The Economy's Willing Executioners
"If we get to the point where you've damaged the full faith and credit of the United States," Obama economic adviser Austan Goolsbee exclaimed in January, "that would be the first default in history caused purely by insanity." But if that economic catastrophe comes to pass, its cause will not have been dementia, but disinformation. In their perpetual quest to gain political advantage and gut the federal government, Republicans in Congress have duped their party faithful - and many Americans - with the dangerous deceit that raising the debt ceiling doesn't matter. And if the "financial disaster" Speaker Boehner warned about comes to fruition for the U.S. economy, the Republican Party will have been its willing executioners.
In May, polls by CBS and Gallup showed that Americans by a 2-to-1 margin opposed raising the nation's $14.3 trillion debt ceiling. (Among Republicans, the gap was a staggering 70% to 8%.) Only now, thanks to the increasingly dire warnings of economists, think tanks, international financial bodies and even GOP-friendly business groups, the tide is turning. While a CBS survey showed 71% disapprove of the GOP's handling of the debt ceiling crisis even as most Americans now favor compromise. A recent Pew Research survey showed Americans now split as to whether raising the debt or defaulting on U.S. debt obligations is the greater concern.
But among Republicans, there is no such schism.
As another Pew Research poll released this week shows, Republicans in general and Tea Party supporters in particular see crisis if the U.S. debt is reached on August. Looking at "the scariest debt-ceiling poll I've seen," Ezra Klein of the Washington Post, already worried about a default that would produce a "global financial panic that makes 2008 look like a warm-up," lamented:
So a third of Democrats, a plurality of independents and a majority of Republicans think everything will be just dandy if we blow through Aug. 2 without raising the debt ceiling. Terrific.
On Tuesday, Klein's colleague and DC's premier conventional wisdom regurgitator Chris Cillizza offered his predictable take on why 53% of Republicans and 65% of Tea Partiers "don't seem concerned. At all."
Cutting through all the numbers, the reality for many Republicans is that they simply don't believe that we are on the verge of crisis, and it's virtually impossible -- given their distrust of the country's major institutions -- for anyone or anything to convince them otherwise.
There's only one problem with Cillizza's off-the-shelf analysis: For months, Republican Congressman, Senators and presidential candidates - and their conservative amen corner - have been pandering to their base by telling the nation the debt ceiling doesn't matter.
And it's not as if the Republican "default deniers" and "debt kamikazes" weren't warned otherwise.
On the same day last week, the U.S. Chamber of Commerce, Federal Reserve Chairman Ben Bernanke and Wall Street rating agencies joined the ever-louder chorus of voices warning Republicans that failure to raise the U.S. debt ceiling would result in "calamity." Those pleas followed a new analysis by the Bipartisan Policy Center concluded that failure to boost the debt ceiling by the August drop-dead window would force the U.S. Treasury to immediately slash spending by 44%. As The Hill reported, "On an annualized basis, the cut in spending alone is a 10 percent cut in GDP, BPC scholar Jay Powell told reporters." The IMF similarly cautioned that "the debt ceiling should be raised as soon as possible to avoid damage to the economy and world financial markets." 235 economists - including six Nobel Prize winners - signed an open letter to Congressional leaders urging them to raise the ceiling, and to do so "without attaching drastic and potentially dangerous reductions in federal spending." Failure to do so, they warned, "could push the United States back into recession." So it came as no surprise when Treasury Secretary Tim Geithner declared on Thursday, "We're running out of time" to avoid what Ezra Klein deemed the "catastrophic calculations" of default.
But Republicans didn't need to take Geithner's word for it. They could heed the words of their party's best and brightest.
In their few moments of candor, GOP leaders expressed agreement with Tim Geithner's assessment that default by the U.S. "would have a catastrophic economic impact that would be felt by every American." The specter of a global financial cataclysm has been described as 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, even 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."
His fellow travelers didn't get the message.
For months, Republican presidential candidates Michele Bachmann and Tim Pawlenty led the default denier chorus. While Mitt Romney joined Rick Santorum, Newt Gingrich and Ron Paul in supporting the "Cut, Cap and Balance" Pledge which demands a balanced budget amendment and draconian spending cuts as conditions of raising the debt ceiling. On Tuesday, the House passed its version of the Cut, Cap and Balance Act, which among other things would require supermajorities to raise taxes or breach a federal spending cap targeted at 18% of U.S. gross domestic product.
(As it turns out, outlays by the federal government haven't been as low as 18% of GDP since 1966. (That's why the Simpson-Bowles Commission created by President Obama and opposed by Senate Republicans set a 21% target.) As it turns out, the 98% of Republicans in Congress voted for Paul Ryan's budget plan would fail their own Cut, Cap and Balance test, as Ezra Klein explained in April.)
