GAME OVER! REBOOBLICANS LOSE. DEFAULT AVOIDED, GOVT REOPENS

N.Y. TIMES

Congressional Republicans conceded defeat on Wednesday in their bitter budget fight with President Obama over the new health care law as the House and Senate approved last-minute legislation ending a disruptive 16-day government shutdown and extending federal borrowing power to avert a financial default with potentially worldwide economic repercussions.  The Senate voted overwhelmingly on Wednesday evening, 81 to 18, to approve a proposal hammered out by the chamber’s Republican and Democratic leaders after the House on Tuesday was unable to move forward with any resolution. The House followed suit a few hours later, voting 285 to 144 to approve the Senate plan, which would fund the government through Jan. 15 and raise the debt limit through Feb. 7.  Most House Republicans opposed the bill, but 87 voted to support it.

The result of the impasse that threatened the nation’s credit rating was a near total defeat for Republican conservatives, who had engineered the budget impasse as a way to strip the new health care law of funding even as registration for benefits opened Oct. 1 or, failing that, to win delays in putting the program into place.

The shutdown sent Republican poll ratings plunging, cost the government billions of dollars and damaged the nation’s international credibility. Mr. Obama refused to compromise, leaving Republican leaders to beg him to talk, and to fulminate when he refused.

Under the agreement to reopen the government, the House and Senate are directed to hold talks and reach accord by Dec. 13 on a long-term blueprint for tax and spending policies over the next decade. Mr. Obama said consistently through the standoff that he was willing to have a wide-ranging budget negotiation once the government was reopened and the debt limit raised.


      

Mr. Boehner and his leadership team had long felt that they needed to allow their restive conference to pitch a battle over the president’s health care law, a fight that had been brewing almost since the law was passed in 2010. Now, they hope the fever has broken, and they can negotiate on issues where they think they have the upper hand, like spending cuts and changes to entitlement programs.       

 

 

But there were no guarantees that Congress would
not be at loggerheads again by mid-January, and there is deep skepticism in both parties that Representative Paul D. Ryan of Wisconsin and Senator Patty Murray of Washington, who will lead the budget negotiations, can bridge the chasm between them.



 
 Wisconsin Republican Rep. Paul Ryan (L) and Washington Democratic Sen. Patty Murray will co-chair a new joint budget committee conference charged with finding a budget and spending solution by Dec. 13

Senator Mitch McConnell of Kentucky, the Republican leader who was instrumental in ending the crisis, stressed that under the deal he had negotiated with the majority leader, Senator Harry Reid of Nevada, the across-the-board budget cuts [the sequester cuts] extracted in the 2011 fiscal showdown remained in place over the objections of some Democrats, a slim reed that not even he claimed as a significant victory.

For Mr. Boehner, who had failed to unite his conference around a workable plan, Wednesday’s decision to take up the Senate bill proved surprisingly free of conflict. Hard-line Republican lawmakers largely rallied around the speaker. Mr. Boehner, they said, ...his conference found itself divided among three conflicting factions: moderate Republicans who were simply eager to reopen the government; those who opposed a provision that would have made members of Congress, White House officials and their staffs ineligible for government contributions to their health insurance on the new exchanges; and conservatives who felt the proposal did not go far enough in dismantling the health care law.

Conservatives in the House also remained skeptical that they would gain the upper hand in the near future. [They] said that with the president still unwilling to negotiate in good faith, he thought it was unlikely that Republicans would extract many concessions in any upcoming conference over the budget between the House and the Senate.
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 An aide brings a cart stacked with pizza to the office of Speaker John Boehner


GREG SARGENT WASHINGTON POST

Dems [hope]that the closer to the 2014 elections we get, the harder it will be for Republicans to stage another debt ceiling hostage crisis.

Democrats don’t want such a crisis. They would prefer that Republicans simply agree to extend the debt limit cleanly. But by pushing this [early] into the 2014 election season, they are giving themselves a kind of insurance policy that guarantees that if Republicans do stage another debt limit crisis, Republicans will pay a serious political price for it.

