Why did Obama try to scare the markets?

Yesterday Obama played a new strategy:

Obama dismissed talk on Wall Street that Washington will solve its problems, warning that the fight this time is putting not only government operations at risk, but the debt ceiling as well.

“I think this time it’s different,” Obama said in the interview. “I think they should be concerned.”

Usually political leaders don’t like to spook markets.  Presumably Obama hoped to spook markets, which in turn would put pressure on Republicans sooner rather than later.  The problem with waiting for “the spook” to come later is that there may not be enough time to put a deal together at the last minute, or trembling hands may make a last minute deal too risky.

But can Obama spook markets in this fashion?  Obviously markets know that Obama has an incentive to talk up the fear for this reason.  The market might thus remain unruffled, or at least it won’t be Obama’s words that are making things worse (the risk of short-term default is going up in the markets).  Furthermore, let’s say that Obama’s strategy, if it could strike fear into the hearts of market traders, would work in pressuring the Republicans.  Markets know that too, and so again the fear doesn’t get off the ground.

It is interesting to compare this to the standard game where a politician tries to talk the value of the domestic currency up or down on world markets.  A president or central banker might, by saying a weaker currency will be tolerated, signal the future stance of fiscal or monetary policy.  Since a leader who wants a stronger currency won’t try to talk down his nation’s money, this strategy (sometimes) succeeds, albeit with multiple equilibria.  But here Obama’s cheap talk isn’t signaling his inner preferences about bond prices, but rather it is an attempt to manipulate trading strategies.  If Obama sees his own talk as ultimately bullish (which is presumably the case if he is saying it), perhaps markets will too.

Would Obama’s strategy work if he blurted out the worries while evidently drunk?  Studied Captain Queeg?  Stated them “mistakenly” into an open microphone, of which he was supposedly unaware?  What if he just begged everyone to believe that things were really, really bad?


The market is too smart, much too smart to believe Obama.

Thankfully, yes. But, I have to say, when I heard his comments yesterday, it was the most shockingly irresponsible thing I've ever heard a politician say.

This. I have a low opinion of the ruling class so I tend not to be shocked by their behavior. Liberal Democrats have a habit of using overheated language to berate The Stupid Party. I'm used to it. Having the President come out and plead for a market collapse was disturbing.

If that was the most shockingly irresponsible thing you've ever heard from a politician, then you don't spend much time reading the news or listening to politicians. Especially given that his remarks simply affirm the claims of Republican members of Congress who have repeatedly told us that they are totally serious about their willingness to breach the debt ceiling.

Might be time to get out of that bubble you've built.

JCW: One man pushes an old woman in front of a bus, while another pushes an old woman out of the way of a bus. JCW says they are just two men who push old ladies.

Your analogy doesn't fit JCW's point at all.

Which politician is pushing old women out of the way of the bus again?

Poll: 44% blame Republicans, 35% blame Democrats, 17% blame both.

Interpretation: The American people say: Lock 'em in a room and figure it out. You have a couple weeks.

I just love the rare episodes of 'grown-up time' in Washington. I'm glad it's coming to a head now too. Next year's an election, then lame duck, which means our next real shot is 2017, which is likely the last window before the shite hits the fan, and only then if we still have divided government.

Grand Bargain now!

You are far more optimistic than me. The current political class is incapable of confronting the public with the necessary changes to avert disaster. The public has shown no signs of being sensible, even when the facts have been presented. Things change when the money runs out and that will be a very unpleasant time. The current bickering will feel like an era of peace and harmony.

I'm actually with Brian on this, the system is a dysfunctional mess but eventually when something has to stop it does. We had deficits at 10% and rising, now it's 4%.

The thing that has to stop is still a ways out there, the baby boomer health care cost bomb. The current structure of Medicare is unsustainable, so it won't stay the way it is forever. How we get to whatever we get to (frankly, simply less stuff covered by the Fed govt) is still a mystery, but we know it will be messy, angry, and vitriolic. But get there we will.


Entitlements, and Medicare in particular, are the problem. Discretionary spending is a comparatively small problem.

The sooner this comes to a head, the better for everyone.

Nobody wants to walk the entitlement plank. I do think we could get a fix for Social Security, although it would mean somehow getting a tax increase through the House (not saying that tax increases should cover the whole nut, however). Medicare... man, I don't see how you fix that without a magic single-payer wand. And if you don't fix it, I don't see how you can pay to continue the status quo.

I don't know, hasn't his entire career been about increasing government (particularly the part the belongs to) at the expense of private enterprise and the economy.

The White House went out of their way to close parks that are usually open 24/7 and unstaffed.

Isn't it rather obvious he wants a crisis. I hear they're terrible things to waste.

It's even better than that, they shut down the *Web sites* for the national parks. Which is like the comedian that said years ago her car was running out of gas and she didn't know what to do, so she turned off the radio.

They're pulling out all the stops.

Do websites require routine IT maintenance? Would these websites be vulnerable to attack and exploitation if everyone knew there was zero IT support for an indefinite length of time?

I'm pretty sure a DOS attack isn't going to be any worse than turning it off.

The anti-deficiency act forbids spending money not appropriated by Congress. Electricity costs money. Bandwidth costs money. Do you think web servers run on fairy dust?

If they actually shut down the web sites that might save power, but rather than shut them down they just changed them to say they were shut down.

