Five years ago today, the subprime crisis was peaking with a run on the money market funds—over $140 billion withdrawn compared to $7 billion the week before—leading to problems for the commercial paper market. Thus corporations could no longer get funding or had to pay higher interest rates. Results of the crash:
- The economy lost $22 trillion, $69,478.88 per person.
- Assets of the four biggest “too big to fail” banks in the U.S.—JPMorgan Chase, Bank of America, Citigroup, and Wachovia/Wells Fargo—went from $6.5 trillion in 2008 to $7.8 trillion this year.
- The 25 banks responsible for the bulk of risky subprime loans leading up to the crash are back in the mortgage business this year.
- Regulating financial products and services is “important” or “very important” to 90 percent of the U.S. voters; that’s 10 percent higher than the 80 percent of the people who know that Earth orbits the sun.
- Wall Street and other financial institutions have spent $487 million to roll back, water down, and weasel out of the Dodd-Frank Wall Street Reform and Consumer Protection Act through the use of 2,429 registered financial industry lobbyists.
- The industry gave $664 million to political candidates in 2011 and 2012.
- Eugene Scalia, son of U.S. Supreme Court Justice Antonin Scalia, has filed seven lawsuits to hold up implementation of Dodd-Frank rules on legal technicalities.
Tomorrow, the House plans to start shutting down the government to cause another fiscal crisis. In exactly two weeks, current funding for the government is set to expire. The House is so dysfunctional that it can’t even present a bill that all the GOP members can support. According to the Bipartisan Policy Center, the Treasury Department will be depleted between October 18 and November 5. With no Congressional action, the nation will not have money to meet financial obligations and be forced to default for the first time ever.
All Congress needs to do is to raise the statutory debt limit. That doesn’t mean spending more money because the money has already been spent. The GOP is fond of comparing government to business or family fiscal affairs. If they refuse to raise the debt limit, it will be as if a family or business voted to not pay any of their bills on items they have already purchased. Congress has already spent trillions on wars and decreased income with tax cuts for the wealthy; now they need to agree to pay for previous debts.
For months, GOP legislators have bragged about holding the country hostage until the Democrats are willing to defund the Affordable Care Act and take health benefits from millions of people in the U.S. More recently the GOP upped the ante by its desire to take away Social Security and Medicare.
As Ezra Klein recently explained:
“Trading a government shutdown for a debt-ceiling breach is like trading the flu for septic shock. And Boehner knows it. Republicans will effectively be going to the White House and saying, ‘Delay the health-care law or we will single-handedly cause an unprecedented and unnecessary global financial crisis that everyone will clearly and correctly blame on us, destroying our party for years to come.’ … This is not a safe way to govern the country.”
House Speaker John Boehner (R-OH) has an even nastier plan in store. He said he will avoid a government shutdown by asking for a “clean” short-term budget resolution, extending current spending levels so that a longer-term deal can be worked out. It’s the usual approach to avoiding decisions, but current spending levels are unnecessarily low because of the sequester. Boehner’s plan wants to not only lock in the painful cuts to domestic spending but also increase defense spending by $20 billion.
House Majority Eric Cantor (R-VA) described the deal this way:
“In signing a CR at sequester levels, the president would be endorsing a level of spending that wipes away all the increases he and congressional Democrats made while they were in charge and returns us to a pre-2008 level of discretionary spending.”
Leaders also devised a plan to convince conservative GOP House members that they can claim that they defunded Obamacare while not shutting down the government. Tea Party members call it “smoke and mirrors.” This is the way it works:
- The GOP uses a legislative tool to pass the Continuing Resolution (CR)—with current sequestration levels—out of the House to the Senate with an attached bill that would defund Obamacare.
- The Senate would then have to vote on the bill to defund Obamacare before they could vote on the CR.
- The bill defunding Obamacare could fail in the Senate even if the CR passes.
- The CR would then go directly to the president for his signature without defunding Obamacare.
Republicans has admitted that it they don’t stop Obamacare before millions of people find out its advantages on October 1, then their steadily-disappearing support will vanish. The anti-Obamacare crowd is already in trouble. A recent poll showed that 57 percent of people in the U.S. oppose defunding Obamacare. Only six percent of people think that Congress should delay and defund the law. A total of 64 percent of people think that Congress should make changes to improve the law, let the law take effect, or even expand the law. Only 30 percent support entirely repealing the law.
The House GOP caucus created a budget blueprint cutting $70 billion in nondefense discretionary accounts, a 15-percent cut from enacted 2013 levels. These cuts are so huge that the caucus was unable to figure out what specific program cuts they could support. For example, cuts in funding for transportation and housing programs were so deep that the leadership couldn’t find enough GOP support for the budget to pass. The bill had to be pulled from the floor because of lack of support. Even worse, the leadership had failed to write a bill showing funding for health and education programs at the levels of the proposed cuts. It’s obvious that their failure that the GOP cannot pass funding levels consistent with their own House budget resolution. Thus they propose just returning to the sequester levels.
The GOP ignores that Obamacare will lower the deficit, $109 over ten years according to a Congressional Budget Office report from July 2012. Savings will be $24 billion in FY 2014. Undoing certain coverage provisions but maintaining the revenues and cuts in the law—a tactic Republicans have used in the past, most prominently in Rep. Paul Ryan’s (R-WI) budget—would decrease the deficit anywhere between $35 billion and almost $50 billion. Doing so, however, would maintain billions of dollars in cuts to the Medicare program and taxes on various sectors of the health care system, which Republicans say they oppose. It would also undermine the GOP’s criticism of Obama for not delaying the law for all Americans.
The House has only four days in which to make the decision. Members return tomorrow but then recess this Friday for the rest of September. Once the House passes the bill, it has to go to the Senate which takes more time. Minority Whip Steny Hoyer (D-MD) pointed out that some GOP members oppose these cuts. Earlier this year House Appropriations Committee Chairman Hal Rogers (R-KY) conceded that GOP leaders cannot find support for cuts among Republicans.
The last government shutdown was also GOP-led. For five days in November 1995 and 21 days from December 15, 1995 to January 6, 1996, the GOP tried to force the opposing party into voting for spending cuts. As a result, 800,000 federal workers were idled, and the ensuing distress with the GOP helped President Clinton’s re-election. He went from deep political trouble when the GOP took control of Congress at the beginning of 1995 to positive numbers in the polls after his willingness to compromise in the face of GOP confrontation. Under Gingrich’s leadership, the GOP kept the House and gained in the Senate but lost the presidency.
Republicans don’t believe in polls, as demonstrated by their ignoring the ones showing that President Obama would win re-election, but polls have bad news for them. A few months ago, only 40 percent of people would blame the GOP for a government shutdown; now the total is over half at 51 percent. Only one-third think that the president would be responsible. If the debt ceiling is not raised, 54 percent will blame the GOP, and only 25 percent would blame the president.
At least 43 conservative House members think that President Obama will “blink” in their childish game. Republicans from swing states, however, worry that a government shutdown on Oct. 1 would severely damage the party and cause a rally for the president. Others are worried about the reaction from Wall Street. The decision comes down to how dumb House leaders can be.