For all the talk of economic crisis should Congress fail to raise the debt ceiling by August, the financial markets are likely to yawn at this vote — if only because Republican leaders have privately assured Wall Street executives that this is a show intended to make the point to Mr. Obama that an increase cannot pass absent his agreement to rein in domestic programs.
“Wall Street is in on the joke,” said R. Bruce Josten, executive vice president of the U.S. Chamber of Commerce.
Wall Street should worry, Times reporter Jackie Calmes writes.
Investors have grown accustomed to partisan games of chicken that always end with the needed increase in the government’s borrowing authority. But this showdown, many say, is riskier because of the strongly held antispending, antitax views of the many freshman House Republicans combined with the fragility of the economic recovery.
The tea party, however, is surely being used as a stalking horses for a Republican party. Republicans believe that if they can hand Obama a lousy economy a year or less before the election, he's sure to lose.
Republicans, on the other hand, are facing signs that their usually staid and moderate voters are fed up with the irresponsible antics of their own party. Unless the party nominates an acknowledged miracle worker, they'll vote their party locally but not nationally. They understand that a government shutdown doesn't save money.
Far from it: the costs of getting the whole government back online after a shutdown -- not even adding the accrual of interest on debt -- are high. That hasn't gotten through to Republican voters yet, according to surveys. But it will when the bills start coming in -- and time is not on Congress' side.
... The time frame for action on a deal is shorter than the Treasury’s debt-limit deadline would suggest: The House’s unusual schedule of recesses this year means both chambers of Congress will be in session simultaneously for just four of the nine weeks before Aug. 2.
Whichever way you look at it, we're facing serious problems if the debt limit is not raised. The self-righteous and the know-nothings in Congress's Republican ranks are playing Russian roulette with the economy. Already they're costing us some real money in both the short and long terms even if they stop in time to avoid default.
Just as the political dynamic is more precarious than in years past, so too, say some analysts, is the economic recovery. The combination “definitely makes it more dangerous” to even flirt with default, said Rick Rieder, a managing director of BlackRock, the world’s largest investment management firm.
“The practical ramifications of it are dramatic, and I truly believe this,” Mr. Rieder said. At some point short of actual default, he said, “you’re going to run down the road where the rating agencies are going to have to react, the Fed is going to have to make a set of decisions, international investors are going to have to interpret what this means, and you could functionally have a self-fulfilling prophecy in terms of the risk while not actually having a default. That is such a dangerous path to go down.”
Even assuming a quick resolution, he added, the nation could face higher borrowing costs for the long term, increasing the national debt.
The following should serve as a reminder to Republicans about what game playing can do.
Increasingly, worriers from Washington to Wall Street recall the how House Republicans by a 2-to-1 margin first rejected the Troubled Asset Relief Program, better known as the bank bailout, on Sept. 29, 2008, though the financial system was near collapse and a Republican president, George W. Bush, was pleading for their support.
That afternoon, cable networks split screens to capture the stock markets going down simultaneously with the House vote; the Dow Jones industrial average fell more than 777 points, its largest single-day point drop. Four days later, following the Senate’s lead, the House approved a revised bailout and Mr. Bush signed it into law.
The tea party campaigned on their antipathy to TARP and to bailout. They're hugging that hobgoblin --consistency -- and their consistency could cost them and the rest of us the gains we've managed to make in economic and financial stability during the two years since the bust. No one in America is voting for a return to chaos ...or are they?
Well, as digby wrote - that's a feature not a bug. The vertiginous drop in the Dow prompted a no strings attached bailout. Let Wall Street drop a thousand points and Medicare will be dead on the sidewalk by sundown.
Posted by: Dan | May 31, 2011 at 08:31 PM
Agree. I like her choice of words.
Posted by: PW | June 01, 2011 at 06:44 AM