No these parks are not "unstaffed"...all these parks, with the thousands of visitors they get each day, are served by park service personnel who are trained to respond to emergencies, who clean up after the crowds, who provide information to visitors. This is an extremely ignorant comment.

First, they really are doing the equivalent of threatening to lay off police, fire and teachers while things they like just quietly keep going.

We could have a government that doesn't fail to catastrophe, but the government doesn't want it that way.

Oh my God, the feds and employees could make the situation so much worse if they wanted to. You'd be surprised how many people who the leadership say are "essential" eventually stop showing up to work if they don't get paid for a few weeks. Hold on tight if you think this is all drama.

So far, so drama.

That Capitol Police officer who was injured responding to a shooting on the Hill today will be skipping his next paycheck. Such an Obama drama mama.

That Capitol Police officer who was injured responding to a shooting on the Hill today will be skipping his next paycheck. Such an Obama drama mama.

Are you referring to the same Capitol Police who just shot an unarmed mother to death with her child in the car for the crime of running into a barrier?

Did you see the video? She ran him over. Not clear whether she was armed, but the officer who ended up in the hospital did not discharge his firearm. Probably shouldn't be paid either, right?

Have you read the relevant section of the anti-deficiency act?

"An officer or employee of the United States Government or of the District of Columbia government may not accept voluntary services for either government or employ personal services exceeding that authorized by law except for emergencies involving the safety of human life or the protection of property. This section does not apply to a corporation getting amounts to make loans (except paid in capital amounts) without legal liability of the United States Government. As used in this section, the term “emergencies involving the safety of human life or the protection of property” does not include ongoing, regular functions of government the suspension of which would not imminently threaten the safety of human life or the protection of property."

If anything the executive is keeping too much of the government open. If they followed the law strictly, all airplanes would be grounded (no FAA or TSA).

General aviation flights to provide medical evacuation involve safety of human life and a great deal more could be said to involve protection of property such as maintenance of the electrical grid. There are also a lot of military aircraft and airfields.

While I consider the TSA to be useless, I don't see why not having the FAA would require general grounding of civilian aircraft. Assuming you can actually see, there is no need for aircraft controllers. There are also non-federal controllers at some fields. Finally, if the FAA really were shut down, there would be nobody to enforce the restrictions.

@Dan Lavatan: "Assuming you can actually see?"

You can't see in clouds. I'm not sure how rare you think clouds are, but the reality of aviation is: not nearly rare enough for us not to need controllers.

No ATC essentially means no IFR flight. Which means no commercial flight whatsoever and a steep reduction in GA flight as well. No flight when the ceilings are low, no flight over 18,000 ft, no flight at optimal altitudes, etc.

VFR flight is fun and all, but it's not enough to give the benefits that you're attributing to aviation generally.

There are now more park personnel around the Mall trying to enforce their silly barriers than there were when the park was open.

Some of the DC parks they've "closed" are just open air memorials that don't have dedicated staff. The Park Service put up barricades to create an artificial barrier. That doesn't seem particularly reasonable, since it cost more money to put up the barricades than it would have to just leave them in their normal state and clean up any litter later.

It's symbolic.

There isn't a very good reason why almost every government websites landing page is offline as well. Ninety percent of the content is static. No valid reason other than symbolic. The cost of sending those badges to the site to "enforce" the closing costs you and I nothing. These are figures that are essentially rounding errors of actual rounding errors.

Would it be acceptable to let garbage pile up at the memorials if this dragged on for a whole month?

I would guess that if garbage became a problem, volunteers would suddenly start showing up to take care of it. Same as at other parks that are already staffed with volunteers that do most of the work. Not sure that would suffice as a long term solution, but it might be prove inconvenient to those who suggest the sky is falling because of the "shutdown".

What are the changes that people let the trash pile up?

People will take their trash with them and others will voluntarily clear the trash there.

They're ordering closed parks that are privately funded and staffed.

Congresss has approved funding for parks, medical needs etc.

Google is your friend.

I want a crisis. I should send letters of support to both sides. "Hang in there -- don't let them make you look weak! If you cave, they'll just walk over you harder next time!"

I think this will go on longer than anybody thinks right now. It could go beyond 6 months. I hope it goes on for more than a year. This could develop into a much bigger conflict than it seems right now, once it takes on the aura of being the ultimate battle against Big Government.

Government sure is high maintenance.

Game theory is fun and all, but for my purposes it's just "opportunist cynical politics."

Most drama queens are.

The radio was complaining about the Army football game, and I thought, if I hadn't turned on the radio, would I ever know about this.

Obama is not credible. All his policies are aimed at supporting the stock market. Now if President Ron Paul were in there, all he'd have to say is something along the lines, "well, people who buy stocks are taking on a risk and they shouldn't own stocks if they're not comfortable with that." That'd be good for a 5% drop this week.

Yup. Or as Obama told the Wall Street bankers back in a 2009 meeting: "My administration is the only thing between you and the pitchforks."

Just because the highest government officials use the language of the mob doesn't mean they are the mob. It doesn't mean they aren't, though.