On the one hand, you’d think that this arrangement simply guarantees that the debt limit will hang over the next talks, meaning it will give Republicans leverage. ... But Democrats ...believe Republicans will have capitulated on the debt limit twice in a row — this time, and earlier this year — and that the political fallout from the current crisis has been so bad for Republicans that party establishment types will be eager to avoid the same thing happening again [in] 2014.

It’s true that those who will try to force another debt ceiling crisis are Tea Party conservatives who don’t much care about the overall political health of the GOP. But as this Democratic aide explains to me, this is precisely the point: More pressure from the right for yet another debt limit crisis close to the election will be even worse for the GOP, because it could again divide the party and potentially force 2014 GOP candidates (particularly those involved in primaries) to adopt an extreme position, damaging them for general elections.

“The effect of this fight has been to destroy the Republican brand and put their 2014 candidates behind the eight ball,” the aide tells me. “We are not trying to bait them into another fight. We’d rather put it past the election. But it’s really up to them. If they want to recommit political suicide  [eight] months before an election, that’s going to be their choice. We’re going to make sure that if this happens it has real consequences for them.”

And so, Dems are hoping that Republican leaders will have even more of an incentive next time to squash any demands from the right for another default hostage crisis. In this scenario, Dems effectively  neutralize the debt limit over the long term, in exchange for accepting sequester level spending into December (only one month longer than under a “clean CR,” which Dems were already prepared to accept). If that worked, it wouldn’t be a bad outcome. Or, if the debt limit isn’t neutralized and Republicans do stage another hostage crisis, the GOP again would devolve into chaos, again underscoring the party’s addiction to destructive, intransigent, crisis-to-crisis governing with only months before Election Day 2014.

That’s the idea, anyway.

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WASHINGTON POST

....despite what most see as a debacle for Republicans, a core group of conservatives insisted Tuesday that they are winning their battle to force concessions from Democrats on fiscal issues.

The president, they say, has been forced into a negotiation, even though he has said he will cede nothing in exchange for opening the government and raising the debt ceiling. The nation’s attention has been focused on problems with the health-care law. And, they say, making Boehner move to the right is itself a victory.

Rep. Andy Harris (R-Md.) said conservatives have succeeded in exposing problems with the health-care law.
“Oh my gosh, we’ve lit up Obama­care for the whole nation,” he said, describing what his wing of the party had won in the shutdown. “Look, the rollout was atrocious, this is a fundamentally flawed plan, and we have made it crystal-clear to the American public that we stand with them on Obamacare.”

That attitude illustrated a split within the GOP that has only grown more profound in the days since the shutdown started: Hard-liners are sure that their position is gaining strength, while moderates and a number of Republican leaders counter that the party has experienced an epic collapse.
“We didn’t get anything. This has been a total waste of time,” said Rep. Peter T. King (R-N.Y.), one of the most consistent critics of his party’s most conservative members.




MICHAEL TOMASKY DAILY BEAST

This is a sad and sickening spectacle,...Today, we have a clavern of sociopaths who know nothing of honor, and we have no easy way to stop them. Except at the ballot box. Except that they’ve rigged that, too, with their House districts. They’ve rigged the whole game so that they light the match and then point at President Obama and shout: “Look! Fire!”
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This is the worst it’s ever been in modern America. But it is going to get worse. They aren’t going to stop hating Obama and Obamacare. They aren’t suddenly going to decide to make their peace with him or it. They sure aren’t going to decide that gee, using default as leverage is naughty. A big chunk of them want the United States to default on Obama’s watch, so they can then blame him for what they themselves caused, say, “The black guy wrecked the economy. Couldn’t you have predicted it?” New horrors await us that you and I, being normal people, can’t begin to dream up. But rest assured, they will.

DEFER OR DEFAULT. MCCONNELL AND REID CLOSE TO DEAL. THEN IT'S BACK TO BOEHNER

HUFFINGTON POST  

Whatever deal emerges from overnight negotiations in the Senate, Republican lawmakers said they weren't sure it could pass quickly enough in their chamber to avert a default -- or that it would ever see the light of day in the House.

