The Entire World is Watching

He spoke softly, looked into the camera.  He started with explanations, and then delivered his message, about compromise being at the heart of the American system of government, about coming together as one nation. He was eloquent at times.   It's perhaps only when you read the transcript that you realize how hard President Obama's message was:

" So defaulting on our obligations is a reckless and irresponsible outcome to this debate...
This is no way to run the greatest country on Earth. It’s a dangerous game that we’ve never played before, and we can’t afford to play it now. Not when the jobs and livelihoods of so many families are at stake. We can’t allow the American people to become collateral damage to Washington’s political warfare.

But do you know what people are fed up with most of all? They’re fed up with a town where compromise has become a dirty word.

The entire world is watching. So let’s seize this moment to show why the United States of America is still the greatest nation on Earth –- not just because we can still keep our word and meet our obligations, but because we can still come together as one nation."
 
Compare this "pitch-perfect" speech with the hostile, sarcastic and devious screech by John Banal, beginning with his odd and absurd claim that he is the Speaker of the whole House, not just the GOPer House--no, the whole House.
 
In one sense, President Obama's speech was puzzling for containing nothing new--except perhaps for one element.  Until now there have been three voices in this contention--the President's (and Democrats), the GOPers and the markets.  President Obama asked to hear from the fourth voice: the American people. With a prime time address, he reached more people directly on this issue--a new issue, as he said, because raising the debt ceiling has always been a bit of congressional housekeeping before.  He explained what it's about: 
 
"Understand –- raising the debt ceiling does not allow Congress to spend more money. It simply gives our country the ability to pay the bills that Congress has already racked up. In the past, raising the debt ceiling was routine. Since the 1950s, Congress has always passed it, and every President has signed it. President Reagan did it 18 times. George W. Bush did it seven times. And we have to do it by next Tuesday, August 2nd, or else we won’t be able to pay all of our bills.

Unfortunately, for the past several weeks, Republican House members have essentially said that the only way they’ll vote to prevent America’s first-ever default is if the rest of us agree to their deep, spending cuts-only approach.

If that happens, and we default, we would not have enough money to pay all of our bills -– bills that include monthly Social Security checks, veterans’ benefits, and the government contracts we’ve signed with thousands of businesses.

For the first time in history, our country’s AAA credit rating would be downgraded, leaving investors around the world to wonder whether the United States is still a good bet. Interest rates would skyrocket on credit cards, on mortgages and on car loans, which amounts to a huge tax hike on the American people. We would risk sparking a deep economic crisis -– this one caused almost entirely by Washington."

 President Obama could call for voters' voices, confidently knowing that according to polls upwards of 2/3 of the electorate supports his position of a budget solution that mixes cuts and revenue, that calls for sacrifice from the very wealthy as well as those with the least resources.  The initial report was that, while Banal was talking, congressional webpages were crashing from the volume.
 
As I observed yesterday, the voice of the markets speak urgently but ambiguously in terms of solution. Since the two sides seem far apart with the clock ticking, I can't see the markets being reassured by either speech. But the voices of voters speak their minds.   
 
What happens now?  The Harry Reid Senate plan calls the GOPers bluff: it provides exactly what GOPers said they wanted as late as a week ago: cuts totaling more than the amount of the debt ceiling rise, which raises the ceiling to get the country into 2013.  But among other things, the new Banal plan fulfills none of those demands that Banal himself was making just a few days ago.  From his own words, it's clear that the intent of his plan is to make this another political circus in six months, on the theory that it would hurt President Obama.  (A theory that is questionable.)
 
As President Obama pointed out, a six month rise may not be enough to satisfy the ratings agencies, who will downgrade the U.S. credit rating, which will send interest rates soaring and the economy downward.  And  signals from one of the agencies itself support the contention that a six month deal on Banal's terms could  trigger a drop in the U.S. credit rating.
 
During the day on Monday, the reporting from Washington indicated a lack of enthusiasm for the Reid plan, but positive hostility towards Banals--not only from Democrats, but from TP GOPers.  It's not clear now that Banal has the votes to pass it in the House--you know, the whole House he is Speaker of.  It could be that President Obama's intent with his speech was to get quickly beyond these two competing but probably equally doomed plans to a compromise this week.  Because if both plans go to votes, it will take until the weekend for that to play out, and next Sunday we'll be in the same deadlocked situation with the first U.S. default in modern history becoming official on Tuesday.   After the market crash on Monday (if not sooner.)