Liberal democrats are prone to believing their own mythology. In this case, they believe the Clinton - Gingrich shutdown was a stunning success for Clinton. The public rose up and carried the president to his throne where Gingrich and the republicans were waiting to kiss his feet and surrender. Reality was something much different. Clinton gave into a lot of demands to get a deal done. It ultimately helped Clinton politically, but it was nothing like they remember. Add in the fact that these games are exposed much more quickly and you get a more jaded public. Twenty years ago no one would be talking about the president’s ham-fisted attempt to scare the markets. Today, everyone, even many in the press, laughed at it.

At some level, the WH probably knows a long fight is not to their advantage. The longer it goes on, the greater the pressure on both sides to cut a deal. Hairy Reed is not the guy you want out there selling your no compromise position. The Tan Man is not much better, but he does not give people the creeps. At best it is a wash and that means the Democrats will ultimately be forced to give in on things they prefer not to surrender. If you can get the public to panic and demand a deal now, then the Democrats have a chance to fleece the Stupid Party as they usually do in these things.

Hairy Reed is not the guy you want out there selling your no compromise position. The Tan Man is not much better, but he does not give people the creeps.

I don't really consider Harry creepy, but he does seem to be a particularly poor speaker to be Senate Majority Leader.

He is creepy. He's the same kind of person that I'd cross the street to avoid passing him by too closely. He gives off really bad, creepy vibes.

He really is a weirdo. Few of these guys are normal as our system attracts and rewards sociopaths, but even by that low standard Reed is a strange man. Pelosi is not much better. She looks like the cat lady from the Simpsons and sounds like they never got her meds right. Putting those two in front of the cameras is not good for the democrats. The oversized oompa-loompa the republicans are running out there is no Dale Carnegie, but you don't recoil in horror.

Yup, quality discourse right here.

Well, I don't know about Reid, he just seems like a typical old school Western Senator, but Pelosi is getting weird. 30 years ago she was an ok SF pol, more reasonable and responsible than most. I didn't vote for her but she wasn't that bad, she was really personable, a really good retail pol. Then around 2000-3 she started icing up, she got more and more remote, she started coming across as really uncomfortable around people, people who dealt with her started saying weird things. The anti war hysteria, and in SF it was truly hysterical, didn't help. She started getting insane local challengers, nut jobs started vandalizing her property, and she got more disconnected. If it was for her really good constituency staff she would be a disaster of Thad McCotter proportions. And since becoming speaker she seems to have lost all human social skills. It is like she had brain damage that removed all her actual political glad handing gifts. Combine that with the creepy plastic surgery, and you get something disturbing.

Tan man isn't creepy?? Much creepier than the average clown, and that's saying a lot.

The way I see Obama (see the Maraniss bio), part of him is always observing, so it's possible his answer came from that part of him. If his comment turns out to be accurate, then he can say: "I told you so".

Science Fail! You can't be an impartial observer and a participant. If the market's go down, it will be at least partially a result of his own comments.

Maybe he's decided to fight fear with fear? Perhaps he's had enough of keeping his rhetoric down since it gets him absolutely no where with these nut jobs controlling Boehner.

Democratic complaints in an official letter about DC spending needing approval (but not federal funds) got the House to pass a bill approving DC's budget. That seems like a form of "getting somewhere." Of course, now that they got what they asked for, they don't want that particular hostage released, because they want them all at once.

But it seems to me that approving DC funding is not quite like the GOP just funding its priorities, like the military. I understand opposition to the Republicans only funding their constituents' priorities but not Democrats', as that could make the shutdown of other things take longer; it's simply hard to believe that approving DC's budget is one of them.

To really fight "fear with fear," he needs to present himself as irrational and unwilling to deal. He has in general been trying to do that, saying in private and in public that no negotiation nor compromise is acceptable, that the Republicans must accept the status quo budget. However, I think he's hamstrung by his political desire at the same time to portray the Republicans as the only ones unwilling to deal, and himself as rational. What "sounds good" politically makes it seem game theoretically like he'd back down.

"Fear" is one of those dog whistles used by racists. I'm sure it was unintentional on your part, but you should avoid using it.

We have a friggin' black President.

And with this one we don't even have to get to racism.

1. How do you do that?
2. How did Obama get Trayvon Martin exactly wrong?

I can't talk to Obama, and I figure it was all political, but I do have you on the line for #1. The reason I bring up #2 is that people like my parents had zero racism. But we have a crap ton of black problems and having people like you and Obama say what you do is turning a lot of non-racists into racists.

Such as when I was interested in the stock market I viewed "uncertainty" as a stochastic mathematical certainty affecting the potential predictions of the future.

It took two-party politics to inform me that I was just being a subliminal racist and I wasn't even aware of it.

Like you, Andrew, I was reared in a home without racism and was a good integrationist who judged people as individuals. But I've been told so many times I'm a racist that I must be. So maybe that word doesn't mean what I thought it meant.

It's a difficult negotiating tactic. I can understand the success of attempting to convince your negotiating partner and the public that you're crazy in a game of chicken in order to get the other side to give in first. But attempting to convince the public that you firmly believe that the other side is crazy, but you're rational-- doesn't that just signal that you'll be willing to back down? (Hence is bullish.)

It seems like even an "accidentally open mic" comment would suffer from this same problem. The markets aren't going to treat it as a negative sign if President Obama is responsibly and rationally complaining about how he knows that the other side is serious. The game theory predicts that in that case he'll yield.

The only way it's viewed as a negative is if his comments seems extreme and make him seem just as irrational and unwilling to yield at the same time as the other side is.

