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Biden Reportedly Told House Dems That Obama Was Prepared To Invoke Fourteenth Amendment

The Huffington Post’s Jennifer Bendery reports that Vice President Biden told House Democrats that President Obama would have used the Fourteenth Amendment to prevent a catastrophic default if Congress failed to reach a debt ceiling deal:

This report is hearsay upon hearsay, so there is no way to be sure what Biden actually told the caucus. And the report is also surprising given the number of times that Obama claimed he did not have the authority to invoke the Constitution in order to lift the debt ceiling.

The GOP was able to force a one-sided deal for a very simple reason — they took the entire world’s economy hostage and left only a shred of doubt that they were foolish enough to shoot the hostage. Their game was to leave President Obama with no choice but to agree to their terms because he had no tools available to free their hostage.

If the reports about Biden’s statement are true, however, we now know that Obama believed that he did have a tool which, if nothing else, he could have threatened to invoke to scare the GOP into believing that if they pushed too hard they’d be left with nothing. Instead of doing so, Obama consistently stated that he believed the Constitution could not save America from the GOP’s hostage crisis.

There are all kinds of good reasons why invoking the Fourteenth Amendment should only have been done as a matter of last resort. Among other things, a cloud of legal uncertainty would have hung over any bonds issued under the constitutional option, forcing America to pay inflated interest rates in order to sell them. Nevertheless, President Obama was wrong to rhetorically take this option off the table at a time when the GOP’s entire negotiating strategy depended upon backing the nation into a corner.

House To Recess After Debt Vote, Even Though FAA Shutdown Is Forcing Inspectors To Work Without Pay

With all eyes in Washington focused on the debt ceiling debate, little has been made of another costly impasse. Republicans have refused to re-authorize the Federal Aviation Administration without including an anti-union measure in the deal, leaving the FAA in the midst of a costly 10-day shutdown that has forced it to furlough more than 4,000 workers nationwide.

Now, with Congressional leaders seemingly close to ending their fight over the debt ceiling, House Majority Leader Eric Cantor (R-VA) announced today that the House will begin its August recess after it votes on the debt deal later today. That means the FAA shutdown, which began July 22, will likely last at least another month.

Democrats on the House Transportation Committee are outraged, as Reps. Nick Rahall (D-WV) and Jerry Costello (D-IL) called the recess “irresponsible” and said they planned to write a letter to Cantor calling on him to keep the House in session until the FAA was re-authorized.

Meanwhile, the FAA’s airport inspectors keep doing their jobs, even without pay:

The administrator for the Federal Aviation Administration says airport safety inspectors nationwide are working without pay and shouldering travel expenses themselves, as the agency’s budget crisis enters a second week. [...]

An inspector may travel to five airports in a two-week period, racking up thousands of dollars in hotel and airline tickets. Babbitt says they’re being asked to put those expenses on personal credit cards.

The government is losing more than $200 million a week in revenue generated through ticket taxes during the shutdown, and $2.5 billion in airport infrastructure improvement projects are on hold. The airlines, meanwhile, have used those tax breaks to line their own pockets rather than pass the savings on to customers.The Senate is reportedly staying in session to work on a re-authorization plan.

Yglesias

What Gets Cut If The Debt Commission Doesn’t Agree?

A majority of the deficit reduction in the plan being proposed to resolve the debt ceiling crisis is supposed to come from the recommendations of a special commission. And to create an incentive for the commission to write a proposal that passes congress, there’s a “trigger” mechanism leading to automatic spending cuts if the commission proposal isn’t adopted. Half of those cuts come from defense, and half come from the non-defense side. But the sequestration mechanism “would exempt Social Security, Medicaid, unemployment insurance, programs for low-income families, and civilian and military retirement. Likewise, any cuts to Medicare would be capped and limited to the provider side.”

So what’s left? Here are Matt Cameron’s calculations:

Basically the “education, employment, and training” category of spending is going to get the largest share of the cuts. The State Department will also be really hit.

Education

Debt Deal Would End Subsidized Loans To Grad Students, Produce Savings Equal To Only Three Months In Afghanistan

Congress is currently preparing to vote on a debt ceiling deal struck between President Obama and congressional Republicans, with many observers expecting the vote to be close.

One aspect of the debt ceiling deal that has been under-reported is the way it would change the federal student aid program. While it admirably boosts Pell Grant appropriations in order to maintain the maximum grant, keeping the program strong for American students, it severely cuts another important federal aid program.

Under the text of the bill, the federal subsidized graduate student loan program would be ended, with an estimated savings of $26.3 billion from 2012 from 2021:

It is important to note that under student lending reform passed in 2009, the poorest students would still receive assistance for their loans thanks to newly-enacted Income Based Repayment (IBR), and this shift would not make graduate education any more expensive for those students.

