Thursday, July 14, 2011

dance monkey, dance

diane swonk, chief economist for mesirow financial and an economic advisor to the CBO and the fed, regarding the chances that the u.s. will fail to raise the debt ceiling in time and default:
Right now, financial markets in the U.S. are giving this a 0% probability of happening. With all the time I’ve spent in Washington, although everyone believes it’s just inconceivable, those who don’t agree it’s inconceivable are the Congresspeople we need to actually vote on it. And that’s what really is disturbing: they’re the ones who are unconvinced that there’s any problem out there.

Everybody else is saying, ‘This is just so horrible. There’s no way they could possibly be this stupid.'
it sounds like the financial markets haven't been paying attention to people elected to congress last year.

for weeks, i have been watching this whole spectacle over the debt ceiling with a bit of embarrassment. but in the back of my mind i have been reassured that actual default is unlikely. that this attempt by the republican party to hold the full faith and credit of the united states hostage to extract spending cuts from the democrats is ultimately a bluff. the financial industry and chamber of commerce, the people who fund and really pull the strings of the GOP, will not tolerate a default. so as long as the president could hold out long enough, the other side would ultimately crumble, taking whatever best deal they can get.

the problem is that we have captain caveman as president. so any plan that requires the president "holding out long enough" is deeply flawed. still, obama seems to have bungled his way there, if only because of the internal politics of the modern republican party. instead of holding out as a good negotiator would do, obama offered to give up the store, but only so long as the GOP accept a small percentage of the deficit reduction package to include changes that would make really rich people pay more taxes. a rational GOP would have taken the money and run. but (luckily in this case) it's not clear that the GOP is rational. any plan that includes anything that can be called a tax increase on the wealthy has become an insurmountable poison pill. a deal that gives them 83% of what they want is not good enough for the party that only controls one-half of the two political branches of government. the compromiser-in-chief meets a party that is, at its core, completely unwilling to compromise even when the "compromise" gives them almost everything they want. which means the president isn't the only one who sucks at negotiating.

and miraculously, obama finally found a place to draw a line in the sand. "i will go no further than giving you most of what you want!" he proclaimed. to obama loyalists this shows his brilliance as a negotiator. but it looks to me like we lucked out in having a GOP that has wandered so far into loonyland they've lost track of the fact that they can't get 100% when they don't control 100% of the government. yes, ms. swonk, they really are that stupid.

which makes me wonder how this can possibly end. as i said above, the money interests behind the GOP won't let a default happen. but the party leadership is trapped. after cultivating the tea party as a way to dress up their blatantly pro-corporate positions in populist clothing, they now have a force in their own party that seems to actually want a default. i still think in the end the GOP will find a way to allow the ceiling to raise, even if that means pissing off the teatards. they could even do it while pretending to be against it by having most of their caucus vote against the deal. so long as they carefully count the votes they can deliver exactly the number of republicans they need to make it happen.

but does the republican leadership have the spine to pull that off? this week for the first time, i think a default is an actual possibility, though still unlikely. but i wonder if the internal dysfunction of the republican party means that we can no longer depend on them to dance for their capitalist masters.