In the actual case, considering the way that the House has passed bills funding the NIH, parks, veterans, and approving the DC budget (the last is only authorization, not spending, since DC needs Congressional approval of its budget to spend money from local taxes), but President Obama and the Democrats oppose such a piecemeal strategy, it seems like the D side in this game of chicken may well be more committed to not "giving in" than the R side. In any case, that kind of uncertainty can be of higher risk for whether a deal will actually be reached.

"Eric, don't call my bluff," he says while obviously bluffing during a negotiation...

I just keep going back to that line from 2011 because the lessons from it still haven't sunk in. I'm wondering what lessons during childhood/adolescence are the teachers of things like this, or are we just preprogrammed in how to do things like play the ultimatum game.

I hate to blame the victim of being outbluffed, but in this case, when you've been feckless, you kind of attract all sorts of challenges to your position. You'd think he'd have advisers who would be telling him how to do this better.

"You’d think he’d have advisers who would be telling him how to do this better."

You'd think he'd have advisers who would be advising him to get involved in the appropriations process in the early spring, like almost every other administration has done.

Haha, really? Obama met face to face with Republicans like 10 times in the spring.

Do you remember when in March a reporter asked a GOP budget daddy whether it would make a difference to his unwillingness to budge on revenue if Obama offered up chained CPI? The legislator said, "Absolutely!" Thing is, Obama had already offered chained CPI, publicly and directly to GOP members. He had also been reaching out to Republicans on their own turf, even showed up at a Republican caucus lunch to talk budget.

It's a flipping mystery why such a uniter would be having so much trouble. The other guys must be racists.

I'm sorry someone was such a meanie and brought up racism on this board today, but it wasn't me. Light up that straw man somewhere else.

"Haha, really? Obama met face to face with Republicans like 10 times in the spring."

I'd like to see a source that records Obama meeting face to face with Republicans for budget negotiations this spring. Do you have anything?

"2/7/2013 - Never let it be said that President Obama has failed to spend time with Republican leaders in seeking an alternative to automatic budget cuts that are due to hit most federal departments Friday. On Wednesday, for example, the president gave GOP lawmakers as much as seven minutes, a rare face-to-face encounter that the White House described as a “meeting.”"


Meeting 10 different times that is. As you've claimed.

Try looking at March and April. Many meetings.

After 2+ years (May 2010 - July 2012) of Euro / IMF policy-makers brinkmanship (national level and global level negotiations/ threats included), Mr Market is way battle - hardened to be spooked by a single interview line.

I think Obama has already decided that it's better for the US to hit the debt ceiling than for him negotiate any deal which delays the ACA. I could be practical minded and suggest that the first outcome would still create opportunities for him to prevail (eg. Scotus could declare the debt ceiling unconstitutional). Fundamentally, though, I think Obama thinks the latter outcome would be deeply undemocratic (given that the Republicans lost the last election and don't even fully control the Congress), and, of course, would nearly destroy his presidency and legacy.

Analogies to previous shutdowns (incl. the one which happened under Clinton) are extremely misleading, I think, because the scale of the dispute and the stakes are so much greater. Obama does have the ability to set the Democratic policy himself (eg. even if the Senate caved he would still have the veto). I think those who believe that this is mostly about gamesmanship are kidding themselves. There are situations where parties won't compromise. I sense this is one.

I think Obama thinks the latter outcome would be deeply undemocratic (given that the Republicans lost the last election and don’t even fully control the Congress), and, of course, would nearly destroy his presidency and legacy.

Accept the same type of thing has happened plenty of times before. Very notably in 1996 when Republicans controlled the House and Democrats controlled the Senate and White House. It certainly didn't destroy Clinton's presidency and legacy.

Since when did engaging in hardball budget negotiations become undemocratic? It's exactly what a democratic republic does.

Which signature piece of policy from his administration did Clinton agree to defund?

In quite the opposite affect, the things Clinton "gave in on" during the 95-96 negotiations with Congress, like welfare reform and the reducing budget deficit, became the signature achievements of his administration.

Obama hasn't figured out how to take credit for repealing the unpopular ACA yet, but if he does figure that out, then watch out... :)

Along these lines, perhaps these are communication to the Republican party: "I'm not negotiating on the debt ceiling"? Market reaction isn't necessarily the purpose.

Could it be that the president was really talking about his resolve being different, that he will do whatever he thinks necessary to end this cycle of government by hostage taking. Let's hope so.

'I will beat those Republicans even if the economy collapses and millions of people are hurt!'

Watching this from Canada, our national hobby other than hockey, I'm amazed at the headline this morning here. Obama has lost. He is portrayed as the nutcase. The sticking point is his intransigence. I'm quite amazed. Power is always about others being afraid to confront you, now no one is afraid of Obama. He knows it, and is willing to make others afraid of him not getting his way.

What will it cost the country for Obama to regain the power he squandered?

'What will it cost the country for Obama to regain the power he squandered?'

Oddly enough, in Germany the general consensus view seems to be bemusement that group of tantrum throwers, who refuse to accept a passed law, one confirmed by following court decisions and another election where that law was a major part of the election, seemingly have enough power to shut down things when they still don't get their way. Which just leads to respect for those who refuse to back down because a self-appointed group of irresponsible Congress members decides it is better to force government to shut down than accept they lost, over and over again.

