So we hit the debt limit...

[grumbler]

But here if neither side compromise, we either go to election or, in theory, we switch governments. In the US they are stuck with the Congress and the Executive they've elected, willy-nilly.

Yes, the US system doesn't have such an immediate remedy for political impasse - though the fact of the matter is that the voters in the US system get to have their say in, at most, some 20 months rather than 4-6 months anyway, so the time difference isn't as great as it might appear.

The big difference I see is the ability of the minority in the US system to influence policies and budgets.  Given that the minority is almost always sizable,  this is not entirely bad... bad as it may look right now.

[MadImmortalMan]

I figured as much. Boehner has hardly any options. I hope the flexibility of Obama in this piece is real and not just friendly press.

For Boehner, Lofty Budget Goals Checked by Reality
By CARL HULSE
Published: July 10, 2011

WASHINGTON — At a private meeting about deficit reduction at the White House last week, Speaker John A. Boehner told his fellow Congressional leaders and President Obama that he did not spend 20 years working his way up to the top job on Capitol Hill just for the cachet of the title — he wanted to accomplish something big.


So he and the president pursued an ambitious plan that would have reduced spending by as much as $4 trillion over 10 years. It was a transformative proposal, with the potential to improve the ugly deficit picture by shrinking the size of government, overhauling the tax code and instituting consensus changes to shore up Medicare and even Social Security. It was a once-in-a-decade opening.

But the speaker's lofty ambitions quickly crashed into the political reality of a divided, highly partisan Congress. His decision on Saturday night to abandon the comprehensive deficit-reduction package, citing the White House's insistence on tax increases, was a sharp reversal. It highlighted the challenge he faces in persuading his party to tolerate any compromise on government spending and exposed the fissures within his own leadership team over how to proceed.

Had Mr. Boehner forged ahead with a plan that fell flat with his rank and file, it could conceivably have led to a challenge of his leadership position, and it would certainly have undermined confidence among conservatives in his ability to lead the Republicans. Even opening the door to increased revenues as part of a deal with Mr. Obama and the Democrats struck many Republicans as a profound misreading of what conservatives, in Congress and at the grass-roots level, would tolerate.

Yet in his push for a sweeping deal, Mr. Boehner may also have underestimated the willingness of Mr. Obama to make concessions on traditional Democratic priorities and to challenge Congressional Democrats to give ground on programs like Medicare and Social Security, an approach that put pressure on Mr. Boehner to cede territory as well.

By pulling the plug on those negotiations, Mr. Boehner no doubt reduced the prospect of a messy fight within his party. But he also disappointed those — including some Republicans — who had hoped lawmakers and Mr. Obama could defy the odds and deliver a budget deal of historic consequence.

As a negotiator, Mr. Boehner operates in a laid-back style that belies canny instincts honed during a previous run in leadership after the Republican takeover in 1995 and his time as chairman of the Education and Labor Committee.

He has cut deals with Democrats in the past, including the late Senator Edward M. Kennedy, and he and Mr. Obama hammered out the 2011 spending deal in a showdown in April. Given the rapport he appears to be developing with the president, it seemed they might have a chance to reach a broad agreement despite the tremendous difficulties.

Mr. Boehner had good reason to pursue such a so-called grand bargain beyond the matter of his own legacy. A big deal could have resolved some of the most stubborn fiscal issues, freeing his ambitious majority to take on new matters while giving a lift to the economy and demonstrating the power of conservative Republican ideals.

From one political angle, it had special appeal. By persuading Democrats to endorse Medicare cuts, the speaker could have neutralized an issue that Democrats have been bludgeoning Republicans with since the House budget this spring called for converting that government insurance program into one subsidizing older Americans in private health plans.

But his motivations to back away were evidently stronger. The deal, which required roughly $1 trillion in new revenue, represented a serious political risk for Mr. Boehner, who found himself caught between the push for a legislative achievement and the Tea Party sentiments of his new majority and ambivalence of his top lieutenants.

By all accounts, the agreement taking shape called for closing corporate tax loopholes. And it was linked to a broad tax overhaul that could have left uncertain the fate of tax breaks for the nation's affluent, which are due to expire after 2012. That was going to cause serious trouble with Republicans who are wedded to those Bush-era tax cuts and who consider allowing them to expire equivalent to a tax hike.

Mr. Boehner and the White House were engaged in delicate talks on the timing of the tax changes and how to package the plan so that it could be seen as not raising taxes to gain new revenue. The speaker argued that the tax rewrite would produce new revenues through economic growth and an expansion of the tax base. And he was pushing a legislative trigger to make certain that the tax changes occurred.

But fellow Republicans were not on board. At the White House meeting where Mr. Boehner said he wanted to go big, Representative Eric Cantor of Virginia, the No. 2 House Republican, threw cold water on the idea, saying the negotiations should focus on a midrange deal like the $2 trillion one that Vice President Joseph R. Biden Jr. had been leading. Those earlier negotiations broke down over potential tax increases as well.

