Bill Black: GOP threatens to use debt ceiling as leverage, creates conditions for more austerity measures by Obama
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Baltimore. And welcome to this week’s edition of The Black Financial and Fraud Report with Bill Black, who now joins us from Kansas City. Bill’s an associate professor of economics and law at the University of Missouriâ€“Kansas City. He’s a white-collar criminologist, a former financial regulator, and author of the book The Best Way to Rob a Bank Is to Own One.
Thanks very much for joining us again, Bill.
BILL BLACK, ASSOC. PROF. ECONOMICS AND LAW, UMKC: Thank you.
JAY: So what’s happened this last week?
BLACK: So we have the gift that keeps on giving, Donald Trump. And Donald Trump went on his favorite place, Fox & Friends, and only about 5Â seconds apart said that the negotiations on the fiscal cliff were the most irresponsible thing he had ever seen, and that the Republicans should exercise what he called the nuclear weapon option of threatening to cause a default on the U.S. national debt, because apparently that wouldn’t be irresponsible, that would just be good negotiating and such.
JAY: So what does he want? In terms of the fiscal cliff, what’s he trying to get out of a nuclear bomb, which essentially would say the United States plans to default on its debt? So what does he want so bad?
BLACK: So in addition to the self-parody of thinking that nuclear weapons are, you know, responsible things to use on your own economy, what his problem with on the fiscal cliff is the usual one, that if you allowed it to stay in place for a considerable time, it would impose austerity and force the United States back into recession. And therefore what he wants the Republicans to do isâ€”he called it “going big”. And “going big” is a term of art in this discussion that means searching for at least a $4Â trillion austerity deal over ten years. So, again, this is the logic of the Donald: the problem is we’re about to have austerity, and that would cause a recession, and the solution is to extort, threaten to destroy the U.S. economy, in order to negotiate much greater austerity that would last for a much longer time, so that we can have not just one recession, but multiple gratuitous recessions. And that is what passes for reasoning on the extreme right of one of our two major political parties.
JAY: Now, the thing is is this isn’t just the Donald. There seems to be quite a few members of the House that are on the same page as the Donald, that would, you know, embarrass John Boehner when he brought his supposed compromise bill to the House and wouldn’t pass their own speaker’s bill. And, I mean, I don’t think Donald’s on his own here.
BLACK: Not at all. And, by the way, the response of the trio, that is, the Fox & Friends, was, hey, we see no problem here. You can imagine just a little thought experiment. Take any Democratic politician and have him come onto Fox News and say, what I would like to do is threaten to destroy the U.S. economy in order to extort the Republicans into giving me everything I want, and imagine what the Fox response to that statement would be.
But with the Donald it was just, well, of course. And you are correct: Boehner is saying expressly that he plans to use the debt ceiling, which is bizarre legacy of the gold standard, to extort concessions from President Obama.
Now, if Obama gives in to this, he is the world’s worst negotiator, because, of course, the thing about a nuclear threat is that you can’t use it, because if you did, (A) you would put the U.S. economy immediately into crisis, and indeed the global economy into crisis, and you would be blamed for it and destroyed as a political party, and you’d have to undo it within about two days. Plus there are ways, at least three ways, that you could defuse the nuclear weapon if you were President Obama. So you could either call the bluff or call the bluff and be prepared to, as I say, defuse the bomb they’re trying to use to extort.
Those three ways, basically, are the Fourteenth Amendment of the United States, which in a spectacular case of unilateral disarmament President Obama has been saying that he wouldn’t use, even though in many ways it’s the cleanest. The Fourteenth Amendment says, basically, we shall pay our debts. And, of course, if the Republicans ever use the debt ceiling, they wouldn’t eliminate any of our debts. We would still owe the debts. All they would do is cause us to default on our debts. And I’ve never understood in the U.S. context how a Republican could make the idea that it is moral for us to refuse to pay our debts as a nation when we have the complete ability to do so. Anyway, there’s the Fourteenth Amendment.
There’s a weirder one, but actually it would work, called coining of this platinum coin for trillions of dollars that would allow you to finance it.