We’ve got a name for it in the House: it’s called the Senate surrender caucus,” said Representative Tim Huelskamp, Republican of Kansas. “Anybody who would vote for that in the House as Republican would virtually guarantee a primary challenger.”

The Treasury Department has warned that sometime on Thursday it may no longer have enough cash on hand to pay all the nation's obligations, setting up a potential default that economists have warned repeatedly may have catastrophic economic consequences.

As of Monday evening, the contours of a deal included reopening the government through Jan. 15 and extending the debt limit until Feb. 15. Both chambers also would have to appoint representatives for a budget conference that would end on or around Dec. 15, with the goal of agreeing to framework for deficit-reduction. Changes to President Barack Obama's health care law would be minimal:
Senate Majority Leader Harry Reid (D-Nev.) said there had been "tremendous progress" earlier in the day. His Republican counterpart, Minority Leader Mitch McConnell (Ky.), agreed.



N.Y. TIMES

If a deal is not completed by the end of Thursday, Treasury officials have said, the United States government will have exhausted “extraordinary measures” for managing its debt, meaning that its ability to pay its bills will be limited to the uneven flow of cash that comes into the Treasury on a daily basis. On some days, officials warned, the amount coming in will be less than the amount that is supposed to go out.       

But even that deadline provides no real sense of clarity. It remains unknown how long the federal government could operate beyond that day, what programs it might choose to suspend, or how quickly the global financial markets would pronounce judgment.

 

 

 

As they drafted their deal, Senate negotiators in both parties were hoping that House Republican leaders would have no choice but to let a bipartisan agreement come to a vote, even if it could pass only with votes from Democrats and a minority of the Republican majority. But John A. Boehner, the House speaker, provided no assurances on Monday that an arrangement hammered out by his Senate colleagues could pass muster among his conservatives.

Senate Republicans had pushed for an agreement that included a provision to delay or repeal a tax on medical devices, but that became a sticking point in the negotiations and will almost certainly be excluded from the final deal, Senate aides said. But the deal is likely to include a one-year delay of another tax associated with the Affordable Care Act known as the reinsurance tax, which employers pay.

Another Republican-backed measure likely to be in the deal would require tighter income verification standards for people who receive subsidies under the new health care law.

 

But with the country just hours from what could be a crippling default, many Republicans believe that Mr. Boehner will have no choice but to ignore his most vocal members and put whatever passes the Senate up for a vote.

DEALING WITH DEFAULT: THINKING THE UNTHINKABLE

PAUL KRUGMAN N.Y TIMES
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So what are the choices if we do hit the ceiling? As you might guess, they’re all bad, so the question is which bad choice would do the least harm.

Now, the administration insists that there are no choices, that if we hit the debt limit the U.S. government will go into general default. Many people, even those sympathetic to the administration, suspect that this is simply what officials have to say at this point, that they can’t give Republicans any excuse to downplay the seriousness of what they’re doing. But suppose that it’s true. What would a general default look like?

 

A report last year from the Treasury Department suggested that hitting the debt ceiling would lead to a “delayed payment regime”: bills, including bills for interest due on federal debt, would be paid in the order received, as cash became available. Since the bills coming in each day would exceed cash receipts, this would mean falling further and further behind. And this could create an immediate financial crisis, because U.S. debt — heretofore considered the ultimate safe asset — would be reclassified as an asset in default, possibly forcing financial institutions to sell off their U.S. bonds and seek other forms of collateral.

That’s a scary prospect. So many people — especially, but not only, Republican-leaning economists — have suggested that the Treasury Department could instead “prioritize”: It could pay off bonds in full, so that the whole burden of the cash shortage fell on other things. And by “other things,” we largely mean Social Security, Medicare, and Medicaid, which account for the majority of federal spending other than defense and interest.

