Why the US Debt Limit Talks Fell Apart

Funny, I don't get much real insight on why the Obama talks with the Republicans suddenly failed on Friday July 22nd. But here is a post by Paul Krugman in his NY Times blog that sheds a great deal of light on the issue:

Naked Blackmail

It turns out that in the final stages of the debt negotiations, Republicans suddenly added a new demand — a trigger that would end up eliminating the individual mandate in health care reform.

This is telling, in a couple of ways.

First, the health care mandate has nothing to do with debt and deficits. So this is naked blackmail: the GOP is trying to use the threat of financial catastrophe to impose its policy vision, even in areas that have nothing to do with the issue at hand, a vision that it lacks the votes to enact through normal legislation.

Second, this is a demand Obama can’t accept, unless he plans on changing his party registration. Health reform doesn’t work without a mandate (remember the primary? Maybe better not to). And if health reform is undermined, Obama will have achieved nothing. So by adding this demand, Republicans were in effect saying no deal — unless, I guess, they believed that Obama is a total pushover.

The media is talking about "an additional $400 billion in taxes" but Krugman is pointing at a real showstopper. I don't know where the truth is, but I would trust Krugman over the media. He has a better reading of the political pulse than anything else I read.

I still find it insane that Obama has allowed himself to be roped into the Republican turf of deficits & debts. Polls show that the real issue for Americans is the economy & jobs. But Obama is still talking as if "solving the debt problem" is suddenly going to lead to a blossoming of the economy. It won't. Obama is acting like Herbert Hoover in the middle of the Great Depression. He is trying to control deficits when in fact government should be opening the spigot to create jobs to get people back to work, earning a living, so they can spend and revive the economy!

By the way... In another post Krugman spells out what Obama was willing to give away to the Republicans to buy agreement on raising the debt ceiling:

Jonathan Cohn summarizes what seems to have been in the deal that Boehner walked away from; it’s horrifying. Above all, the proposed rise in the age of Medicare eligibility was a real betrayal of both Democratic principles and good government.

...

But it’s quite something else to take people who are currently being covered by a rational single-payer system, and force them back into the inefficient, parasitic world of private insurance. That’s terrible. And it’s also politically stupid: if you think for a minute that Republicans wouldn’t turn right around and run ads about how Obama is taking away your Medicare, you’ve been living under a rock.

Oh, and of course, Republicans were also trying to undermine health reform; so seniors would find themselves thrown off Medicare but, in many cases, unable to get private insurance either.

Great work, White House.

Obama is a tragedy. The year 2008 was a watershed year, a real chance to turn the tide after 30 years of Reaganite "trickle down" economics and an ever more shrill and fanactical right wing politics in the US. But Obama has positioned himself centre-right after running as a centre-left candidate!