And third, of course, is more fundamental, although it my strike a number of people as weird, and that is the United States does not have to borrow to create money. And in fact we typically don’t borrow to create money. We literally create it through keystrokes on a computer. And so does most everybody else in the world. And we’ve been doing this for many decades without producing inflation.
So Obama would have to be a really terrible negotiator to give in. And, of course, if he did give in to this kind of extortion, well, then, Boehner could use it constantly. He could extend the debt ceiling only by a few tens of billions of dollars, so that he could use the leverage every other month to extort more things. So one hopes that even the Obama administration will see through this and will not impose European-style austerity and push the United States back into recession, or even a great depression.
And, of course, all of these entities are still trying to cut the safety net. And the question is whether progressives, and indeed moderatesâ€”because overwhelmingly Americans oppose thisâ€”will rally together to prevent Boehner and Obama from beginning to unravel the safety net. So that’s what’sâ€”.
JAY: Now, one of the things that youâ€”one of the points you made in an earlier interview is this whole fiscal cliff thing was kind of created by Obama in the first place, and that this talk of the nuclear option, in some ways that helps him, because now the grand bargainâ€”as you’ve coined the term, grand betrayalâ€”looks more and more reasonable if he makes these kinds of deals to cut entitlement programs, ’cause, oh, we’re facing not just the fiscal cliff, we’re now facing the nuclear blast.
BLACK: Yes, it’s quite true. Obama actually took the lead in creating the fiscal cliff. I’m not saying the Republicans have no responsibility. They agreed to it. But he pushed it. The Republicansâ€”after the act, which was in AugustÂ 2011, creating the fiscal cliff, the Republicans tried to weaken it and modify it, and President Obama refused. And then, after the failure of the so-called Supercommittee in NovemberÂ 2011â€”by the way, a very good failure, ’cause if they had done what they wanted to do, it would have been a disaster that would have put us back into recession. But, anyway, after that failure, the Republicans again tried to undo the fiscal cliff, and Obama actually issued a veto warning saying he’d veto the bill if they tried to get rid of the fiscal cliff.
So you are quite right. President Obama wants the fiscal cliff. He’s still not calling for simply eliminating it, which is the clean option. And the reason Obama wants the so-called fiscal cliff is he wants something to coerce progressives to vote in favor of cutting the safety net and in favor of cutting roughly $1Â trillion in social spending over the next tenÂ years.
JAY: And when I listen to the liberal mediaâ€”I’m going quotation marks here for progressive or liberal media, and in this I’m talking some of the people that host MSNBC shows and some other placesâ€”they’re treating this as if it’s just a straightforward battle over tax increases. Obama wants to increase taxes on the rich, and the Republicans don’t. And there’s barely any talk about Obama’s willingness to cut entitlement programs.
BLACK: Yeah. That is one of the saddest things, because it’s the old carny game of, you know, watch my left hand, watch my left hand, while everything is happening in the right hand. Taxes are, of course, important, and of course there has been a massive increase in inequality under Bush and President Obama. But the key thing that everybody should be focusing on is (A) stopping us from being forced back into recession. And if Obama had gotten his way and if Boehner had gotten their way, we would have been forced back into recession in 2011. And they still won’t admit it. They still want to do the stupid deal.
And, of course, the second area is that they both want to cut the safety net. And not only should they not be cutting the safety net; if anything, they should be strengthening the safety net, given the terrible unemployment and given the fact that it would actually help the nation recover more quickly and actually reduce the budget deficit.
So their policy is self-defeating.
Take a look at what happened to Europe when the kind of policies that Obama and Boehner are trying to get were actually used and it forced the Eurozone back into recession and Spain, Greece, and much of Italy back into Great Depression levels of unemployment. And, of course, budget deficits remain very high in these countries. So it is an incredibly stupid policy. This is the economic version of medicine bleeding a patient, and then finding out, of course, that it doesn’t work, and therefore you bleed them more.
JAY: Thanks for joining us, Bill.
BLACK: Thank you.
JAY: And thank you for joining us on The Real News Network.
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