 

Some advocates of prioritization seem to believe that everything will be O.K. as long as we keep making our interest payments. Let me give four reasons they’re wrong.

First, the U.S. government would still be going into default, failing to meet its legal obligations to pay. You may say that things like Social Security checks aren’t the same as interest due on bonds because Congress can’t repudiate debt, but it can, if it chooses, pass a law reducing benefits. But Congress hasn’t passed such a law, and until or unless it does, Social Security benefits have the same inviolable legal status as payments to investors.

Second, prioritizing interest payments would reinforce the terrible precedent we set after the 2008 crisis, when Wall Street was bailed out but distressed workers and homeowners got little or nothing. We would, once again, be signaling that the financial industry gets special treatment because it can threaten to shut down the economy if it doesn’t.

Third, the spending cuts would create great hardship if they go on for any length of time. Think Medicare recipients turned away from hospitals because the government isn’t paying claims.

 

 

Finally, while prioritizing might avoid an immediate financial crisis, it would still have devastating economic effects. We’d be looking at an immediate spending cut roughly comparable to the plunge in housing investment after the bubble burst, a plunge that was the most important cause of the Great Recession of 2007-9. That by itself would surely be enough to push us into recession.

And it wouldn’t end there. As the U.S. economy went into recession, tax receipts would fall sharply, and the government, unable to borrow, would be forced into a second round of spending cuts, worsening the economic downturn, reducing receipts even more, and so on. So even if we avoid a Lehman Brothers-style financial meltdown, we could still be looking at a slump worse than the Great Recession.

 

So are there any other choices? Many legal experts think there is another option: [see below] One way or another, the president could simply choose to defy Congress and ignore the debt ceiling.

Wouldn’t this be breaking the law? Maybe, maybe not — opinions differ. But not making good on federal obligations is also breaking the law. And if House Republicans are pushing the president into a situation where he must break the law no matter what he does, why not choose the version that hurts America least?

 

There would, of course, be an uproar, and probably many legal challenges — although if I were a Republican, I’d worry about, in effect, filing suit to stop the government from paying seniors’ hospital bills. Still, as I said, there are no good choices here.

So what will happen if and when we hit the debt ceiling? Let’s hope we don’t find out.

SEAN WILENTZ POLITICO

Make no mistake: Although the United States may well be headed for a catastrophic economic crisis, we are already in a monumental political and constitutional crisis. As a historical matter, were the House Republicans to push the country into the abyss, they would be creating a situation analogous in the past only to the nullification crisis of 1832 and the secession crisis of 1860-1. The emergency is that grave.
So what should President Obama do? First, he must make the self-evident case that if the Republicans go through with their threat to take the country over the fiscal cliff, they will have violated the 14th Amendment of the Constitution that states: “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.” Explaining that the Republicans propose to act unconstitutionally would immensely strengthen his position in this emergency no matter what. He needs to make the argument loudly and clearly, without the lawyerly diffidence he has displayed.

The burden in this crisis rests entirely with the congressional Republicans who have precipitated it. If they were to violate the Constitution, it would be their fault, not the president’s. The president needs to make that argument as well – crisply and loudly.
On Oct. 8, the New York Times published my op-ed arguing for the president to declare that the Republicans would be violating the Constitution, specifically the 14th Amendment, if they refused to approve the debt limit bill, and that their abdication would demand that the president exercise his emergency power to end the crisis.

Text Fourteenth Amendment:

Section 1. All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws. Section 2. Representatives shall be apportioned among the several States according to their respective numbers, counting the whole number of persons in each State, excluding Indians not taxed. But when the right to vote at any election for the choice of electors for President and Vice President of the United States, Representatives in Congress, the Executive and Judicial officers of a State, or the members of the Legislature thereof, is denied to any of the male inhabitants of such State, being twenty-one years of age, and citizens of the United States, or in any way abridged, except for participation in rebellion, or other crime, the basis of representation therein shall be reduced in the proportion which the number of such male citizens shall bear to the whole number of male citizens twenty-one years of age in such State.
Section 3. No person shall be a Senator or Representative in Congress, or elector of President and Vice President, or hold any office, civil or military, under the United States, or under any State, who, having previously taken an oath, as a member of Congress, or as an officer of the United States, or as a member of any State legislature, or as an executive or judicial officer of any State, to support the Constitution of the United States, shall have engaged in insurrection or rebellion against the same, or given aid or comfort to the enemies thereof. But Congress may, by a vote of two-thirds of each House, remove such disability.
Section 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.
Section 5. The Congress shall have power to enforce, by appropriate legislation, the provisions of this article

