Illinois Senator Barack Obama, March 16, 2006:

The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies.

Over the past 5 years, our federal debt has increased by $3.5 trillion to $8.6 trillion. That is “trillion” with a “T.” That is money that we have borrowed from the Social Security trust fund, borrowed from China and Japan, borrowed from American taxpayers. And over the next 5 years, between now and 2011, the President’s budget will increase the debt by almost another $3.5 trillion.

[snip]

Our debt also matters internationally. My friend, the ranking member of the Senate Budget Committee, likes to remind us that it took 42 Presidents 224 years to run up only $1 trillion of foreign-held debt. This administration did more than that in just 5 years. Now, there is nothing wrong with borrowing from foreign countries. But we must remember that the more we depend on foreign nations to lend us money, the more our economic security is tied to the whims of foreign leaders whose interests might not be aligned with ours.

Increasing America’s debt weakens us domestically and internationally. Leadership means that “the buck stops here.” Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.

I therefore intend to oppose the effort to increase America’s debt limit.

President Obama got called on this by George Stephanolopolous. He says he’s grown up since:

As president, you start realizing, you know what, we, we can’t play around with this stuff. This is the full faith and credit of the United States. And so that was just an example of a new senator making what is a political vote as opposed to doing what was important for the country. And I’m the first one to acknowledge it.

There’s been a fair amount of reporting on the endgame, but no one seems to have nailed down a sufficiently coherent theory, at least not one that’s made me think, oh, ok, that makes sense. I mean, that is, if you are presuming some greater intelligence at work in the universe:

The tale of the secret talks between Barack Obama and John Boehner is the story of a political system that has largely ceased to function and yet may be the prelude to something even worse. Lawmakers must work out a package of spending cuts and revenue increases that will permit the Treasury to keep paying its bills through August and beyond. If they fail, the government will lose its ability to meet its obligations — including paying soldiers their salaries and seniors their pensions — ensuring an economic meltdown at home and a crippling loss of faith in the U.S. in financial markets overseas. That would be an unprecedented fiasco.

Cheer up, Time! I do not think this will happen:

The Wall Street executives say even pushing close to the deadline — or talking about it — could have grave consequences in the marketplace.

“They don’t seem to understand that you can’t put everything back in the box. Once that fear of default is in the markets, it doesn’t just go away. We’ll be paying the price for years in higher rates,” said one executive.

And the question will be who’s left holding that bag. Probably no one:

"We would like to see, even if we can’t get a grand deal, that some real cuts be added to Senator McConnell’s proposal and perhaps Senator McConnell’s proposal be modified," said Sen. Chuck Schumer (D-NY). "That is another possibility, not as good as a larger deal, but certainly better than just avoiding default."

My guess is that the White House will get what it actually wants—sufficient budget cuts to lock down, or at least not alienate, conservative Democrats/moderate Republicans. I can’t help but think that, perhaps, the 2012 goal is to make Reagan Democrats-turned-Republicans back into Democratic-voting Reagan Democrats.

Photograph: White House Flickr Stream