"As Eric has said for weeks, tax increases that the Democrats are insisting upon cannot pass the House and are the last thing Congress should be doing with so many people out of work," said Brad Dayspring, a spokesman for Mr. Cantor. "Eric has always believed the Biden group identified between $2 trillion and $2.5 trillion in spending cuts that could represent the framework for an agreement."

Other Republicans saw the Boehner idea as a political disaster in the making. Not only would it potentially hand Democrats a major victory by conclusively extending the Bush tax cuts for only the middle class, they said, it could cost House Republicans the majority in 2012 by throwing doubt on the tax breaks for wealthy Americans and angering voters who expected them to keep their pledge not to raise taxes.

Mr. Cantor and the speaker had been dancing around each other on the debt talks for a few weeks, and Mr. Cantor's call at the White House for a more modest plan seemed an attempt to put some distance between himself and the speaker should Mr. Boehner get too far ahead of House Republicans. Mr. Cantor does not appear eager to directly challenge Mr. Boehner's leadership, but he wants to be in the right spot if things veer off track for the speaker.

Democrats say that because of Mr. Boehner's retreat, they will now be able to portray Republicans as refusing major Democratic concessions on spending in order to protect tax breaks for big businesses and rich Americans. Whether that works depends on how the debt fight plays out.

But one lesson has emerged: going for the rewards offered by a big deal requires the willingness to take big risks — and such political nerve seems to be lacking in Washington at the moment.

http://www.nytimes.com/2011/07/11/us/politics/11boehner.html

[MadImmortalMan]

Ezra Klein's take:
http://www.washingtonpost.com/blogs/ezra-klein/post/wonkbook-three-reasons-the-debt-deal-collapsed/2011/07/11/gIQAfQDb8H_blog.html

Last week's sudden and inexplicable burst of debt-deal optimism is over. But don't ask why the $4 trillion deal collapsed. That's like asking why John Boehner didn't sprout wings and fly. Ask why anyone ever thought it'd take off in the first place.

Nothing changed between Thursday, when the grand bargain was apparently alive, and Sunday, when the papers solemnly recorded its time of death. But the real tell was that nothing had changed between the week before last, when a $2 trillion deal was too tough for the negotiators, and last week, when a $4 trillion deal was suddenly posited as possible. So asking "what went wrong?" isn't so much about what we've learned in the last few days as it is about what we already knew, but perhaps did not want to admit.

It does not matter if John Boehner is a reasonable man. The White House likes John Boehner. They feel -- or at least felt -- he's someone they can do business with. But they're learning that they're not actually doing business with Boehner. They're doing business with the Republican Party. And Boehner isn't the Republican Party. In fact, of the four major figures in the GOP leadership -- Mitch McConnell, Eric Cantor, and Jon Kyl -- Boehner is perhaps least representative of the modern Republican Party. The main reason people thought we might have a deal last week was because Boehner said he wanted one. The deal's collapse is, first and foremost, a reminder that what Boehner wants really doesn't matter.

For Republicans, this isn't about deficits. It's about spending and taxes. If this were really about deficits, a win-win would be possible. Easy, even. Republicans want spending cuts, and those cut the deficit. Democrats want revenues, and those cut the deficit. See where I'm going with this? But where Democrats really are arguing over deficits -- note their willingness to give more in spending cuts if Republicans will give more in revenues -- Republicans want less deficit reduction because it'll mean Democrats have less leverage with which to demand tax increases.

For a deal to be possible, something will need to change. We've reached an equilibrium where Republicans can't accept any revenues and Democrats can't accept a deal without any revenues. And I use the word "revenues" advisedly. There was a brief, shining moment when it seemed the deal would be changes to the tax code that did raise revenues but didn't increase rates and so Republicans wouldn't count as tax increases. But Cantor and others have made clear that they will oppose any net increase in revenues. So there's no deal until something breaks the equilibrium. Right now, the most likely candidates, in order, are public fury arising out of a government shutdown or a market panic arising out of near-default.

I'll end on a more speculative note: Republicans might come to regret rejecting Boehner's deal. Few noticed that his framework for new revenues was comprehensive tax reform -- which would preempt the expiration of the Bush tax cuts. In other words, he was finishing the tax debate during the debt-ceiling debate, when Republicans have most of the leverage, rather than letting it drift linger into 2012, when the Bush tax cuts are set to expire and Democrats will have most of the leverage. If Republicans could've agreed with Democrats this year, taxes would have gone up by $1 trillion. If they can't agree with Democrats next year, they'll go up by $4 trillion. And Republicans had a better hand this year than they will next year. I expect they'll come to wish they'd played it.

Interesting bit at the end there. He doesn't take into account the likelihood of the Democrats supporting the compromise though.

[Admiral Yi]

Bummer.

[crazy canuck]

Bummer.

Are you going to be paying increased taxes?