What is harder to understand from a German perspective is why this farce continues. When the FDP tried to weasel Germany out of the Atomausstieg, that attempt was a major part of why they have been spanked by voters so hard they are no longer even a part of the Bundestag. But then, Germany seems to have this quaint idea that once a law is passed, it is law - and if a following election confims its relevance to the electorate, only the truly obtuse decide to oppose what has already been decided.

It is not Obama that is the laughingstock here. However, admittedly, the news that Italy's famously incompetent politicians were able to work out things better than in the U.S. is still just a bit surprising in Germany. Though not as surprising as it was 17 years ago, sadly.

Germany had a lot of "quaint ideas", you'll allow me to apologize if they're not the first place we'd go for democratic advice or opinion versus our neighbor to the north.

>Oddly enough, in Germany the general consensus view...

... might as well have come directly from a Democrat press release. There is nothing "odd" about this whatsoever.

As for what happened to Obama's "power," he never had much to begin with. Despite his party controlling Congress for his first 2 years, all he could do was pass an expensive, unpopular health care law. Meanwhile, the economy spun further and further into the toilet. His job approval rating has always been mediocre, and falling.

You can't get back what you never had.

Oh man, you're delusional. But at least you've got Rob Ford.

Which headlines? I'd love to read them.

>>He is portrayed as the nutcase.<<

Where? I've checked the websites of the CBC, Montreal Gazette, Toronto Star, Toronto Sun, Vancouver Sun, Calgary Herald, Edmonton Journal, Winnipeg Free Press, and Fort McMurray Today. The U.S. Shutdown isn't a headline on any of them, and what articles there are on the subject consist of standard wire feeds from the AP, McClatchy, and Reuters. No headlines that Obama has lost or that he's lost it. I've also checked the Globe and Mail as well as the National Post. Same thing.

Are you implying that some guy yakking on the comments section of a politicized blog is making something up? Or presenting his opinion as fact? Or anecdote as data? You are clearly unaware of how the internet works.

Seems he is making reasonable predictions based on publically available information. Is the point that he is saying something false, or that he should not say something true? How is it different from negative predictions made by other politicians on a daily basis?

This "spook the market" meme going around smacks of bad faith or at least confirmation bias.

Given that he's one of the negotiators, it's impossible to look at his statement as merely a reasonable prediction based on publicly available information. Everyone will-- and should-- look at it as possibly reading something into his own negotiating stance and likelihood of caving.

Didn't the head of Goldman Sachs say something similar? Was he "spooking the market," too?

I agree with WD, John Thacker and Brandon

"an attempt to manipulate trading strategies"

I disagree. It is possible, but unlikely, that Obama is trying to provoke a small correction now to reduce the risk of a larger crash later. More likely he is trying to wake up a complacent Wall Street and get them to pressure Republicans directly by picking up the telephone rather than indirectly by shorting the market.

This is probably mostly just Obama trying to get out ahead of the issue: (1) if the debt ceiling gets resolved he can claim that this statement helped by waking up Wall Street; and (2) if the debt ceiling is not resolved, then the US will, in some real sense of the word, "default" and Obama can say that he played straight and warned Wall Street and the country while the Republicans were blowing smoke.

Whether or not Obama can successfully spook markets is almost beside the point. The mere fact that he would try reveals an complete corrosion of good-faith between government and commerce. Obama is willing to (attempt to) use his bully pulpit against the entire American economy. Americans should find that disturbing regardless of how successful those attempts are.


Further, the hypocrisy is abundant: He accuses the Republicans of being cavalier about the health of the economy, all while actively working to tank the economy so that he can get his way.

Get his way on what exactly? The single piece of legislation he has worked to achieve for the past few years of his presidency? He's to back down now? You can agree or disagree with the ACA, but that is the chip we're talking about.

For the last few years of his presidency the presidents been chipping away at the ACA, delaying the employer mandate, income verification, mini-med extinction, application to certain public sector unions, and canceling the Medicare reimbursement revenue raiser, 1099 reporting, CLASS, application to politicians, etc.

The GOP makes the not-insane proposal that the president delay the whole thing for a year, not randomly choosing bits and pieces for variable waivers.

Do you really think the GOP is making a good-faith proposal to delay the ACA for a year so it can be improved? If so, you're probably the only one. If you think they're offering a bad faith proposal, and want to kill the ACA, Obama would be a fool to take it.

The actual shutting down of Government corrodes the good faith between government and commerce more than Obama's comment has.

One faction, of one party, in one house, in one branch of government has completely erroded the good faith aspect of commerce and government because they can't win through elections. They are hijacking democracy and eroding the trust of the public while doing so.

The folks that you are talking about actually won their election, a majority in the house in fact. The electorate in their wisdom made sure there was divided power in Washington.

House Republicans actually received less votes then House Democrats, in aggregate. A large reason for gaining control of the house had to do with re-drawing the lines of congressional districts.

RPLong, if you are making the argument Obama is corroding the trust of the public by speaking his opinion from his bully pulpit, a pulpit he won twice by popular election, than I'm afraid your case if rather week. That's what Presidents do. You win general elections in a democracy and you get to use it as a pulpit to spread your vision of what the American people voted for.

It wasn't even a close election, either time.

Huh, what you have just done is dropped the context of the discussion. I agree that Obama won the election, and I accept that he possesses the power of the bully pulpit.

