by flory
It looks like, just maybe, the teabagging Republicans may've shot themselves in the foot with their oh-so-clever tax deal with Obama. I suspect everybody who reads this blog has heard by now that there's a stealth assault on Social Security prominently featured in the deal. What's just now being discovered is the dog that didn't bark in the night -- what wasn't included in the deal. Turns out that's a not-at-all-surprising assault on state finances and government employee unions:
Congressional Republicans appear to be quietly but methodically executing a plan that would a) avoid a federal bailout of spendthrift states and b) cripple public employee unions by pushing cash-strapped states such as California and Illinois to declare bankruptcy. This may be the biggest political battle in Washington, my Capitol Hill sources tell me, of 2011.
This all has to do with a federal program --called BABS, set to expire on 12/31 -- that subsidizes the interest cost of state borrowings. Republicans wouldn't let Obama include it in the deal:
my Reuters colleagues report that a GOP congressional aide said Republicans “have a very firm line on BABS — we are not going to allow them to be included.”
What this means is that for the big states with the big projected budget deficits, those deficits just got measurably bigger. (There was an article in the Oakland Tribune on monday wondering why in the hell Jerry Brown wanted the damn job again.) The Republican assumption is that the only way to balance those budgets will be to take on the civil service unions -- in the hope that the crisis will get so bad the governors will kill the unions as dead as their hero Rayguns did to PATCO.
What they don't seem to have taken into account -- being Republicans and unable to think more than one step ahead of themselves -- is what this will do to the municipal bond markets. Kill them, basically. And that won't make Wall Street particularly happy. I suspect that having been apprised of this little oversight, Chuck Shumer, Joe Lieberman and Dianne Feinstein just became opponents of this deal.
And Wall Street in opposition, with any luck, may be enough to kill it.