Tomorrow is going to be interesting.
If all goes well, the Republican Tea Party crazies in Congress are either going to come to their senses or be bypassed (Boehner could allow a vote and pass a Senate bill with Democrat votes plus 20 or so moderate Republicans).
But if Ted Cruz or some other wacko Republican Senator puts up a procedural roadblock, the Senate won't be able to pass a bill until the weekend to re-open the government and pay our nation's bills on time. By then, the financial markets could have taken a big tumble -- 10% or more.
Political junkie that I am, I spent quite a bit of time today keeping up on the latest Washington goings-on via Twitter, news sites, and satellite radio.
My conclusion: the Democrats and Obama are doing a great job so far. It looks like they're going to hold firm, or nearly firm, on their entirely reasonable position that Republicans get zero, nada, nothing, in exchange for their extortion demands:
Give us what we want or we'll keep the federal government unfunded, and wreck the economy through a debt limit default.
Earth to GOP: the sworn duty of every elected official is to keep government functioning and pay bills already incurred.
You don't get bonus points for doing your basic job. If you want to change federal policies, win elections and negotiate through the usual "how a bill becomes law" process that you learned in elementary school.
I'd prefer that Congress pass an absolutely clean continuing resolution to fund the government and raise the debt ceiling. But if there's a minor change to Obamacare in the bill that does this, I guess that'd be OK. Next time, though, the Dems need to make clear that what the GOP will get extra for doing its job is precisely nothing.
I've heard a lot of dumb statements from Congressional Republicans today. For example, the fantasy persists among some that Obamacare can be defunded or delayed by the threat of a debt limit default. Not going to happen.
Republicans need to realize that Democrats are just as committed to their values as Tea Party types are to theirs. Difference is, Democratic values make sense and are shared by a majority of Americans: keep the federal government open and pay the nation's bills.
Plus, the D's won the last election handily and they control the Senate plus the presidency. So there is no way they're going to let their signature achievement, near-universal health insurance coverage, be whittled away by the party that campaigned in 2012 on doing away with Obamacare, and lost.
Another dumb thing I've heard from Republicans is that defaulting on the debt won't have big economic consequences. In fact, one GOP politician told CNN that defaulting would improve the nation's credit rating, because it would show that the United States is serious about dealing with its debt problem.
This guy (didn't get his name) needs to read the Fitch credit rating bureau report that came out today, "Fitch Places United States' 'AAA' on Rating Watch Negative." Just about everything Tea Party types believe is belied by the report.
I urge you to read the whole thing. Here's some excerpts.
KEY RATING DRIVERS
In line with Fitch's previous statements, the RWN reflects the following key rating drivers and their relative weights:
- The U.S. authorities have not raised the federal debt ceiling in a timely manner before the Treasury exhausts extraordinary measures. The U.S. Treasury Secretary has said that extraordinary measures will be exhausted by 17 October, leaving cash reserves of just USD30bn. Although Fitch continues to believe that the debt ceiling will be raised soon, the political brinkmanship and reduced financing flexibility could increase the risk of a U.S. default.
- Although the Treasury would still have limited capacity to make payments after 17 October it would be exposed to volatile revenue and expenditure flows. The Treasury may be unable to prioritise debt service, and it is unclear whether it even has the legal authority to do so. The U.S. risks being forced to incur widespread delays of payments to suppliers and employees, as well as social security payments to citizens - all of which would damage the perception of U.S. sovereign creditworthiness and the economy.
- The prolonged negotiations over raising the debt ceiling (following the episode in August 2011) risks undermining confidence in the role of the U.S. dollar as the preeminent global reserve currency, by casting doubt over the full faith and credit of the U.S. This "faith" is a key reason why the U.S. 'AAA' rating can tolerate a substantially higher level of public debt than other 'AAA' sovereigns.
...The 'AAA' rating reflects the U.S.'s strong economic and credit fundamentals, including:
...- The 'AAA' rating also reflects the halving of the federal budget deficit since 2010, which is now approaching a level consistent with debt stabilisation. The Budget Control Act passed in August 2011 implied significant fiscal consolidation and Congress and the Administration have adhered to the automatic spending cuts - the sequester - specified under the Act in the absence of agreement on an alternative and equivalent set of deficit-reduction measures. In addition, the passage of the American Taxpayer Relief Act on 1 January 2013, which implied a tax increase of more than USD600bn, has also contributed to the deficit reduction effort.
- Fitch's medium-term fiscal projections imply federal and general government (which includes states and local governments) gross debt stabilising next year and over the remainder of the decade at around 72% and 104% of GDP, respectively. This is below the 80% and 110% thresholds that Fitch previously identified as being inconsistent with the U.S. retaining its 'AAA' status.
So basically everything is fine with the nation's economy and level of debt (short to mid-term, at least) except for the wacko Republicans in Congress.
Ideal scenario tomorrow: (let's see how close optimistic me comes to forecasting reality)
(1) Stock market drops 200 to 300 points in first few hours of trading.
(2) Another credit agency issues warning about U.S. rating being downgraded.
(3) Scared shitless, senators give unanimous consent to proceeding with clean or nearly clean bill to re-open government and raise debt ceiling.
(4) Boehner allows vote on Senate bill.
(5) Bill passes House with all Dems voting in favor, plus 20 Republicans.
(6) Tea Party types go insane, while rest of country and world rejoices.