That same day, President Obama was questioned in a news conference about these points. He rejected using the 14th Amendment in any way because expert opinion is divided about it. “If you start having a situation in which there’s legal controversy about the U.S. Treasury’s authority to issue debt, the damage will have been done even if that were constitutional, because people wouldn’t be sure,” Obama said. “It’d be tied up in litigation for a long time. That’s going to make people nervous. There’s no magic bullet here.”
His statement presumes a consensus among legal scholars that will never occur. They are as polarized as the country. Surely the president encountered the conservative ideologues of the Federalist Society when he was editor of the Harvard Law Review. By failing to make the case that the Republicans would be more than irresponsible but indeed unconstitutional, he deprives himself of his strongest argument and his only means of preventing a national disaster. He also does his own disservice to the Constitution that he is sworn to preserve, protect, and defend.


In the event that the House Republicans were to act unconstitutionally and to put the country in an unprecedented catastrophic situation, the president is not a potted plant. To say otherwise is mere legal pettifoggery. Nor should it be assumed that the Constitution is a static document that prevents any remedy in the event of emergency. The tradition of standing on presidential power goes back to President Thomas Jefferson. That tradition holds that the Constitution is not, as Associate Justice Robert Jackson once observed, “a suicide pact.”
“A strict observance of the written laws is doubtless one of the high duties of a good citizen,” Jefferson wrote in 1810, “but it is not the highest. The laws of necessity, of self-preservation, of saving our country when in danger, are of higher obligation. To lose our country by a scrupulous adherence to written law, would be to lose the law itself, with life, liberty, property and all those who are enjoying them with us; thus absurdly sacrificing the end to the means.” (Jefferson’s emphasis.)
Jefferson was hardly alone. Presidents Andrew Jackson and Abraham Lincoln believed that the Constitution provided power to the executive in a national crisis to save the Union.



Before the Civil War, President James Buchanan argued at great length to the contrary. Those who say that President Obama is prevented from doing anything echo Buchanan’s arguments for passivity. They are upholding the long-disgraced Buchanan tradition. These are Buchanan’s words, stated soon after South Carolina seceded in 1860:

Apart from the execution of the laws, so far as this may be practicable, the Executive has no authority to decide what shall be the relations between the Federal Government and South Carolina. He has been invested with no such discretion. He possesses no power to change the relations heretofore existing between them, much less to acknowledge the independence of that State. This would be to invest a mere executive officer with the power of recognizing the dissolution of the confederacy among our thirty-three sovereign States.”
Lincoln thought differently.
If the Republicans decide not the raise the debt ceiling, the solution to the political and constitutional crisis is clear. By his constitutionally dictated oath of office, the president is required to preserve, protect, and defend the Constitution of the United States. By defaulting on America’s public debt, the Republicans will have attacked the Constitution, giving the president no choice. If he fails to act by invoking emergency powers, based on his constitutional oath of office, and raise the debt ceiling, he will have violated that oath.



