Unless you’ve been living under a rock the past two months or been hiding in a cave in the mountains of Afghanistan, you are doubtless aware of an impending, though entirely manufactured, fiscal crisis about to hit the United States.
Quite simply, on August 2nd the United States will reach its statutory debt limit.
In the past, Congress routinely passed legislation to increase the country’s borrowing authority.
This time, the Republicans in Congress are not interested in simply increasing the debt ceiling. If there is to be an increase in the United States’ borrowing authority, it is going to come with conditions, such as spending cuts that will gut the social safety net.
Yesterday, the Speaker of the House, Representative John Boehner (R-OH), walked out of negotiations. The sticking points appear to have been 1) Republican refusal to allow any tax increases and 2) Obama’s refusal to allow the legislation to increase the debt ceiling to repeal the health care reform that was passed last year.
Congressional leaders met with the President this morning, but the hour-long meeting produced no breakthrough.
One major issue is that House Republicans see no reason to increase the debt ceiling. They do no see drastically curtailed federal spending and a default of US debt obligations as a bad thing, and they refuse to believe it when experts tell them otherwise. On NPR’s Weekend Edition this morning, Representative Mick Mulvaney (R-SC) denied that anything bad will happen and explained that Republicans have already compromised enough by even entering negotiations about the issue.
The Republican caucus has staked their future on blowing up the economy. The world economy, as their instransigence is already freaking out the markets and will, if unchecked, induce a full-blown global financial panic. And as Ezra Klein explains, even if there is a solution in the next few days, the credit ratings agencies intend to downgrade the US bond rating anyway; the last four months have demonstrated quite plainly that Congress is functioning at a Third World level at best.
Do I expect a solution? Yes. Do I expect it Monday? No. Tuesday? Well, possibly…
If I were a cynical, conspiratorial bastard, I’d wonder if perhaps Obama and Boehner hadn’t worked this blowing up of the talks together, as both know that Boehner’s caucus isn’t going to go for anything because they simply do not believe what everyone says will happen if nothing is done. So they need to precipitate a market freakout to get it through the think skulls of the Tea Party faction of the Republican caucus that they can’t not raise the debt ceiling.
So what’s likely to happen? The Dow crashes 1500 points on Monday, Monday night a clean debt ceiling bill through the 2012 election is introduced and passes both chambers on a voice vote, and it’s done. Drama over.
That’s what it’s going to have to take. A market freakout and the corporate purseholders behind the GOP calling every Republican Congressman to say, “Your stupid tactics have just cost us millions and billions of dollars.”
But it would also be damned dangerous. Market freakouts are impossible to predict.
These are scary times. I don’t understand how people in Washington and the financial capitals of the world are sleeping at night.