The context of this discussion, however, is whether that power ought to be used against Obama's own country's economy. If you are suggesting that merely winning an election gives Obama the right to hold the economy at his mercy, then - assuming you're right - you have eviscerated your own argument against Congressional Republicans.

I would rather not assume that you are right, however. I would rather that you explain yourself. Why on Earth do you feel Obama has the right to threaten markets? Please show your work.

The premise of your claim is deeply flawed. In your context, simply speaking about what Republicans are doing and how they are acting constitutes "hold[ing] the economy at his mercy" which is just flat out incorrect. Pointing out this time is different from the 2011 negotiations and people should be concerned because Republicans have no end game, nor any idea of what they want is holding the economy hostage? How? Why? .

Making such an outlandish claim requires YOU to show proof of concept in that statement.

Huh, I asked you a question that does not require that any of my "premises" be accepted. You didn't answer my question. I suppose we'll have to leave it at that.

In order for me to answer the question to your satisfaction, I would have to agree that the premise of said question is valid: Your question is" Why on Earth do you feel Obama has the right to threaten markets". Firstly, you are not following this if you think I have said he is allowed to threaten markets. Secondly, this question is built on the premise you believe he is threatening markets with his comments or at least tried to threaten markets (read your first comment above). I disagree with your interpretation for reasons I've already expressed.

Either you cannot or you will not expand that thought further and justify that claim. I cannot answer a question I disagree with if you are unwilling to extrapolate your reasoning as to why you believe President Obama expressing his opinion of how Republicans are acting constitutes holding the economy hostage. There are too many leaps of logic for me to even try to answer such a loaded question.

If your response to a criticism of Agent X is to cite problems with Agent Y, then your case is not very strong.


Talking about whether he can, rather than the fact he attempted to, is missing the forest for the trees.

Beyond that, can he?
Well, by his direct actions, maybe or maybe not. Indirectly, he can signal he's an incompetent boob though, and that might do the trick.

If Obama genuinely believes that Republicans are unwilling to raise the debt ceiling without a hostage exchange and really will let the government default, why is it so horrible that he state his opinion?

What about the Republicans that have said a debt ceiling default would be no big deal at all?

That's some disingenuous bullshit. Obama's not the one who, with control of a portion of the government, is threatening to shut down the government and destroy the creditworthiness of the nation in order to repeal existing legislation. He's merely pointing out that the people threatening that might be serious this time.

Get back to us when Obama threatens to veto every approriations or budget bill and shut down the government in order to pass ... I don't know... disbanding the military or mandatory gay sex or something.

But he is the one willing to destroy the creditworthiness of the nation over a couple of small portions of one bill. Apparently, you are, too. So don't bitch.

He's refusing to negotiate with a faction of one half of Congress. They are willing and, in some cases, eager for the US to default if they don't get to damage or repeal Obamacare. In this scenario, the thing Republicans are "giving up" is "not blowing up the economy."

It's not the police that are willing to let a few hostages die when the irrational hostage-takers are making demands.

You may not think the distinction is important but I do. The last bill passed by the House was a 1 year delay in the individual mandate plus a repeal of the congressional exemption and it was turned down by the Senate and thus we have a shut down.

Why won't the House hold a vote on a clean CR? It'd pass, easily, and then quickly pass the Senate and be signed into law by the President.

What, exactly, are Republicans giving up in that scenario? Democrats have to undercut their signature legislative act of the last several decades in order to get sequestration-level government funding to continue, and then who knows what next week in order to avoid a default. Republicans give up....not shutting down the government and blowing up the economy?

If hostage takers agree to only shoot one hostage instead of shooting all ten, are they really compromising?

...Because it is not the job of the House to only pass laws the other houses of government agree with. The normal process is for now the Senate to pass their own version and the two houses go into conference to negotiate but guess which house isn't willing to do the last part?

If you don't believe the Democrats/Obama haven't already undercut their signature legislation then I'm not sure what to say (waivers for politically connected groups, delays, this week's rollout, etc). The R's (the leadership, not the tea members) reasoning is that since businesses already got a 1-year extension (an "undercut" in your terms) and Congress got exempted by Obama (another undercut), then it is not irresponsible to ask that individuals get the same treatment and that Congress's exemption be repealed. If they don't attach it to the CR it is near impossible for it to pass otherwise so they're choosing to do it now.

Obama is supposed to delay the mandate for a year to keep the government funded until, at the latest, Dec. 17? What would he have to give up next? That's a verrrrrry heavy price to pay for a couple of months of funding. I think it might be worth it for him if the Republicans funded the government and extended the debt ceiling until the end of his presidency.

Also, the one-year delay would cause problems with the exchanges, since it would worsen the insurance death spiral. Screwing insurance companies is not likely to make the PPACA function more smoothly going forward.

It's mildly amusing (or depressing, take your pick) that this entire debate is about a continuing resolution, rather than a budget. None of the MSM seems to understand the distinction, and continue to use the latter term.

More worrying is that the politicians don't seem to be able to make the distinction any longer, either.

when you publish a book are you "spooking the market"?

Perhaps Obama doesn't spend as much time thinking about what he is going to say as we spend on interpreting his statements.

IMO, this is just Obama staying with his core strategy of blame whenever he faces adversity.

Confusion more likely. He doesn't seem well read, just parochial papers. They led him to believe the shutdown would be a disaster and the country would exclusively blame GOP. None of that happened, but he still parrots the NYT editorial line about doom.