Claims by our modern-day James Buchanans that bonds issued as a result of such executive action would be shrouded in uncertainty and therefore worthless are pure speculation, based not in fact but on mere projections. The law professors and pundits who have claimed as much are in no position to know. They have not, for example, consulted the finance ministries of China, Japan, or Germany on whether they wish to accede to the collapse of the world economy. Their conjecture is not, in any event, either a legal or historical judgment.
Still others in the Buchanan tradition contend that there are no enumerated powers in the Constitution for the president to act in such a national emergency. This is precisely the position Buchanan articulated:
“The question fairly stated is, has the Constitution delegated to Congress the power to coerce a State into submission which is attempting to withdraw or has actually withdrawn from the Confederacy? …After much serious reflection I have arrived at the conclusion that no such power has been delegated to Congress or to any other department of the Federal Government. It is manifest upon an inspection of the Constitution that this is not among the specific and enumerated powers granted to Congress, and it is equally apparent that its exercise is not ‘necessary and proper for carrying into execution’ any one of these powers.”



Lincoln rejected this line of passive thought. The ultimate provision in the Constitution that provides for presidential action is the oath of office itself, enumerated in the Constitution. If the current Congress willfully violates the Constitution, an act of unarmed rebellion and insurrection, it will create a vacuum that must be filled by executive action to prevent the nation’s ruin. With Congress’s abdication, its rebellion against the Constitution, the president could theoretically also invoke another constitutional provision. Obama, for wholly political reasons, should not raise it. Nonetheless, it is there, and it should be publicly discussed. That provision stipulates that the president must act to suppress insurrection. It is in the Constitution as clear as a bell. Lincoln in fact had arrested the elected members of the state legislature of Maryland on these grounds.
Those who criticized Jackson and Lincoln accused them of being merely political and denounced them as tyrants. But Jackson and Lincoln felt compelled by necessity and their oath of office to preserve the nation. Lincoln kept Jackson’s Proclamation on Nullification on his desk throughout the secession crisis. Perhaps Obama, a Lincoln acolyte, might read the words his predecessor used as his blueprint. If he wishes to go down in history as a Lincoln and not a Buchanan, Obama owes the nation and the Constitution nothing less.

THE DEBT CEILING: WHAT'S AT STAKE

CBS NEWS

It is the economic calamity that no one expects and everyone fears.
Experts agree that failing to raise the nation's debt ceiling by Oct. 17, when U.S. officials say the government will run out of money to pay its bills, would gravely wound the economy, and perhaps even throw it back into recession. Because Treasury bonds and the dollar are cornerstones of the global financial system, meanwhile, the shock wave would be felt around the world.

"The potential is disastrous," said Gus Faucher, senior economist with PNC Financial Services Group. "We would see interest rates spike across the board. We'd see a huge crash in the dollar. People count on lending their money to the federal government and getting it back, and if that trust is taken away -- it's never happened that we haven't met our obligations as a nation -- then that has very, very negative consequences for the U.S. economy."
The consequences are so severe that, even as the government shutdown enters its second week, most seasoned political observers still expect Congress to ultimately reach an eleventh-hour deal to lift the government's borrowing limit.
But what exactly is the debt ceiling, and exactly how worried should Americans be that it could come crashing down?

The debt ceiling is the total amount of money the U.S. government can borrow (by selling Treasury bonds) to pay its obligations, including interest on the national debt, Social Security and Medicare benefits, and many other payments. That limit is currently $16.7 trillion, although technically the government already exceeded it in May. The Treasury Department has since used various measures to continue borrowing.
During World War I, amid uncertainty regarding the total costs of funding U.S. involvement in the conflict, Congress created the cap in 1917 to put an upper limit on federal borrowing. Since 1960, Congress has raised the debt ceiling 78 times.



How is the debt ceiling changed?
Lawmakers can adjust it by passing a standalone bill or by including it in another piece of legislation as an amendment.

Does raising the debt ceiling increase the federal debt?
No. Lifting the borrowing limit simply allows the government to pay its existing bills. That debt exists whether or not Congress authorizes additional borrowing, and to avoid default it must be paid.

Why can't Congress and the White House avoid lifting the cap by cutting federal spending?
Because preventing the government from borrowing to meet its obligations would require all discretionary spending, such as for defense, education, housing and other annual appropriations, to stop, according to the Congressional Research Service. Most of the outlays for mandatory programs, such as Social Security, also would have to be halted, while taxes would need to rise to ensure the government had money to spend. Deep spending cuts and tax hikes would throw the economy into recession.


