By Peter Schroeder - 11/11/11 11:00 AM EST
The world’s eighth largest economy is teetering on the brink of default. But you wouldn't know it by paying attention to the halls of Congress.
As the EU debt crisis threatens Italy, U.S. lawmakers have stayed relatively mute even though the crisis is already hurting American businesses and stock markets.
A collapse of Italy’s economy would only make matters worse for a U.S. economy already being dragged down on the problems across the Atlantic.
To an extent, Congress is focused on the U.S. debt crisis.
The supercommittee charged with finding at least $1.2 trillion in federal deficit cuts is nearing a Nov. 23 deadline with no agreement in site. Without a deal, hundreds of billions in automatic defense and domestic spending cuts will be ordered.
But the relative silence on Europe’s problems also highlights the complexities surrounding the debt crisis, and the political risks both here and abroad.
Any attempt to suggest assistance to the troubled European Union could earn the ire of voters long tired of bailouts to their own institutions. Furthermore, any unwanted advice from U.S. lawmakers could earn the ire of counterparts abroad as they grapple with the issue themselves.
One major reason for U.S. policymakers to stay on the sidelines for the time being is the fact that European leaders still have not figured out what to do themselves.
“If the [European Union] and specifically the French and the Germans don’t step out in front of this first, why would the United States do so?” said Brian Gardner, senior vice president of Washington research at Keefe, Bruyette & Woods. “Why would any U.S. legislator get out in front of an issue where the nation at risk ... has yet to make up its mind on how it will act and has not demonstrated the political will to do what it needs to do?”
“Bailout burnout” is another reason to stay mum.
After the political beating lawmakers in both parties took after Congress approved a $700 billion program to deal with its own financial crisis in 2008, few are eager to tout the same for a foreign nation, especially with America’s economy still regaining its footing.
Yet another factor is diplomatic. Treasury Secretary Timothy Geithner took the case for strong, decisive action directly to European leaders in September, and in turn European leaders chided the U.S. for the lecture, pointing out that the U.S. has its own fiscal issues to deal with.
“The Europeans basically told Geithner to mind his own business,” Gardner said.
Just because members are publicly quiet in public about the European situation does not mean they are not paying attention.
House Speaker John Boehner (R-Ohio) and Geithner last week held a one-on-one meeting to discuss Europe’s implications on the U.S. economy.
And members of the Senate Banking and House Financial Services Committees have been checking with regulators to see how exposed American financial institutions are to European debt.
As the crisis grows, so too does the media attention, which in turn pushes political leaders to speak out on the issue.
When GOP presidential candidates appeared at a Wednesday debate on the economy hosted by CNBC, the very first question was about the European debt crisis.
“Europe is able to take care of their own problems,” said front-runner Mitt Romney. “We don't want to step in and try and bail out their banks and bail out their governments."
Sen. John Kerry (D-Mass.) had to field a question about Italy on Thursday, saying trouble abroad ups the ante on the deficit supercommittee to reach a deal back home.
One of the few members who has consistently spoken loudly about the situation in Europe is Rep. Cathy McMorris Rodgers (R-Wash.), who is pushing legislation that would prevent U.S. dollars donated to the International Monetary Funds (IMF) to be used to assist Europe in bailing itself out.
McMorris Rodgers, who is vice chairwoman of the House Republican Conference, has been looking to add support to the legislation, which has 22 co-sponsors and a companion bill in the Senate, introduced by Sen. Jim DeMint (R-S.C.). As Italy tilts, she hopes more members will support her bill.
“She does think that there’s opportunity for House Republicans and the House in general to be more active and more aggressive on this issue,” said Todd Winer, her spokesman. “We definitely would be very happy if other members and senators were to be more vocal in expressing the concerns that I think a lot of us have privately, but being more public about them.”
Now that Europe’s struggles have not been contained just in Greece, but are threatening one of the world’s largest economies, he is hopeful that her bill will get more attention as the headlines grow.
“There’s a real chance for having a breakthrough moment on this issue very soon,” he said.