But at least he's not talking about Syria, the IRS, NSA or Obamacare's debut, so that's a positive byproduct for him.

Givco, you're conflating the shutdown and the debt ceiling while accusing Obama of being poorly read. Strange. Some fearmongering going on about each, but the debt ceiling really does have the potential to spark a worldwide crisis. Don't think it will come to that, but it's not crazy to say "If X, then Y." If you want to argue that saying so is counterproductive, that would be fair.

Givco, you're confusing the shutdown with the debt ceiling and making comments about how sharp someone else is? Might want to think that through a little bit.

Republicans in Congress have repeatedly emphasized that they are willing to breach the debt ceiling. President Obama has essentially affirmed that he believes they are telling the truth.

If they are telling the truth, that should spook the markets.

Pointing out the truth can be a tactic in negotiation; the President undoubtedly made those statements in hopes of strengthening his position. But being useful, tactically, is not the same as being untrue, and when people assess the value of information based exclusively on its tactical value, rather than its accuracy, they are starting down a dangerously myopic road.

More interesting to me is the unspoken underlying assertion: that participants in the markets assume that Republicans are essentially lying about their willingness to breach the debt ceiling over Obamacare, because breaching the debt ceiling would be so stupid. At some point, if counter-parties believe that you are pretending to be a psycho but are actually a cynically negotiating liar, that knowledge erodes the very negotiating position you have built, and they stop negotiating, since there is little point in negotiating with a bad-faith actor. At that point, the only way for the 'liars' to restore their credibility is to prove that they were actually telling the truth by doing the psycho thing.

So when we evaluate the President's statement, the real question is, "How badly do you think Republicans want to 'beat' the President versus how much do they worry about the economy?"

Obama is spooking the markets by telling the press the positions Republicans have publicly stated. This argument makes perfect sense.

Am I missing something here. Does everyone agree that default I. The debt would be a disaster and that tea party members of Congress are advocating that tactic. If so, Obama would be irresponsible not to point that out and get more responsible members to understand.d the danger. The market will move when it realized that the it WILL happen .

Who's advocating default? That word is only brought up by one side and its the not the Tea party members.

Please. Save us.

Who started this incredibly stupid game of chicken?

And one more thing: If we default on our debt, Obama may have no choice but to act and perhaps act in a way that will break some law while defending another.

You can rest assured that the Republicans will immediately start the impeachment talks and we will waste more time in unproductive crisis mode.

It's the stupidity of it that really gets me. Obama is a center right president. I guess in order to save the country we had to destroy it.

Obama is center right...

You mean compared to Bush/Cheney (not even correct btw) who were the main driving force for the genesis of the Tea Party?

The guy who said very clearly that he would not negotiate?

No. You are not missing anything.

Obama isn't trying to spook the market. He can't and he knows it.

What he is doing is suggesting that refusal to raise the debt limt might well spook the market.

Tyler's "Presumably Obama hoped to spook markets," is just wrong.

So Obama wanted to calm the markets?

How about Obama is telling the truth and the markets already are spooked because of the actions (or inactions) of congress?

Yes, the stock market is basically at an all-time high and bond yields are...not doing much. Count Floyd says: ooh, scary!

I don't get it. if the markets aren't spooked then obama couldn't have spooked the markets anyway so tyler is still wrong.

Does anybody think things will be really, really bad when the annual interest payable on the US national debt is greater than annual US tax receipts?

There won't be a default.

They still have the "trillion dollar" coin option.

No, wait!

Them [expletive!!!] tea party anarchists/fanatics/terrorists would vote it down.


Never attribute to precise planning and forethought what can be attributed to the vocalization of spontaneous, random thought patterns and emotion. Above all, don't bring in game theory.
This is the same guy who unexpectedly decided, during a Friday walkabout in the Rose Garden a month ago, to seek congressional approval for a strike on Syria in order to cover for a threat that he made a year earlier as part of a spontaneous and unscripted exchange with reporters. It is widely reported that he didn't realize what he had done with his "red line" comments until his advisers confronted him afterwards. This is not a man who prepares his remarks with that level of exactitude.

"This is not a man who prepares his remarks with that level of exactitude."

That actually sounds about right. What it makes me wonder though, is why so many people read into the tea leaves for everything said at the Fed, but not so much for the government in general. I wonder if it's because the actors know that the Fed has generally crafted their phrasing with the knowledge that it will be parsed heavily, and that they themselves are thinking at least a few months out, making those tea leaves a neccesity?

Nomination for best MR comment of the year.

Wow, thanks! I don't comment a lot here--but it seemed to be an argument not otherwise covered at the time.

Barack Obama = George W. Bush. Left / right = manufactured false distinction. Left vs Right = Coke vs Pepsi. Corporatist warmongers and fatcat finance coddlers to a man, with no real power over the establishment that actually runs things.

As for irresponsible statements and bad leadership parallels -- remember W.'s infamous "This Sucker Could Go Down"

dude. come on. poor choice of words. seriously.

Given he's dealing with this level of stupid -
"We're not going to be disrespected," conservative Rep. Marlin Stutzman, R-Ind., added. "We have to get something out of this. And I don't know what that even is."
- I find his assessment quite straightforward.

