious belief in raising the taxes. If you don’t have that, you can’t have a deal, so it created a kind of a theological panic.

    Obama, it seems, cannot stand up to the rest of his party. He will negotiate but once some interest group objects, he is gone. No deal.

    It’s a good thing the Soviet Union is gone.

     

    14 Responses to “An Explanation for Obama’s actions”

    1. chuck Says:

      I think Obama just does what looks to benefit himsel, deals and understandings mean nothing to the man. Remember what happened to his pledge to use public financing for his election campaign? It went away the moment it looked like he could clean up on contributions. I wouldn’t trust a thing the man said, he has no scruples.

    2. Robert Schwartz Says:

      Yes, OK, he is a weasel, and an empty suit. This is not news. Those of us who never swallowed the hype, expected no less. It is the rubes who are experiencing the aftermath of coyote love.

    3. sol Says:

      The Social Security and Medicare contributions of Americans and their employers are safely stored in The Lock Box which is protected by the might of the US armed forces. Woe to the man who would break open The Lock Box and steal the meager savings of all Americans. Social Security checks will be always be paid on time and without interruption. Buraq Hussein promised as did Al Gore and every Democrat. And they would never make false promises.

    4. sol Says:

      The Conssumer Price Index is unchanged since Buraq Hussein took office. During that time the price of gasoline has doubled or even trippled. The price of groceries are up an easy 100%. Car prices are higher. Everything is more expensive but the CPI is locked at 0% increase. The CPI has beeen flatlined.

      Cost of living increases are built into social security, government paychecks, some treassury bonds, and a host of other things. A good way for Buraq and the Dems to save money is to pass a law making “technical adjustments” to the CPI so that it becomes a permanent flatline that never goes up. This is the wrong way to Whip Inflation Now.

    5. Shannon Love Says:

      As Thomas Sowell pointed out, Leftist intuitive believe that complete solutions and even a state of pragmatic “perfection” is possible. They have a very, very weak sense of the inevitability of tradeoffs in any action and the absolute necessity of balancing those tradeoffs. This makes them very difficult negotiating partners because they don’t acknowledge that anything the other side wants is even valid much less necessary. For a Leftists, negotiation is all about a power play in which the perfected supermen they perceive themselves to be are trying to wrest as much as possible from their evil opponents.

      It doesn’t help in economic matters that they think wealth “just happens” like biblical manna falling from the sky. Obama probably does honestly believe that nothing the government does: taxes, regulation, trade treaties, threats etc has any significant impact on the material wealth of a nation. He probably is honestly confused when people with real-world experience try to explain to him that his pursuit of “social justice” could possibly have any negative economic impacts.

      He also views himself and people like him as so vital to the nation and the world that he has no psychological conception that what might be bad for him might be good for the country and vice versa. He has no concept of “taking one for the team.” He is the Sun King saying, “America? It is I!” In his mind, the loss of political power by people like himself is the worst possible outcome for any negotiation.

      All this combines to make negotiations with him a surreal experience. Everything non-Lefitsts want is unnecessary if not immoral. Nothing that Obama wants can possibly do any harm and any concession much be viewed as a weakness to be exploited in order to advance the power of those who are good and true.

      Obama comes from a very odd, very insular and very naive American subculture as do most of those around him. Thinking of him as a being from the general subculture of economic-creatives in America is a big mistake. He his an alien to the culture of creation.

      We should negotiate with him like he was from a foreign culture: carefully with no assumptions.

    6. Michael Kennedy Says:

      The maddening part of trying to deal with these people is that they do not accept the validity of the alternative viewpoint. They are also very fond of magical thinking. I keep going back to that essay in the Ottawa newspaper, which has long since disappeared from their web site. It compares Obama and Gorbachev, a more valid comparison than that with Carter, I believe.

    7. Jonathan Says:

      Maybe Obama can’t stand up to the Left or maybe he negotiates like Arafat or both. Arafat prospered in negotiations by doubling down until he got what he wanted. This tactic worked for a long time until it didn’t. The Israelis offered him a fantastically good deal in 2000. Rather than leap to lock it in he held out for more and the Israelis walked away. Then Arafat started a war and eventually got bailed out by the USA and EU. But for the people Arafat nominally represented his intransigence was costly. One lesson for voters: beware of leaders whose personal interests diverge from your personal interests. Obama’s personal interest appears to lie mainly in being reelected. Most voters’ interest is in having the country thrive. These are probably mutually exclusive outcomes.

