WHITE HOUSE WARNS OF ‘ARMAGEDDON-LIKE’ CONSEQUENCES…. Congress hasn’t quite approved the budget deal for the fiscal year just yet, but the next fiscal fight is already heating up. This round focuses on the debt ceiling, and the stakes are far higher than a government shutdown.
At face value, this should be an easy one. Democrats, Republicans, economists, the Federal Reserve, Treasury officials, and the financial industry all agree on the same thing: policymakers have to raise the debt limit. Period. Full Stop. With all of this agreement, a resolution should be easy. Indeed, given how infrequently all of these institutions want the exact same thing at the same time, this seems like the sort of thing that could be wrapped up in an afternoon.
But when dealing with today’s congressional Republicans, nothing is ever easy. President Obama wants Congress to get this over with, send him a clean bill, and the political world can move on to a larger fight over next year’s budget. GOP leaders have already said that’s not going to happen — they’re prepared to cause an economic catastrophe, on purpose, unless Democrats give Republicans “something really, really big.”
Yesterday, White House Press Secretary Jay Carney told reporters, given the stakes, this isn’t a vote “you can play around with.”
“[Y]ou need to take very seriously the need to raise the debt limit so that the full faith and credit of the United States government is maintained around the globe.
“The consequences, as Secretary Geithner and many others, including the Speaker of the House, Senate Minority Leader, Congressman Ryan have pointed out, the consequences of failing to raise the debt ceiling would be Armageddon-like in terms of the impact on interest rates, on job creation, on growth would be devastating. Others outside of government, including former Treasury Secretary Henry Paulson, S&P chief economist David Weiss, for example, said that it could cause significant and long-lasting financial and economic disruption. JPMorgan Chase head Jamie Dimon said, ‘If anyone wants to push that button — i.e. fail to raise the debt ceiling, which I think would be catastrophic and unpredictable — I think they’re crazy.'”
Carney added, “[W]e support a clean piece of legislation to raise the debt ceiling…. [W]e cannot play chicken with the economy in this way. It’s just too darn risky. It is not appropriate.” Asked about how to convey the seriousness of the situation to the public, the press secretary went on to say, “[T]he best way to explain it is that the United States, the most powerful economy in the world, it needs to be creditworthy. The impact of anything that it would do, that the Congress would do that suggests that the United States was not creditworthy would be calamitous.”
Carney generally doesn’t use stark language like this, so it was encouraging to hear him make this plain.
So, what happens now? At this point, Republicans are still in the posturing stage, and haven’t even begun to write the ransom note as part of the hostage strategy. The Wall Street Journal, meanwhile, reports today that White House officials “have opened the door to a deal” on the debt ceiling, but the article was so thin, it didn’t even quote anyone anonymously, and there’s no sense of a deal might look like.
In the meantime, Nate Silver notes that failure on this issue would likely do so much damage, President Obama and most members of Congress would find it difficult to win re-election: “In short, this as close as you can get in American politics to mutually assured destruction.”