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Shutdown/debt limit: President Obama finally uses the I-word

October 08, 2013|By Michael Hiltzik
  • President Obama pointed fingers at the default caucus on Tuesday. It's about time.
President Obama pointed fingers at the default caucus on Tuesday. It's… (Associated Press )

That is: "Insane."

Also, "irresponsible."

And "ideological extremists."

At his press conference Tuesday, President Obama described the budget standoff in terms as stark as any he has used since the outset. He needs to get even angrier and more direct. For example, he sugar-coated his description of the consequences of a debt default as "insane, catastrophic chaos" by stating he was "quoting" others. He could use those words on his own dime; no sane person would disagree.

The point has been passed where the Republican-provoked government shutdown and stalemate over the debt limit has any political logic. The stunt began as an effort to "defund" the Affordable Care Act, whatever that means. That horse has left the barn; Obamacare is with us, and its last major piece, the launch of insurance exchanges for individual buyers, is up and running. The technical glitches that have marred the Oct. 1 launch don't matter; they'll be solved soon enough.

Obama was right to describe the stalemate as "nonsense" and "a gimmick." He was right to ridicule the notion advanced by some Republicans that a default wouldn't be a big deal -- the "let's take the default out for a spin and see how it rides" option. He was right to describe the United States in a post-default world as a "deadbeat."

And he was right to declare that "prioritizing" federal spending isn't an answer to Congress's failure to raise the debt limit. First of all, it's not that easy; second of all, that sort of maneuvering won't settle the nerves of bond market investors.

The bond market is already starting to punish Treasury securities. As noted by the Bipartisan Policy Center (it's Howard Baker and Bob Dole, Republicans, and Tom Daschle and George Mitchell, Democrats), the cost of insuring U.S. Treasury debt in the credit default swap market is spiking. That's an indication that investors are getting very nervous at the utterly unnecessary brinkmanship in Washington.

In just the last two days, prices of short-term Treasury bills have plummeted. Reuters reports that some big bond investors, including Newport Beach-based PIMCO, are avoiding T-bills maturing around the end of this month and holding cash. They're afraid that money fund investors will rush to withdraw money in a panic. The last time that happened, the government had to step in with a $50-billion guarantee to keep the funds solvent.

This "nonsense," as the president called it, is getting more real by the day. What was the point of this standoff again? If it was to strike a blow for fiscal responsibility, it's failed.

Reach me at @hiltzikm on Twitter, Facebook, Google+ or by email.

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