Wednesday, December 21, 2016

Trump's fiscal follies and the new director of OMB

Remember when the Republicans wanted to not raise the debt ceiling and thus to trash the “full faith and credit” of the United States - not withstanding the unconstitutionality of that action? Those were the good old days. Trump’s OMB pick might presage a fiscal folly.

Catherine Rampell writes in the Washington Post about how Trump’s OMB pick seems poised to ignite a worldwide financial crisis.

Over the weekend, President-elect Donald Trump tapped Rep. Mick Mulvaney (R-S.C.) to be his director of the Office of Management and Budget. This Cabinet-level post is responsible for producing the federal budget, overseeing and evaluating executive branch agencies and otherwise advising the president on fiscal matters. It’s a position with tremendous, far-reaching power, even if the public doesn’t pay much attention to it.

Which is why it’s so concerning that Trump chose Mulvaney, who seems poised to help Trump ignite another worldwide financial crisis.

Mulvaney was first elected to Congress in 2010 as part of the anti-government, tea party wave. A founding member of the right-wing House Freedom Caucus, he is among Congress’s most committed fiscal hawks. He has repeatedly voted against his own party’s budget proposals because they were insufficiently conservative.

Whatever their differences on line-item details … Mulvaney and the president-elect have at least one major thing in common: an alarming openness to defaulting on the federal debt.

As you may recall, during the campaign Trump repeatedly flirted with the idea of defaulting on U.S. debt obligations. In a CNBC interview in May, he suggested that his experience in offloading private debt would translate nicely to federal obligations. That is, he’d simply persuade the country’s creditors to accept less than full payment.

“I would borrow knowing that if the economy crashed you could make a deal,” he said.

When the financial press freaked out, he walked back the language — only to revive it a month later.

Mulvaney has also questioned the need to preserve the country’s sterling reputation as a borrower.

He ran for Congress promising to never raise the country’s debt ceiling, and he has mostly kept to that pledge. Since taking office in January 2011, he has voted against (ultimately successful) legislation to raise this ceiling four times. He also publicly questioned whether failing to raise the ceiling would be such a bad thing, and whether it would necessitate defaulting on our debt.

To be clear: It would, and it would.

Raising the debt ceiling is about enabling the federal government to make payments that have already been promised, not new spending. Refusing to increase this limit would call into question the country’s creditworthiness.

Set aside the fact that this flippancy about making full and timely payments on our debt would likely violate Section 4 of the 14th Amendment. That’s the part of the Constitution that says that the “validity of the public debt of the United States . . . shall not be questioned.”

One might hope that once Mulvaney adopts his new role, he’ll become more cautious about encouraging default. That seems optimistic, though, given that, as budget expert Stan Collender put it, Mulvaney will probably be the most ideological and least-qualified OMB director in decades.

Steve Benen (MSNBC/MaddowBlog) concurs and explains Why Mick Mulvaney may be one of Trump’s most alarming picks.

… OMB is easily the most important agency the country knows very little about, and the fact that Donald Trump has picked a far-right congressman to lead the office is, to put it mildly, unsettling.

Reviewing the Republican congressman’s record, “sanity” is not the first word that comes to mind. Mulvaney, for example, is a Tea Partier who helped create the right-wing House Freedom Caucus.

When GOP lawmakers shut down the federal government in 2013, it was Mulvaney who helped lead the charge, celebrating the shutdown as “good policy.” When Republicans launched their debt-ceiling hostage crisis in 2011, threatening to push the nation into default unless the party’s demands were met, Mulvaney not only championed the dangerous scheme, he publicly argued that default wouldn’t be a big deal, and undermining the full faith and credit of the United States would carry few consequences.

Mulvaney eventually lost that one. But in his new post as OMB director he can do more damage short of a government shutdown.

It’s important to remember that leading the federal Office of Management and Budget means more than crunching numbers and looking at balance sheets. NBC News’ report added, “As the White House’s budget director, Mulvaney would be responsible for reviewing the budgets of federal agencies and making sure they align with the administration’s priorities.”

I realize this may sound dry, but we’re talking about an office that has “central authority for the review of Executive Branch regulations,” determining whether or not agencies’ budgets are in line with Donald Trump’s broader goals.

About those goals and priorities? Think of these associations. Perry –> Energy. DeVos –> Education. Sessions –> Justice. Price –> HHS. Zinke –> Interior. Carson–> HUD. Pruitt –> EPA. Now add Mulvaney –> OMB to the mix and apply the authority of the OMB to Trump’s goals and priorities.

As Mother Jones’ Kevin Drum noted the other day, “Mulvaney will be the patron saint of ‘cost-benefit’ analysis of federal regulations – which, in Republican hands, normally means totting up the costs and ignoring the benefits. In particular, it means that environmental regulations, even those with immense benefits, will be scored into oblivion and never see the light of day.”

Trump has made a variety of alarming personnel decisions in recent weeks. This one is among the worst.

Mulvaney and his new boss Trump are riddled with fiscal fallacies which, if acted upon, will visit a fiscal folly of immense proportions on the economy of this country and thereby create an economic global nightmare. Even if that future is not realized, the face of America is likely to be scarred by Trump and his cabinet of socioeconomic horrors.

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