[CountDeMoney]

You know, this would be fucking hilarious if it weren't so serious.  Or at least if it weren't about to happen to us.  I can't believe we have people who are willing to tank the US economy if they don't get their way on a budget.  I'm not exactly sure even why they are actually doing it.

There's a black man in the White House, and he just gotta go.

[CountDeMoney]

Even when the Economist, longtime friends of traditional conservativism, calls you "economically illiterate and disgracefully cynical", then there's a problem.

America's debt

Shame on them
The Republicans are playing a cynical political game with hugely high economic stakes

Jul 7th 2011 | from the print edition

IN THREE weeks, if there is no political deal, the American government will go into default. Not, one must pray, on its sovereign debt. But the country will have to stop paying someone: perhaps pensioners, or government suppliers, or soldiers. That would be damaging enough at a time of economic fragility. And the longer such a default went on, the greater the risk of provoking a genuine bond crisis would become.

There is no good economic reason why this should be happening. America's net indebtedness is a perfectly affordable 65% of GDP, and throughout the past three years of recession and tepid recovery investors have been more than happy to go on lending to the federal government. The current problems, rather, are political. Under America's elaborate separation of powers, Congress must authorise any extension of the debt ceiling, which now stands at $14.3 trillion. Back in May the government bumped up against that limit, but various accounting dodges have been used to keep funds flowing. It is now reckoned that these wheezes will be exhausted by August 2nd.

The House of Representatives, under Republican control as a result of last November's mid-term elections, has balked at passing the necessary bill. That is perfectly reasonable: until recently the Republicans had been exercising their clear electoral mandate to hold the government of Barack Obama to account, insisting that they will not permit a higher debt ceiling until agreement is reached on wrenching cuts to public spending. Until they started to play hardball in this way, Mr Obama had been deplorably insouciant about the medium-term picture, repeatedly failing in his budgets and his state-of-the-union speeches to offer any path to a sustainable deficit. Under heavy Republican pressure, he has been forced to rethink.

Now, however, the Republicans are pushing things too far. Talks with the administration ground to a halt last month, despite an offer from the Democrats to cut at least $2 trillion and possibly much more out of the budget over the next ten years. Assuming that the recovery continues, that would be enough to get the deficit back to a prudent level. As The Economist went to press, Mr Obama seemed set to restart the talks.

The sticking-point is not on the spending side. It is because the vast majority of Republicans, driven on by the wilder-eyed members of their party and the cacophony of conservative media, are clinging to the position that not a single cent of deficit reduction must come from a higher tax take. This is economically illiterate and disgracefully cynical.

A gamble where you bet your country's good name

This newspaper has a strong dislike of big government; we have long argued that the main way to right America's finances is through spending cuts. But you cannot get there without any tax rises. In Britain, for instance, the coalition government aims to tame its deficit with a 3:1 ratio of cuts to hikes. America's tax take is at its lowest level for decades: even Ronald Reagan raised taxes when he needed to do so.

And the closer you look, the more unprincipled the Republicans look. Earlier this year House Republicans produced a report noting that an 85%-15% split between spending cuts and tax rises was the average for successful fiscal consolidations, according to historical evidence. The White House is offering an 83%-17% split (hardly a huge distance) and a promise that none of the revenue increase will come from higher marginal rates, only from eliminating loopholes. If the Republicans were real tax reformers, they would seize this offer.

Both parties have in recent months been guilty of fiscal recklessness. Right now, though, the blame falls clearly on the Republicans. Independent voters should take note.

[Neil]

It's the natural progression of Reagan/Bush II economics.  Eisenhower, Nixon, Ford and Bush I (at least Bush I's private sensibilities) are sad at what's happened to their party.

[Admiral Yi]

Are you going to be paying increased taxes?

Huh?

[Legbiter]

Eisenhower, Nixon, Ford and Bush I (at least Bush I's private sensibilities) are sad at what's happened to their party.

It is very sad. I can't believe I'm even technically considering the possibility of a US default.

[crazy canuck]

Are you going to be paying increased taxes?

Huh?

Sorry, I thought your comment "bummer" was directed at the observation that more tax revenue was about to come into the government.

[mongers]

Eisenhower, Nixon, Ford and Bush I (at least Bush I's private sensibilities) are sad at what's happened to their party.

It is very sad. I can't believe I'm even technically considering the possibility of a US default.

We are all Icelanders now ?

[CountDeMoney]

Eisenhower, Nixon, Ford and Bush I (at least Bush I's private sensibilities) are sad at what's happened to their party.

It is very sad. I can't believe I'm even technically considering the possibility of a US default.

Why not; the Republicans are banking on it.  And they're banking on you blaming the President on it, along with their mouthbreathing Dumbfuckistanian voters.

[Legbiter]

Why not; the Republicans are banking on it.  And they're banking on you blaming the President on it, along with their mouthbreathing Dumbfuckistanian voters.

I basically thought, democracy, aircraft carriers, you'll kick ass no matter what. 

[Admiral Yi]

Anyone feel like making a little book on whether or not the debt limit will be raised by August 2nd?