While it appears that Congress may soon pass a bill that could leave many graduate students paying far more for their education, it’s instructive to compare the cost of ending this program with another expenditure: the war in Afghanistan. The U.S. is spending roughly $300 million a day in Afghanistan, meaning that it spends roughly $27 billion on that war over three months. Americans are left to wonder which cost-saving measure would be more worthwhile.

The Invisible Unemployed: Major Media Ignore Jobless Americans And Obsess Over U.S. Debt

As ThinkProgress’s Lee Fang has reported, a handful of right-wing front groups and billionaires have engineered a political consensus that trumpets reducing U.S. debt rather than tackling unemployment. But unfortunately, these front groups have had some assistance from the mainstream media outlets who seem obsessed with covering deficit reduction and debt debates in Washington, while ignoring the other problems plaguing the economy as it recovers from the Great Recession.

For instance, a ThinkProgress media analysis of the coverage of three major cable news networks — CNN, MSNBC, and Fox — over the last week finds that these outlets gave a much larger portion of their coverage to U.S. debt rather than the unemployed. ThinkProgress scanned media coverage at these outlets for the words “unemployed,” “unemployment,” and “debt.” The first two phrases put together still got 15 times less coverage than the debt. ThinkProgress has assembled this data in the following chart:

Of course, it makes sense that the media dedicated time to the debt ceiling debate last week, as the U.S. was inching closer and closer to an unprecedented default on its obligations. However, by failing to cover the other problems in the economy — continued high unemployment, mounting foreclosures, and record corporate profits that are not translating into job creation — the media does a disservice to those who are struggling with a slew of economic problems that have nothing to do with the federal budget or congressional negotiations.

And while the mainstream press has obsessed over U.S. debt, the American people appear to have different priorities. A Gallup poll taken last month finds that only 16 percent of Americans see the federal budget deficit as the “most important problem facing the country.” Meanwhile, 27 percent of American see “unemployment/jobs” as that problem, while 31 percent name the “economy in general” as that concern.

NEWS FLASH

Romney Finally Weighs In On Debt Debate, Says He Can’t Support It | Days after every other major presidential candidate had spoken out on raising the debt ceiling, GOP presidential hopeful Mitt Romney said today that he opposes the deal struck last night between the White House and congressional Republicans. “While I appreciate the extraordinarily difficult situation President Obama’s lack of leadership has placed Republican Members of Congress in, I personally cannot support this deal,” he said in a statement. Romney had completely dodged the issue until now, leading the conservative Daily Caller to mock Romney for “going AWOL on [the] debt debate,” putting a picture of the former governor on a milk carton asking, “Have you seen me?”

NEWS FLASH

CBO: New Debt Deal Would Cut Deficits By $2.1 Trillion | According to an analysis by the non-partisan Congressional Budget Office, the debt deal brokered by the White House and Congressional leaders will cut deficits by $2.1 trillion over the next 10 years. $917 billion in deficit reduction would come from caps on discretionary spending, with another $1.2 trillion coming from either a package agreed to by the super committee that the legislation creates or from the “triggers” (automatic spending reductions) that go into effect if the committee can not come to an agreement.

Study: Deunionization A Leading Factor Behind Increasing Income Inequality

Deunionization is worsening the income inequality gap, accounting for nearly a third and a fifth of wage inequality among men and women, respectively. According to a study by Bruce Western of Harvard University, data proves “the role of unions as an equalizing force in the labor market“:

“From 1973 to 2007, wage inequality in the private sector increased by more than 40 percent among men, and by about 50 percent among women. [...] deunionization—the decline in the percentage of the labor force that is unionized—and educational stratification each explain about 33 percent of the rise in within-group wage inequality among men. Among women, deunionization explains about 20 percent of the increase in wage inequality, whereas education explains more than 40 percent.

Part of the reason for this gender discrepancy is that men have experienced a much larger decline in private sector union membership—from 34 percent in 1973 to 8 percent in 2007—than women (who went from 16 percent to 6 percent during the same period).”

Even nonunion workers benefit from stronger unions as employers raise wages and increase employee benefits. The study also attributes the changing normative perception of pay equity to the decline of unions, arguing that “unions helped institutionalize norms of equity.”

Tellingly, the decreasing rate of unionization clearly parallels the squeeze on middle-class incomes. See the trend in this chart:

Since the union movement began to stumble in the 1970s, the link between worker productivity and wages has been severed, leading employees to work harder for less and less money. In between 1980 and 2008, “nationwide worker productivity grew by 75.0 percent, while workers’ inflation-adjusted average wages increased by only 22.6 percent.” Today unionized workers make about $2.50 more per hour than their nonunionized counterparts.

