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Business Leaders Warn GOP on Debt Ceiling Disaster

April 20, 2011

Nothing focuses the mind, it is said, like the sight of the gallows. So it is for the American business community as the clock ticks down on the looming deadline to raise the U.S. debt ceiling. Over the past few days, the U.S. Chamber of Commerce, Wall Street executives, the National Association of Manufacturers and a host of the GOP's other big business allies have warned the Republican leadership that the party's grandstanding risks an economic calamity for the United States.
During George W. Bush's tenure in the White House, Republican majorities voted seven times to increase the U.S. debt ceiling. (The current GOP leadership team cast a total of 19 yea votes.) But demanding a vote on a balanced budget amendment to the Constitution and draconian budgets cuts to Medicare, Medicaid and Social Security as preconditions for boosting the $14.3 trillion ceiling, Mitch McConnell, John Boehner and Eric Cantor are creating fear, uncertainty and doubt about the full faith and credit of the United States.
But as The Hill reported this morning, the same business backers who bankrolled the GOP's overwhelming victories in November has had enough of the FUD:

The Obama administration will likely have the support of major business groups as it works to round up Republican votes for raising the federal debt ceiling.
Groups such as the National Association of Wholesaler-Distributors (NAW), the U.S. Chamber of Commerce and the National Association of Manufacturers (NAM) plan to step up their advocacy for a debt-limit increase as the deadline for congressional action draws closer.
Lobbyists for several major trade associations told The Hill that they have already had discussions with first-term House Republicans about the necessity of lifting the debt ceiling to avoid a default on U.S. debt.

With good reason. The specter of a global financial cataclysm caused by the default of the United States caused most sentient mammals to denounce that prospect as "insanity" (Obama economic adviser Austan Goolsbee), resulting in "severe harm" (McCain economic adviser Mark Zandi), "financial collapse and calamity throughout the world" (Senator Lindsey Graham) and "you can't not raise the debt ceiling" (House Budget Committee Chairman Paul Ryan). In January, Speaker John Boehner acknowledged as much:

"That would be a financial disaster, not only for our country but for the worldwide economy. Remember, the American people on election day said, 'we want to cut spending and we want to create jobs.' And you can't create jobs if you default on the federal debt."

That's precisely the message Wall Street has been communicating to Speaker Boehner, who under pressure from the GOP's Tea Party wing has since joined the dangerous game of chicken. As Politico reported last week:

House Speaker John Boehner (R-Ohio) has had conversations with top Wall Street executives, asking how close Congress could push to the debt limit deadline without sending interests rates soaring and causing stock prices to go lower, people familiar with the matter said...
The Wall Street executives say even pushing close to the deadline -- or talking about it -- could have grave consequences in the marketplace.
"They don't seem to understand that you can't put everything back in the box. Once that fear of default is in the markets, it doesn't just go away. We'll be paying the price for years in higher rates," said one executive.
Another said that "anyone interested in 'testing' the debt ceiling should understand the U.S. debt traded wider [with a higher yield] than Greek debt roughly five years ago. Then go ask CBO what happens to our deficits/public debt to GDP, if the 10-year [Treasury bond] goes from 3.5 percent to 5.5 percent to 7.5 percent." The executive said such an increase would result in a downgrade of U.S. debt by ratings agencies and an end to the dollar as the standard global reserve currency.

All of which puts the Party That Cried Uncertainty in an ironic position.
For years, Republicans have deployed the word "uncertainty" to stymie any public policy with which they disagreed. A decade after President Bush declared "scientific uncertainties remain" about global warming, virtually the entire Congressional Republican caucus has proudly joined the deniers' camp. In the run-up to the $800 billion, two-year tax cut compromise in December, GOP leaders revved up the uncertainty myth over taxes, falsely claiming that another tax cut windfall for the wealth was needed to "reduce the uncertainty that's affecting employers all across our country." In February, Rep. Mike Pence (R-IN) and Senator Jim Demint (R-SC) proposed making the Bush tax cuts permanent in legislation which would drain $4 trillion from the U.S. Treasury over the next decade. The name of their bill?
The "Tax Relief Certainty Act."
Meanwhile, business lobbies are growing increasingly concerned about Republican intransigence. Bruce Josten of the U.S. Chamber of Commerce explained, "The leadership knows that we favor supporting and increasing the debt limit." Dorothy Coleman of NAM warned:

"We have been very upfront. We support an increase in the debt limit. We need to meet our obligations," said Dorothy Coleman, vice president of tax and domestic economy policy for the NAM. "There is a huge downside to default."

Or even, to use a favorite Republican phrase, uncertainty about it.


About

Jon Perr
Jon Perr is a technology marketing consultant and product strategist who writes about American politics and public policy.

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