September 10 2012
Bob Woodward’s latest book is about the debt ceiling crisis from inside the White House and Congress. The Washington Post excerpted the book over the weekend, and there was a chilling scene.
No, I am not talking about the now infamous incident in which a Senate staff member blasts the president to his face for not having a secondary plan to resolve matters, if he didn’t get exactly what he wanted. Not regarding POTUS as a royal figure, I didn’t find this the least bit shocking. (Many commentators did.)
Here in its entirety is the scene that stuns me:
In the White House at 10 later that night, Obama’s key advisers discussed the House vote. There was a chance the Senate Democrats would fold, because the fastest solution would be to pass the House bill and get out of town for their summer recess. If the bill managed to gain Senate approval, would the president really veto it?
“You can’t veto,” Treasury Secretary Timothy F. Geithner told the group. “You cannot be responsible for default.” Anything had to be done to prevent it. Anything to preserve the global economy.
“If he caves,” said David Plouffe, Obama’s senior political adviser, “it will have long-lasting political repercussions that we may never get out of. If we draw a line in the sand on something this important and cross it, we may never be able to come back.”
Accepting a two-step deal would not work, Plouffe said. “We will not get credit for doing anything. We’ll look like we got bullied by a bunch of very unpopular and irresponsible people.”
Geithner had to deal with the possibility that the House bill could reach Obama’s desk. “My recommendation to the president would be, we’ve got to sign this. If that’s what they offer us, we sign it.”
Obama appeared unexpectedly at the door of William Daley, his chief of staff. “What’s going on? What are you guys talking about?”
He knew, of course. They quickly recapped.
Could I actually veto it? Obama asked, adopting his law professor manner. What would happen on the day of the veto? The day after?
“It would have massive effects,” Geithner said. Treasury had to conduct a bond auction in the open market in about five days, the regular Tuesday auction, with settlement on Thursday. That first auction could be a kind of tripwire, setting off a chain reaction. The federal government couldn’t pay its bills. “Why would anyone buy U.S. bonds if it’s an open question whether we are going to have the authority to pay for them?”
Another possible outcome, Geithner said, was perhaps worse. “Suppose we have an auction and no one shows up?”
The cascading impact would be unknowable. The world could decide to dump U.S. Treasuries. Prices would plummet, interest rates would skyrocket. The one pillar of stability, the United States, the rock in the global economy, could collapse.
Geithner thought there was one other consideration. He did not mention it to anyone, not even the president, but he had thought about it a great deal. It was not just that Obama faced an economic choice or a political choice. He faced a moral choice.
The president should not put himself in the position of saying unequivocally that he would veto, Geithner concluded, for one simple reason: No one could be sure how to put the American or the global economy back together again. The impact would be calamitous.
“And the people who would bear the pain of that would be the people less prepared,” Geithner told others, “less able to absorb that cost. It would be something you could not cure. It is not something you can come back and say, a week later, ‘Oh, we fixed it.’ It would be indelible, incurable. It would last for generations.”
Obama never had to confront the veto question. A few days later, House Republicans dropped their insistence on the two-step plan. The final plan accepted a debt limit increase that would take the country through the 2012 presidential contest. It also postponed $2.4 trillion in spending cuts until early 2013.
The long-term deficit crisis had not been solved, but merely put off, leaving the United States at the edge of the fiscal cliff, where it remains today.
I was going to opine on this, noting how it reflects upon POTUS, what this says about his much-vaunted solicitude for the poor, about breathtaking ruthlessness, how I disagree with some of my radical friends on this side of the aisle about not letting the world tumble into utter chaos. But, you know what, this passage speaks for itself. There is nothing to add.