On Last Night's Debt Limit Vote: Appeasing Republicans Won't Work
Shortly after voters gave Republicans control of the House of Representatives, House Speaker John Boehner (R-Ohio) struck a refreshingly responsible tone about the debt ceiling. "I've made it pretty clear to [my caucus] that as we get into next year, it's pretty clear that Congress is going to have to deal with [the debt limit]," Boehner said after the midterms. "We're going to have to deal with it as adults. Whether we like it or not, the federal government has obligations and we have obligations on our part."
The House GOP, of course, quickly abandoned this maturity. Following through with American obligations is out; playing chicken with the economy is in. Acting like adults is out; acting like intemperate children is in.
Late yesterday afternoon, Republicans brought a "clean" debt ceiling bill to the House floor for the express purpose of watching it fail. The point was to let a right-wing caucus thump its chest, telling the White House that the hostage strategy -- give GOP lawmakers sweeping cuts or they'll cause a recession on purpose -- is still on.
But the White House already knew that, making yesterday's little charade the latest in a series of pathetic displays. When the dust settled, the final vote was 97 to 318, with 7 Dems voting "present," and 9 members not voting at all. Every Republican voted against their own bill, as was predetermined when it was introduced.
The GOP leadership is well aware of the dangers in stunts like these, so they "scheduled the vote for after the stock market's close, and in the preceding days called Wall Street executives to assure them that the vote was just for show."
The showdown over the issue is likely to continue well into the summer, with consequences for both parties and, potentially, for the economy and Wall Street, where the bond market in particular is watching the partisan standoff closely. Yet for all the talk of crisis should Congress fail to raise the debt ceiling by Aug. 2, when the Treasury Department says it will run out of room to meet all the government's obligations without further borrowing, the financial markets are likely to yawn at Tuesday's proceedings.
"Wall Street is in on the joke," said R. Bruce Josten, executive vice president of the U.S. Chamber of Commerce.
Right. It's all just a big game, which happens to put the global economy at risk. Few seem to believe Republicans would deliberately cause a catastrophe -- basic American patriotism should prevent anyone from crushing the country's economy on purpose -- though the "the joke" itself may prove dangerous. As Ezra Kleinrecently explained, "The danger in this is that as the rhetoric ramps up, the market may not realize this is all just more of Washington's fun and games. Brinksmanship runs the risk of misjudging what is the last minute, or the maximum amount of uncertainty, that the market will accept before it reevaluates the American government's capacity to pay its debts back in a timely and smooth way."
The question becomes one of whether investors believe Republicans are crazy or really crazy. Yesterday, the GOP's message was, "We're pretending to be the latter, but don't worry, we're really the former." The moment the financial industry stops believing that line, there's cause for genuine alarm.
As for nervous Democrats, who were split on the House floor yesterday, it's worth noting that the National Republican Congressional Committee issued two kinds of press releases after the vote: one attacked Democrats who voted for the Republican bill, the other attacked Democrats who voted against the Republican bill. The Dems who sided with the GOP were smeared as cowardly hypocrites; the Dems who sided against the GOP labeled "brazen kings of debt" who want to "make the problem worse."
I hope congressional Democrats notice this, because it's a reminder that appeasing Republicans won't work. The GOP is going to attack no matter what they do, so Dems might as well do the right thing, because Republicans will try to smear them either way.