After congressional members of both parties spent Sunday talking to themselves, the ultimate chicken game is emerging. House GOPers will presumably pass a bill authorizing the debt ceiling to be raised by a trillion accompanied by a trillion in cuts. That debt ceiling level means that they go through this whole thing again in the middle of the 2012 campaign season. Senate majority leader Dem Harry Reid has said the Senate won't pass it, and President Obama said he won't sign it. With that in mind, it's not certain that the GOPers can even pass this in the House. But if they do, Banal is apparently betting that the Democrats and the President will blink before he does, to avoid default. It is an overtly partisan political move.
Meanwhile, the story is going around that Harry Reid will introduce a separate bill in the Senate, raising the debt ceiling by the $2.4 trillion necessary to get the country through 2012, accompanied by the same amount in cuts (the Nancy Pelosi plan) without tax increases. This is essentially what the GOPers claim they have been asking for. Depending on the cuts, it's not certain that this will pass the Senate. But if it does, the Dems are betting that the GOPers will blink, and why shouldn't they? This is what they said they wanted.
If it plays out like this, an objective view would have to be that the Dems have bent over backwards to accomodate the GOPers unreasonable demands. But there's no objective view of any consequence here. It's all about how this plays out on Capitol Hill, with the world economy held hostage.
The wild card some observers are pointing to is the behavior of the markets. The Asian markets and the first hours of the European markets were broadly down, and investors were shedding dollars for other currencies. (U.S. stock market is hours from opening.) If and when--and it's probably when--markets show greater alarm, it puts pressure on the process, but I don't see how it helps one side or the other. It's a game of chicken while the drivers also play Russian Roulette.
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