But whereas unions may contribute to increased wages and benefits, a harsh legal environment and negative public perception are keeping unionization rates low.

Sarah Bufkin

Pimco CEO El-Erian: Debt Ceiling Deal Will Lead To More Unemployment, Less Growth, More Inequality

Pimco CEO Mohamed El-Erian

The White House and congressional leaders last night struck a deal to raise the federal debt ceiling, agreeing to cut $1 trillion in spending over the next 10 years, create a special committee to find another $1.5 trillion in cuts, and instituting “triggers” that will lead to automatic cuts if the committee can’t come to an agreement. “Now, this process has been messy; it’s taken far too long. I’ve been concerned about the impact that it has had on business confidence and consumer confidence and the economy as a whole over the last month,” said President Obama during a brief address last night. “Nevertheless, ultimately, the leaders of both parties have found their way toward compromise.”

But left out of the equation thus far is what impact those sorts of cuts will have on an economy struggling to recover from the Great Recession. Mohamed El-Erian, CEO of the bond investment firm Pimco, said yesterday that the deal will weaken the already fragile economy:

The potential budget agreement “does nothing to restore household and corporate confidence. So unemployment will be higher than it would have been otherwise, growth will be lower than it would be otherwise, and inequality will be worse than it would be otherwise.” [...] “We have a very weak economy, so withdrawing more spending at this stage will make it even weaker,” El-Erian said.

El-Erian added in an interview with Bloomberg, “When you look at the debt burden, there is a numerator and a denominator. We may end up creating so much damage to the denominator, which is growth of GDP, that what we do in the numerator, reducing the debt, may end up being insufficient.” This conclusion was also made by Nobel Prize-winning economist Paul Krugman, who noted today that the deal “will damage an already depressed economy“:

Slashing spending while the economy is depressed won’t even help the budget situation much, and might well make it worse. On one side, interest rates on federal borrowing are currently very low, so spending cuts now will do little to reduce future interest costs. On the other side, making the economy weaker now will also hurt its long-run prospects, which will in turn reduce future revenue. So those demanding spending cuts now are like medieval doctors who treated the sick by bleeding them, and thereby made them even sicker.

The House and the Senate could both vote on the debt ceiling deal today. While its possible that the special committee could look at revenue increases, House Speaker John Boehner (R-OH) has already vowed to appoint Republicans to the commission who will vote against any sort of new revenue.

Update

Jared Bernstein, former chief economist to Vice President Biden, wrote today that “these cuts will hurt our ability to pursue what I view as most positive aspects of the President’s economic agenda — investment in infrastructure, clean energy, research, education. They will pinch programs that are already budget constrained…programs that help low income people with child care, housing, and community services.”

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Econ 101: August 1, 2011

Welcome to ThinkProgress Economy’s morning link roundup. This is what we’re reading. Have you seen any interesting news? Let us know in the comments section. You can also follow ThinkProgress Economy on Twitter.

  • The White House last night announced the contours of a deal to raise the debt ceiling that cuts $1 trillion in spending over the next ten years and sets up a special committee to reduce deficits by a additional $1.5 trillion. It includes no new revenue (though the committee could theoretically raise revenue later). [White House fact sheet]
  • Speaker of the House John Boehner (R-OH) last night assured conservatives that “”there’s nothing in this [debt ceiling deal] framework that violates our principles,” adding “it’s all spending cuts.” [The Hill]
  • The White House has confirmed that “there would not be an extension of unemployment benefits as part of the final package” to raise the debt ceiling. [Huffington Post]
  • The U.S. homeownership rate dropped “to the lowest level since 1998 in the second quarter as stricter lending standards blocked purchases and foreclosures forced people out of their residences.” [Bloomberg]
  • The stock market drop last week cost investors $680 billion. [Bloomberg]
  • Budget cuts mean fewer firefighters to combat California’s wildfires. [McClatchy]
  • In her farewell note to the employees of the Consumer Financial Protection Bureau, which she played an instrumental role in creating, Prof. Elizabeth Warren wrote, “I leave this agency, but not this fight.” “The issues we deal with — a middle class that has been squeezed and business models built on tricks and traps — are deeply personal to me, and they always will be,” she said. [Huffington Post]
  • Bank of America is facing yet another lawsuit stemming from its 2008 purchase of troubled lender Countrywide. [Associated Press]
  • According to a new survey, “consumer sentiment fell in July to its lowest point in more than two years, as anxieties over stagnant wages and rising unemployment deepened.” [Reuters]
  • Tennessee is the latest state seeking “to use its revamped education standards to measure schools instead of those mandated by No Child Left Behind.” [Associated Press]
  • “Four out of 10 new public school teachers hired since 2005 came through alternative teacher-preparation programs,” according to new data released by the National Center for Education Information. [Education Week]
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