On Debt Ceiling, GOP Causing Economic Uncertainty It Once Decried

Racing full speed toward an uncertain edge of a very real cliff.

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Do you remember economic uncertainty? The GOP spent most of the 2010 campaign season issuing dark warnings about the terrible consequences of economic uncertainty. Uncertainty was the great peril stalking the U.S. economy, and the Republicans would not stand for it.

That was then. Or more specifically, that was a talking point in service of making permanent the (deficit-exploding) Bush tax cuts. Months later, with the topic du jour being raising the national debt ceiling, GOP lawmakers seem not only comfortable with economic uncertainty generally, but are actually actively trying to foment the dread condition. And what do you know? Big business isn’t especially wild about it.

[See editorial cartoons about the federal budget and deficit.]

If you haven’t been following the story, the U.S. government will bump up against its legal debt limit no later than May 16. There are a few “extraordinary measures” the Treasury Department can take to keep things running, but if nothing is done by July 8 the U.S. government will stop being able to pay for its operations and its maturing debt. It would, in short, go into default. All mainstream economists and political leaders say that this would be really, really bad for the global economy. House Speaker John Boehner, for example, has used the phrase “financial disaster” to describe the consequences.

Nevertheless, Republican leaders view this as a “leverage moment,” to borrow House Majority Leader Eric Cantor’s phrase. They figure that they can extract maximum concessions from the self-styled adult in the room (President Obama) by pushing as close to the edge of the cliff as possible. On Wednesday Cantor upped his leverage moment ante by declaring that the House GOP "will not grant [the] request for a debt limit increase" without major spending cuts or other concessions. As Politico reports, "In the most recent budget battle--over a six-month spending bill--Republican leaders carefully avoided threatening to shut down the government. Now, Cantor says he’s ready to plunge the nation into default if the GOP’s demands are not met." So they're more willing to flirt with "financial disaster" than they were to talk about government shutdown. Wonderful.

[Read the U.S. News debate: Should Congress raise the national debt limit?]

Which brings us back to the concept of uncertainty. If there’s one thing businesses and Wall Street like less than uncertainty about whether taxes might go up, it’s uncertainty about things like “financial disaster.” They prefer that we not be making a bee line for a cliff at all, because of the attendant uncertainty about the politicians’ ability to avoid driving off of it. [Check out political cartoons about the economy.]

Specifically, while Boehner has tried to explain to Wall Street types the politics of this 'leverage moment,' they have shot back that the debt ceiling vote (and the possibility of “financial disaster”) really isn’t something pols should be mucking around with. And it’s not just the Wall Street money wizards who are telling the GOP to quit it: Main Street business groups like the U.S. Chamber of Commerce and the National Association of Manufacturers are also lining up in the don’t-play-politics-with-the-debt-limit camp (h/t Steve Benen).

There’s one other thing to keep in mind about uncertainty: It applies to the dates I’ve mentioned. The United States government will hit its debt limit by mid-May ... but it could be earlier. We can’t be certain. And the government would then go into default by July 8, or maybe before. But there is no specified date for the tipping point at which the tetchy financial markets hit the panic button and start a cascading economic meltdown.

So while the GOP sees leverage in sending us all speeding toward a cliff, there’s no certainty as to where that precipice’s edge is. And that kind of uncertainty really is scary.

  • See editorial cartoons about the budget and deficit.
  • See political cartoons about the Tea Party.
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