StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between

Boehner Debt Ceiling Statement Wasn’t Surprising; Might Have Been A Huge Miscalculation

16 May 2012
Posted by Stan Collender
No one should have been surprised that House Speaker John Boehner yesterday said that he was going to go to war this fall with the White House over the debt ceiling.
Boehner simply doesn’t have the freedom from the House Republican caucus to move away from that extreme/take-no-prisoners position at this point in the year. Had he in any way indicated five+ months before the election and 7 months before not raising the debt ceiling will become a critical problem that he was willing to avoid a fight (let alone use the word “compromise’), Boehner would have been immediately slapped down by other House and Senate Republicans and had one or more GOP members announce that they were going to oppose him for Speaker.
Boehner had no choice and his statement on the debt ceiling was totally predictable.
However valuable Boehner’s hard line was with the base, it’s hard to imagine that his position will help the GOP in any way with the independent voters they will need to be successful in November. His statement and hard line position will remind independents of what they felt last August when, in the wake of the cliffhanger ending, the approval rating for Congress fell to single digits.
Bottom line: This simply was a play by Boehner to keep his job and should not be assumed to be an accurate prediction of what’s to come on the budget in the lame duck session.

Parsing Boehner's statement

Boehner said he will demand that every dollar of new debt will require a corresponding dollar of reduction in government spending.

Since each dollar of annual budget deficit requires an additional dollar of debt be added, and each dollar of government spending reduction (assuming taxes are held constant) results in a dollar of deficit reduction, doesn't his request amount to a call for an immediately balanced budget? Is that not absurd on its face given the current budget situation?

I think that the "spending

I think that the "spending reduction" can be spread out over multiple future years. So the budget isn't balanced, only moved somewhat toward balance (though the progress toward balance is likely to be retarded by a negative effect of the tightening of fiscal policy on the economy and consequently on tax receipts, as has happened in parts of Europe).

RueTheDay, Speaker Boehner is


Speaker Boehner is not referring to balancing the budget immediately. He means "new debt" as in "each dollar of an increased debt limit." That is, if the President and Democrats in the Senate want to raise the debt limit so that the government doesn't default on its debt obligations, each dollar of the debt limit increase has to be offset by a dollar of spending reduction. And as Anonymous said in the previous reply, this spending reduction is usually spread out over the ten-year budget horizon.

Now whether something counts as a spending reduction depends on the baseline used. Under a "current law" baseline, a reduction in funding for Iraq and Afghanistan as troops withdraw would count as a "spending reduction."


Well it's nice to see he's

Well it's nice to see he's putting principal over position. Apparently Boehner being the speaker of the house is so very important that the country can fall into fiscal crisis as long as he gets to keep his job. I'm so very thankful that we have such principaled men and women in Congress. We all know the truly important things going forward are not the US losing it's place as the world's reserve currency, or fixing our structural deficits, or trying to close the gap on income inequality, the most important thing is that John Boehner gets to put "Speaker of the United States House of Representatives" on his letterhead, and gets to have a seal on his podium. I can't wait to tell my grandchildren that Grandpa is still working at 85 because the United States had to end Social Security and Medicare in 2035 and the continued weekness in the economy made your Grampy's retirement savings actually lose money after inflation over the last twenty years - but all is not lost kids. The late Speaker Boehner got to keep making an extra $49,500 a year for those extra couple of years, before the Tea Party voted him out anyway because he refused to bring the $5,000 a pill contraception tax to a floor vote.

Debt ceiling signaling

What a wonderful, wonderful, wonderful world....

Cutting Spending

How about this. Just recommend to the Speaker that since he thinks cutting government spending is a net positive for the economy, he should consider eliminating Wright Patterson Air Force Base to save money. See table 4. I'm sure he will be able to tell the good folks of Central Ohio the loss of the billion dollars from their economy is a good thing. After all, the base is only 30 miles away from his district, which should see enormous growth if that happens.

Debt debacle

We're treading a fine line with the budget deficit in this country and going to radical on any front may get us one step closer to a tipping point. Which is in nobody's interest. I hope the politicians on both sides of the fence will come to their senses before the whole thing spins out of control. I'm afraid we'll see this issue coming for for years to come and it's so frustrating the establishment will hold us at gunpoint over its resolution every time it pops up.


Most liberal and intelligent pundits I read, like Ezra Klein, always say that they really don't believe the Republicans want to trash the economy in order to defeat Obama. Do they really believe this or is it simply a proviso to make them look "reasonable" and not "GOP haters?" Because I have no hesitation in saying just that. I think many in the GOP, perhaps most, are perfectly willing to trash the economy intentionally in order to defeat Obama.

savaging economy to defeat Obama

Is there anyone who could think that they wouldn't savage the economy to defeat Obama? Not only would they, but they have already done everything they could. Goodness, Bush and the Repub Congress ran up the deficit like there was no tomorrow and now they are running on the deficit? Say what? And there are earnest people who buy this BS?

Because the Republicans are

Because the Republicans are bankrolled by people who want to earn more money, they don't want to destroy the economy where the money is coming from. That seems to be the only reason the Republicans are not doing more for preventing any economic recovery. All the talk about deficits is just political tactic: remember when Cheney said: "Reagen proved that deficits don't matter" - the day Romney is sworn in, deficits won't be mentioned anymore and the media will try to draw a picture of Monring in America again.

Interesting to see the

Interesting to see the divergence of political calculation between Boehner and Romney, for whom this brinksmanship is toxic.

Just about every Republican

Just about every Republican politician alleges that: "we do not have a taxing problem, we have a spending problem;" but this is a lie. Everyone knows that Ronald Reagan reduced income taxes (more than one half for the wealthy); what is less commonly understood is that he extensively offset this by raising payroll taxes(more than double for most self-employed). Today, most American families pay more in payroll taxes than they do in income taxes. Between 1946 and 1981, income taxes averaged 12%(+/-1%) of normalized GDP. Reagan reduced income taxes to near 9%. Clinton increased them back to 12%; and Bush/Obama reduced them again to 9 %(and below). However, on budget expenses(which excludes Medicare,Social Security, Iraq war and stimulus) have remained 12%(+/-1%) of normalized GDP throughout. The deficit in income taxes has been financed by borrowing, largely from the Social Security trust fund. When Clinton raised income taxes back to 12%, this eliminated the on budget deficit. The CBO projected that this, plus the Social Security and Medicare surpluses, was enough to pay off the entire US debt by the time that the Social Security/Medicare trust funds would have to be amortized for beneficiary payments, all without having to raise taxes to pay for the amortization of those trust funds. Like Reagan before him, Bush took those excess payroll tax receipts and gave them “back” as income tax reductions, heavily weighted to the wealthy–who didn’t create those surpluses in the first place. By doing this, Bush guaranteed that income taxes would have to be raised in order to amortize the trust funds. The failure to do so simply permits the 1% to steal the money contributed by workers for their retirement. Everything about not raising taxes or limiting expenses, is about stealing the 99%'s money. The national debt has been caused primarily by income taxes which were reduced far below their historic 12%(+/-1%), not by on budget expenses, which have remained at their historic 12%(+/-1%) throughout. These taxing games have transferred $ trillions from the 99%'s payroll taxes to subsidize income taxes.


Absolutely. Nothing more than a bait and switch by the wealthy to get out of their fair share of taxes.

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