Nevertheless, House Republicans, pressured by Tea Party zealots, have been digging in their heels. Last week, Congressmen Louie Gohmert (R-TX) and Steve King (R-IA) joined Bachmann in calling the Obama administration's warnings about the August 2 deadline lies. (Not to be outdone, Sarah Palin, who previously blasted "Timothy Geithner's false statements to the American people," tweeted "Obama lies, economy dies.") Georgia Rep. Paul Broun called for the debt ceiling to be lowered to $13 trillion, would necessitate immediately cutting roughly three-fourths of all federal spending. And while Arkansas Rep. Eric "Rick" Crawford announced that a default "wouldn't work for just a few days, that would work for a few years," his freshman colleague Mo Brooks (R-AL) insisted no debt ceiling increase, no problem. As the Washington Post reported:
"There should be no default on August 2," Brooks said. "In fact, our credit rating should be improved by not raising the debt ceiling."
That stands in contrast to a warning from Moody's. The rating agency said Wednesday that it might downgrade the U.S. government's top-notch credit rating, "given the rising possibility that the statutory debt limit will not be raised on a timely basis, leading to a default."
"The people who are threatening not to pass the debt ceiling are our version of al Qaeda terrorists. Really. They're really putting our whole society at risk by threatening to round up 50 percent of the members of the Congress, who are loony, who would put our credit at risk."
Sadly, right now the lunatics control the asylum.
Eight months after he warned his new GOP House majority that "we're going to have to deal with it as adults" and three months after he told a Tea Party gathering that "we're going to have to raise it again in the future," Speaker Boehner last week acknowledged that at least 60 GOP Congressmen "won't vote to raise the debt ceiling under any circumstances." As Huffington Post reported, "38 have signed a pledge to oppose any debt ceiling increase unless it is accompanied by a constitutional amendment to balance the budget, which is politically unachievable." Steve LaTourette (R-OH) worried that "big number" is almost certain to grow:
The danger in the balanced-budget push, LaTourette said, "is that the more conservative among us will say, `OK, I made my vote, and now I'm not going to make another.' And if that gets up to 40 or 60 or 80, then you've got to go back" and negotiate with House Democrats and the White House.
Former GOP Senator and aborted Obama Commerce Department nominee Judd Gregg summed up the impasse in the House. "The House is nowhere near an agreement," Gregg said, adding "it's a 50-50 chance that we go into a few days of disruption."
Only at this late hour, some of the economy's would-be assassins are starting to understand that their debt ceiling hostage taking could mean national suicide. As the Los Angeles Times and National Journal revealed, this weekend the House leadership deployed Paul Ryan and Jay Powell of the Bipartisan Policy Center to explain the consequences of a Republican failure to raise the U.S. borrowing limit.
Freshman Rep. Steve Womack (R-Ark.) said the presentation about skyrocketing interest rates that could result from downgraded bond ratings was "sobering."
"It illustrates to us that doing nothing is unacceptable," he said. "I think the conference understands this is a defining moment for us. It's time to put the next election aside."
But many of his colleagues remain unconvinced. While Michele Bachmann doubled-down in a new ad declaring, "I will not vote to increase the debt ceiling," ThinkProgress reported that Indiana freshman Todd Rokita "declared defiantly that he's willing to vote down a debt ceiling raise even if it means 'the economy might get worse.'" For his part, Texan Louie Gohmert wondered if the August 2nd deadline was chosen because "the president has a big birthday bash scheduled for August the 3rd."
That's not true, of course. But then again, so little of what exits the mouths of Republicans is.
(Leave aside for the moment that Ronald Reagan tripled the national debt and increased the debt ceiling 17 times. Forget also George W. Bush nearly doubled the debt or that the Bush tax cuts were the biggest driver of debt over the past decade, and if made permanent, would be continue to be so over the next. Pay no attention to the federal tax burden now at its lowest level in 60 years or income inequality at its highest level in 80 years after a decade of plummeting rates on America's wealthiest taxpayers, Ignore for now that Republican majorities voted seven times to raise the debt ceiling under President Bush and the current GOP leadership team voted a combined 19 times to bump the debt limit $4 trillion during his tenure. Look away from the two unfunded wars in Afghanistan and Iraq, the budget-busting Bush tax cuts of 2001 and 2003 and the Medicare prescription drug program because, after all, John Boehner, Mitch McConnell and the Republican majorities in Congress voted for all of it.)
Arizona's Jon Kyl, the second-ranking Senate Republican, gave the game away in April when his office declared his slander of Planned Parenthood was "not intended to be a factual statement." So it is for just about every GOP talking point. Tax cuts don't "pay for themselves." The GOP job creators didn't create jobs after the Bush tax cuts, though they did when their taxes were higher. There are neither "death panels" nor a "government takeover of health care" in the Affordable Care Act which, despite Republican myth-making, actually reduces the national debt over the next decade. Barack Obama isn't a Muslim, but he was born in the United States. Public employees are not overpaid and vote fraud does not threaten American democracy. Global warming isn't "the greatest hoax ever perpetrated on the American people." And we did not go to war in Iraq "because we were attacked."
Despicable and dangerous as these frauds are, they didn't threaten to destroy the American economy in a matter of days and with it, the global financial system.
Which is why if the cataclysm of default and with it the death of the U.S. economy, should come to pass, Republicans will be responsible for its murder. And the autopsy will read: death by deceit.