Please stop you're spooking me. Can i get that bubble the Tea Party uses ?
I need to not see reality and must be comforted at all costs.

Section 2: HR 421

"In the event that the debt of the United States Government, as defined in section 3101 of title 31, United States Code, reaches the statutory limit, the authority of the Department of the Treasury provided in section 3123 of title 31, United States Code, to pay with legal tender the principal and interest on debt held by the public shall take priority over all other obligations incurred by the Government of the United States."

I believe the foregoing House Bill was passed by the House in May along strictly party lines. It was attached to the CR that went to the Senate and was "stripped out" by action of the Senate majority leader. His reasoning, pointed out in today's (10/03/2013) WSJ, was that it could benefit China as a holder of US debt, should the Treasury shall determine the priorities of expenditures of available federal funds.

See, McClintock-Toomey legislation.

One of the confirmed ways to denigrate honest people is to classify them as "stupid."

Why is there no knowledge and dissemination of this simple, honest provision for the prevention of "default." Why did the President denigrate this preventative for the situation he presumes portends great dangers for the US economy?

That doesn't actually prevent default, though.

Why not?

I think Obama could do a *way* better job spooking the markets than this if he tried. How about

"The little voices keep telling me to default on the debt and nuke Iran, but I'm holding firm...so far."

"I want to talk about the debt ceiling. America needs to know that the debt ceiling has been imposed on us by a mysterious conspiracy, known only to a few. I am speaking, of course, about the Bavarian Illuminati. They are behind this latest crisis."

Yes, I think that might do it. . . . .

Section 2: HR 421

"In the event that the debt of the United States Government, as defined in section 3101 of title 31, United States Code, reaches the statutory limit, the authority of the Department of the Treasury provided in section 3123 of title 31, United States Code, to pay with legal tender the principal and interest on debt held by the public shall take priority over all other obligations incurred by the Government of the United States."

This is referred to in today's (10/03/2013) WSJ, as having been passed by the House in May 2013 on a strictly party-line vote. It was attached to the CR submitted to the Senate, but "stripped out" by the majority leader on the grounds that it could benefit China as a holder (10%-23%) of US debt, ignoring the discretion to the Treasury to selectively determined debt payments and other uses of federal funds available.

Why did the President denigrate that simple solution?

My apologies for the repost, but it appeared that the original had been rejected.

During the period immediately prior to the showdown over the debt ceiling in 2011, the S&P fell from about 1350 to around 1125. This is a fact. I see nothing wrong or awful about Obama pointing this out.

Also, anybody who is for the shutdown but is running around whining about certain particular parts of the govenment being shut down, should really have their heads examined. Do you really want to be alike Michelle Bachman, voting for the shutdown and then running less than 12 hours later to the WW II Memorial to complain about its being shut down?

Answer to your question: yes they do.

When the same memorial was not closed during previous shut downs, I do not see anything unreasonable about her position.

Sorry, Jay, the memorial did not exist the last time the government was shut down.

Apologies, not this particular one, but the open-air ones in general were open during previous shut downs.

When it costs money to shut it down, but nothing to keep it open?

That's what I was wondering.

You are wrong. Shutting down is a one shot cost, but savings from not paying those who normally manage it will quickly outweigh that.

Are you suggesting that this time around Federal workers won't be 'reimbursed' for their furlough time? That would be a welcome change.

It's open air. Nothing to manage day to day.

Obama did not barricade the Federal Interstate Highway System for the the so-called government shutdown. His preference is to push around aged WWII veterans, and military families.

Obama did not barricade the Federal Interstate Highway System for the duration of the so-called government shutdown. He pushed out some 80 and 90 year old WWI vets.

No, Shaw, it was the House GOP who shut it down. I suspect that you would be even more hypocritical than Bachman and imitate Rep. Neugebarger (sp?) who berated one of the unpaid Park Service employees about the closing and demanded an apology from her for the shutdown, which she offered, although thankfully the crowd quickly began to shout criticisms of this scoundrel.

The Democratically controlled Senate has refused to vote on the CR.
The House did their job.

Why did Tyler claim that Obama deliberately and purposely tried to spook the market.

No more proof of this than that he is a Keynan, but it does reveal Tyler's perspective, notwithstanding reality.

Why did Tyler claim Obama deliberately tried to spook the market?

Give me a break.

Here is what I suspect Obama is doing. He knows (well, his political advisors know) that the Tea Party was primarily discipline against moderate Republicans. So, Obama's game is to agitate amongst Republicans. He doesn't really care who wins as long as the fight remains between moderate and right-wing Republicans, although he wants to appear to side with the moderates. It's just a garden variety political wedge.

The important point to realize about market reactions to political events:

Markets won't panic unless there is a chance that even a panic will not generate a solution. A large market route won't occur until it looks like things might not work out even if politicians respond to the pressure from the market volatility.

If the politicians actually require a significant amount of market volatility in order to act (debatable in this case), the situation is likely to come down to the wire.

What if Obama just "went missing"? Hiding out in a bunker with no information available to the media about his whereabouts... how would markets react to that?

Interesting to read this thread as of today (10-7). Seems that maybe the comments were just telling the true status of the situation. I'm wondering how much Medicare, Social Security, and Medicaid will be cut if solution is not found by 10-17 and we possibly default on debt. Would be interested in an article outlining what options are open to prevent default, and how mandatory cuts would be implemented? thanks

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