‘Uncertainty’ over the debt limit

For two-and-a-half years, Republicans have cited “uncertainty” as one of the most serious issues facing the economy. It’s a shallow and painfully weak talking point, but they’ve stuck to it. Focus groups must love it.

The irony, of course, is that these same Republicans are responsible for a debt-ceiling hostage strategy in which they’ve effectively proclaimed, “If we don’t get what we want, Republicans will crash the economy on purpose.” There’s arguably no better way to create uncertainty than by announcing the world’s largest economy will voluntarily refuse to pay its bills.

But this leads to a different question: does this uncertainty actually matter? Or is it just some amorphous concept with limited real-world applicability?

President Obama spoke briefly this morning from the White House, commenting on the weak new job numbers. He touched on the problem Republicans have created.

“We’ve always known that we’d have ups and downs on our way back from this recession. And over the past few months, the economy has experienced some tough headwinds — from natural disasters, to spikes in gas prices, to state and local budget cuts that have cost tens of thousands of cops and firefighters and teachers their jobs. The problems in Greece and in Europe, along with uncertainty over whether the debt limit here in the United States will be raised, have also made businesses hesitant to invest more aggressively. […]

“The sooner we get [a fiscal deal] done, the sooner that the markets know that the debt limit ceiling will have been raised and that we have a serious plan to deal with our debt and deficit, the sooner that we give our businesses the certainty that they will need in order to make additional investments to grow, and hire and will provide more confidence to the rest of the world as well, so that they are committed to investing in America.”

The Center for American Progress’ Michael Ettlinger published a brief report on this yesterday, before the new job numbers came out, making the case that the private sector may already be “pulling back” out of fear of a congressionally-created crisis.

Most businesses don’t make big investments or ramp up hiring when they see a substantial risk of the economy tanking. They don’t want to be on the hook for the costs if there aren’t going to be customers and revenue for what they produce. Right now the failure to increase the federal debt limit is creating such a risk and that may well be why the economy is starting to drag.

The good part of this is that it means Republicans, through their borderline-criminal recklessness, are directly responsible for the recent economic headwinds. The bad part of this is, I’m just not convinced it’s accurate.

On a conceptual level, I can appreciate why this seems plausible. The business community has been practically begging Republicans for months not to play this game of chicken, warning them that even flirting with the possibility of a crisis could do serious harm. To date, GOP officials have, uncharacteristically, ignored businesses’ pleas and pursued the irresponsible hostage strategy anyway.

But I still think businesses hire when they have customers, and they have customers when employed people are injecting money into the economy. Republicans playing Russian Roulette with the full faith and credit of the United States seems largely detached from this.

That said, I’d love to be wrong about this, and maybe there’s so much economic anxiety out there, the private sector will be relieved when the debt-ceiling fight is over. Anything that makes employers feel a little less anxiety about the near-future certainly can’t hurt.

But those expecting a bright green light for employers once the debt-limit issue is resolved are likely to be disappointed.