Jacob Lew

Treasury Secretary Jacob Lew recently forecast that on Oct. 17 the government would have about $30 billion on hand. That isn't enough because the government spends as much as $60 billion per day. "If we have insufficient cash on hand, it would be impossible for the United States of America to meet all of its obligations for the first time in our history," he said last week in a letter to congressional leaders.

What happens if Congress doesn't raise the debt ceiling?
If the government runs low on cash, it will have to withhold a range of payments. Retirees might not get their Social Security checks, especially worrisome for the millions of Americans who depend almost entirely on the social insurance program for income. The same goes for Medicare and Medicaid recipients. Holders of Treasury notes, from Wall Street and other global banks to foreign governments, also could get stiffed, jeopardizing the solvency of many financial institutions and choking off global credit flows.

The U.S. also would struggle to pay the interest on its debt, including a $6 billion payout due at the end of the month. At that point, the U.S. would be in default of its obligations. The value of Treasury bonds and the dollar would nosedive. The nation's borrowing costs would soar as anxious investors demanded a higher return to buy suddenly shaky U.S. debt. And because the interest rate on Treasuries provides a benchmark for rates on other loans, from mortgages and credit cards to car and student loans, borrowing would become far more costly for consumers and businesses. Stock markets in the U.S. and elsewhere around the world would almost certainly plunge.
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....Consumer confidence plummeted after lawmakers squared off over the debt ceiling in the summer of 2011, while the Standard & Poor's 500 stock index dropped nearly 20 percent. Hiring among small businesses slowed. Ever after a deal was struck to raise the cap in August of that year, credit rating agency Standard & Poor's downgraded U.S. debt for the first time ever.

Beyond the immediate economic fallout of defaulting on its debt, for the U.S. the symbolic blow might be even greater. In the post-World War II era, Treasuries and the greenback have -- for better and for worse -- served as the foundation of the global financial system. A default would shatter the faith on which that system relies.



How much danger are we in?
Although financial markets are not yet in panic mode, the standoff in Washington has them worried. Unlike during the 2011 dispute, when Republicans and most Democrats favored cutting federal spending, the stark division over Obamacare suggests there may be less room for compromise this time around. One clear sign of distress: Interest rates on short-term Treasury bonds rose last week, as investors seek greater yields to offset what they perceive as the greater risk of holding the debt.

Still, most economists, stock analysts and, for all the pointed rhetoric on Capitol Hill, even congressional leaders themselves downplay the chances of a default. The belief is that common sense, or at least a sense of political self-preservation, will prevail.




THE HILL

Under the prioritization option, Treasury theoretically could chose some to make payments, such as to Social Security recipients, but forgo others such as refunds to taxpayers or pay for federal workers.

Treasury officials have said prioritization is technically unworkable when applied to non-bond payments, the group noted.

Under a delay scenario, Medicare and Medicaid payments could be pushed back from Oct. 18 to Oct. 21, for example, when more revenue comes in. Social Security checks set for Nov. 1 could be delayed until Nov. 13, leaving seniors without money for half a month.

BPC said that under this option, the delays would become longer and longer until at some point payments would have to be missed.

Hoagland said that Social Security recipients could sue the government over the delay and could likely win a judgment since the benefits are legally considered entitlements.

In either case, delays or missed payments would be seen as some type of default, BPC warned. They said there is no conceivable way the real deadline is in December or January, as some in Congress appear to believe.

AT LAST. BOEHNER STANDS UP, PLEDGES TO AVOID DEFAULT.

N.Y. TIMES

Speaker John A. Boehner has privately told Republican lawmakers anxious about fallout from the government shutdown that he would not allow a potentially more crippling federal default as the atmosphere on Capitol Hill turned increasingly tense.

Mr. Boehner’s comments, recounted by multiple lawmakers, that he would use a combination of Republican and Democratic votes to increase the federal debt limit if necessary appeared aimed at reassuring his colleagues — and nervous financial markets — that he did not intend to let the economic crisis spiral further out of control.

