Manufactured Chaos

Wednesday saw the ratcheting up of pressure on the GOPers to understand the catastrophe they are flirting with in preventing the U.S. from paying its bills.  Wall Street Journal editorials, David Brooks' column, a statement by a Citcorps economist to the effect that asking what happens the day after America defaults is like asking what you're going to do the day after your suicide, all trumped by the Moody's statement that it is considering  downgrading this nation's credit rating.  If that happens, interest rates go up immediately, and experts say only one point will be enough to send the country back into recession, with even higher unemployment.  And there's nothing temporary about it--it's a genie that's very hard to get back in the bottle.

Hyperbole is always a temptation in political battles.  But in this one, it is unnecessary.  This is the Armageddon of ignorance.

Wednesday's other news was of the most openly contentious meeting among the members of Congress and the White House trying to negotiate an agreement that will pass both houses of Congress.  Rep Eric Cant broke protocol and gave his version in a press conference.  We'll see today if anyone believes him.  The most complete journalistic account I've seen so far is from Ben Stein.

The fear expressed by Democrats such as Sen. Sherrod Brown and journalists including Joe Klein is that GOPers, especially in the House, are so fragmented now that they are incapable of getting anything done at all.  Mitch McConnell's proposal, initially embraced by John Banal, has found some favor with Harry Reid, but there are features of it that won't get Democratic support, and that may doom it.  But again, it may be a genie that can't get back in the bottle.  (There's a contrary view, expressed by Jay Newton Small,  that the proposal was only tactical, aimed at getting Eric Cant focused on doing a deal.)

President Obama has ruled out a short-term raising of the debt limit, and most business minds would agree--it just continues the uncertainty that stalls the economy.  He has stood firm on including some revenue as well as cuts.  He has also given this group meeting in the White House until Friday to craft their proposal.

There is undoubtedly more drama to come. But the remaining possibilities: a face-saving (for GOPers) deal that has cuts but includes revenues (but with a middle class tax cut that makes it all revenue neutral); an almost clean bill raising the debt ceiling with some meaningless face-saving (for GOPers) language; or complete stalemate, and at that point, I wouldn't be surprised if the President plays the 14th amendment card.  I think essentially that's what he meant when he said "I'll take it to the American people."  But it's a big gamble. If there's a big noise against it, Moodys and their ilk may still downgrade the credit rating.  It's really uncharted territory, as is this whole manufactured unnecessary mess.