      (Also, Obama’s interest in dealing with China and other US creditors is to finesse more borrowing by the USA to finance the spending schemes he wants. Is that in the interest of most Americans? People should ask what the Obama administration gave to China et al, or what behavior by the Chinese we promised to overlook, in exchange for promises to buy more of our debt.)

    8. arcs Says:

      “People should ask what the Obama administration gave to China et al, or what behavior by the Chinese we promised to overlook, in exchange for promises to buy more of our debt.”

      Wouldn’t it be a wonderful world if we had a Constitution empowering a Congress for such oversight?

    9. Michael Kennedy Says:

      China has sold a lot of the US debt it once held. The past six months 70% of the Treasuries sold were bought by the Treasury with new money printed. AS of May, China held about 25% of US debt.

    10. Accountants Says:

      From this side of the pond this looks terribly similar to the situation we have unfolding in Europe.

      There is too much political posturing and horse trading while Rome continues to burn. There is an underlying weakness in the Western economy that has been laid bare for all to see.

      The sad thing seems to be that none of us have leaders able or willing to begin to address it. Perhaps things really will have to get worse before they get better.

    11. ElamBend Says:

      @Michael Kennedy:
      China can’t NOT buy US treasuries, or in the alternative, assets priced in dollars. The export model economy they have cudgeled together, primarily by artificially keeping their currency low means they have a gusher of dollars coming into their country and they need a way to repatriate it. They have even resorted to purchasing treasuries by stealth:
      http://globaleconomicanalysis.blogspot.com/2011/03/china-holdings-of-us-treasuries-revised.html

      http://globaleconomicanalysis.blogspot.com/2011/03/china-holdings-of-us-treasuries-revised.html

      Of course this inflow of dollars has lead to high inflation in China and now the government has painted themselves into a corner. The outcome will not be good.

      As for Obama, negotiating with him must be maddening. It seems to be clearer by the week that there is no such thing as a final position with this administration. The passage of the health care bill is illustrative. Many promises were made to obtain votes, only to effectively discarded as soon as the bill was passed. The administration presents no plan of its one, thus provides no base to negotiate from, and they simply change terms whenever it fits them. It’s as if (and I think it is) that they went into these negotiations with no clear idea of what exactly they wanted to achieve in terms of a final ‘product’ and have been lurching around, almost day-by-day, changing what they’re asking for.

      I get the sense that the Speaker of the House is getting tired of the “you can’t out-crazy me” approach and is considering just presenting the President with a bill and effectively daring him to veto it. If that happens, I have no clue what the President would do. I bet he doesn’t either.

    12. cjm Says:

      and that’s called “checkmate”. if obama vetoes a bi-partisan bill, he’s toast. if he signs it, it’s the same as tipping your king piece over. there is no outcome at this point that allows him even the veneer of success…

    13. tomw Says:

      I think too much credence is being given to the intellectual prowess of the current executive. There is, to my knowledge, no public record to substantiate any claims to superior intellect.
      On the other hand, there IS substantial evidence to the contrary. The “Ooooh I Want It” reaction to a new toy, while instantly dropping the current one, is the behavior of a young child. The continued moving of the goal posts is the negotiating tactic of an immature mind.
      Please, can someone direct me to anything that contradicts the conclusion that the current president is not just entertained by the most recent sparkling bauble and has NO idea of where he wants to go and what he wants to achieve to ‘take care of the working man’ and ‘not do anything on the backs of the poor’.
      Rudely, bunchacrap demagoguery based on class warfare. What’s new?

      tom

    14. elambend Says:

      the press secretary just today refused to elaborate on the administrations ‘plan’ and told someone that asking for it was a ‘Republican talking point.’

      There is no plan; and it totally explains the lurching around. I think the president is really banking on the idea that the Republicans will be blamed for any default-like situation. He’s playing chicken with the economy and we’re all in the car with him.