They came even though he has so far refused to allow a vote on a Senate budget measure to end the shutdown that many believe could pass with bipartisan backing. They also reflect Mr. Boehner’s view that a default would have widespread and long-term economic consequences while the shutdown, though disruptive, had more limited impact.

With the mood in Congress already unsettled by the bitter sparring over the fiscal standoff, the Capitol was shaken anew Thursday afternoon when a high-speed chase beginning near the White House ended near the Senate office complex with Capitol Police shooting the driver to death.

 

His comments were read by members of both parties as renewing his determination on the default and came as the Treasury warned that an impasse over raising the debt limit might prove catastrophic and potentially result “in a financial crisis and recession that could echo the events of 2008 or worse.”

 

It is conceivable that Mr. Boehner could pass a debt-limit increase with a slim majority of Republican votes, with Democrats making up the difference, as he has in the past on budget measures. But moving in that direction poses risks of a threat to Mr. Boehner’s leadership position from a watchful conservative bloc, which has warned that his post could be on the line if he goes against the legislative position of large numbers of the rank and file.

Representative John C. Fleming, Republican of Louisiana and one of his conference’s more conservative members, said that he doubted Mr. Boehner would be able to pass any bill — with or without Democratic support — that did not extract some significant concessions from Mr. Obama and Senate Democrats.

 

At the same time, growing numbers of House Republicans have expressed frustration at those insisting on changes to the health law when Mr. Obama has made clear he will not accept them. Their unhappiness, the furor caused by the shutdown and the desire to avoid default could help protect Mr. Boehner.

 

Boehner on the Tightrope:

 

CILLIZZA & SULLIVAN WASHINGTON POST

 

There are currently 19 House Republicans on the record in support of a “clean” continuing resolution, meaning one without any other extraneous measures — like the defunding or delaying of Obamcare — attached. Combine those nineteen with the 200 Democrats who would almost certainly vote as a bloc in support of such a clean CR and you get 219 votes — a majority of the House. The bill has already been passed by the Democratic-controlled Senate, so it would go to straight to President Obama who would sign it. Shutdown over. Easy.
Except one little thing, which is that the only way for that scenario to happen is for Boehner to allow a piece of legislation supported by roughly 7 percent of his conference to come to the House floor for a vote. And, doing that on something as high-profile as a government shutdown/Obamacare, would almost certainly signal either the symbolic (or maybe even practical) end of his speakership.

Why? First a bit of context.

On Jan. 1, 2013, Boehner put the deal to avert the fiscal cliff on the House floor. It passed with 257 votes — just 85 of which came from Republicans. Later that month, the House voted in favor of relief money for Hurricane Sandy victims although just 49 Republicans supported it. Then in February, the House re-authorized the Violence Against Women Act (VAWA) with just 87 Republican votes. In all three cases, a minority of Republican House Members backed the measure.
So, there is both precedent and peril in allowing a vote on a measure that lacks the support of a majority of the House Republican conference. Precedent in that Boehner has done it before — although never with so few Republicans “yes” votes guaranteed — and peril in that, well, Boehner has done this sort of thing before.

Remember that Boehner came within a hair’s breadth of being forced into a second ballot vote to be re-elected Speaker at the start of the 113th Congress, and that was before the Sandy relief and VAWA votes.  To allow another measure — and this one that not only deals with a government shutdown but also Obamacare — to pass with almost exclusively Democratic votes would be a bridge too far for lots and lots of House Republicans. There could well be an immediate revolt against Boehner and, even if there wasn’t, any chance that he would remain on as Speaker in 2015 (assuming Republicans hold the majority) would be gone.
Boehner knows that reality all too well. Without some sort of major concession — something he can go to his GOP conference with and say, “See, they gave in on this” — it would be political suicide for him to bring up a clean continuing resolution supported by less than 10 percent of his conference.
So, the government will remain shut unless that sort of deal is made or Boehner decides that he’s had enough of being Speaker.