Shudders went through the Beltway on Monday on the news that Standard & Poor’s had lowered its outlook for U.S. debt because of its “fears” that the Democrats and Republicans wouldn’t be able to come together to eliminate the deficit. The press breathlessly reported that the market “plunged” 140 points on the news. Chris Matthews barked, “This is scary!”
The so-called plunge turned out to be the biggest one-day drop since ... March 16 of this year. And Paul Krugman wryly commented on his blog that “If S&P warns that U.S. bonds might not be safe, and the price of those bonds rises, you really have to wonder how anyone can write with a straight face that this warning caused other market movements.” But let’s not let any of that get in the way of a good story: “The Market Gods are displeased with all this partisanship and Washington. Must. Heed.”
Unfortunately, deficit hysteria has managed to turn all government business into a single exhausting negotiation that makes the Paris Peace talks look like a quick handshake by comparison. At this point it’s unlikely that Chairman of the Council of Economic Advisers Austan Goolsbee’s attempt to separate the debt-ceiling vote and the budget negotiations by saying they are on “parallel but separate tracks” will convince anyone, especially when you have Republican members of Congress saying just the opposite.
House Majority Leader Eric CantorEric Ivan CantorBottom line Virginia GOP candidates for governor gear up for convention Cantor: 'Level of craziness' in Washington has increased 'on both sides' MORE (Va.), for instance, jumped on the S&P news, saying “serious reforms are needed to ensure America’s fiscal health, and today S&P sent a wake-up call to those in Washington asking Congress to blindly increase the debt limit.”
Oddly, however, the S&P release said absolutely nothing about the debt limit.
Cantor’s remarks are especially cynical since he addressed a GOP retreat for freshman members last January and spelled out the strategy for them. He told them in no uncertain terms that the debt ceiling would have to be raised, but explained, “It’s a leverage moment for Republicans. The president needs us.” House Budget Committee Chairman Paul RyanPaul Davis RyanJuan Williams: Pelosi shows her power Cheney takes shot at Trump: 'I like Republican presidents who win re-election' Cheney allies flock to her defense against Trump challenge MORE (R-Wis.) made the same argument on “Face the Nation” this past weekend, saying, “Nobody wants to play around with the country’s credit rating. ... What we’re saying here is spending cuts and controls in conjunction with raising the debt limit.”
So the Republicans are quite openly admitting that their threats not to raise the debt limit are empty — even as they shake their fists and say they’ll do it. And the White House knows it. On Sunday, Treasury Secretary Timothy Geithner said that the Republicans had assured the White House last week that they were going to raise the limit. “I sat there with them, and they said, ‘We recognize we have to do this. And we’re not going to play around with it.’ ” One could be tempted to think he was just saying this to reassure the nervous Market Gods, except for the fact that Ryan said the same thing, right down to the phrase “we’re not going to play around with it.”
It’s clear everyone understands the debt limit will be raised. The crazy Republicans aren’t completely crazy (and according to The Washington Post, Wall Street is having a very special chat with those who are). Nixon’s “madman” theory looks a little bit silly when both sides already agree on the outcome. So the only real question is why the White House and the Democrats are pretending that they need to negotiate at all.
Parton writes the Santa Monica-based liberal political blog Hullabaloo. You can follow the blog at http://digbysblog.blogspot.com.