As congressional Republicans inch ever closer to crashing the American economy on purpose, it’s tempting to start looking at the calendar and wondering when we’ll see the real-world effects. We’re all aware of the Aug. 2 deadline, but we’re also aware of the fact that some credit-rating agencies aren’t prepared to wait that long.
But even if we’re fortunate, and Congress somehow manages to prevent a calamity sometime very soon, this breathtakingly stupid game of chicken has already made an important statement. Felix Salmon had a piece the other day that continues to linger.
The base-case scenario is, still, that the debt ceiling will be raised, somehow. But already an enormous amount of damage has been done: the US Congress has demonstrated clearly that it can’t be trusted to govern the country in a responsible manner. And the tail-risk implications for markets are huge. Think of the speed with which the Egyptian government collapsed earlier this year, or the incredible downward velocity of News Corporation right now.
When you build up large stocks of mistrust and ill will, nothing can happen for a very long time. But when something does happen, it’s much quicker and much worse than anybody could have anticipated. The markets might not be punishing the US government at the moment. But the mistrust and ill will is there, believe me. And when it appears, it will appear with a vengeance.
I don’t know if Republican lawmakers are aware of any of this. Worse, I also don’t know if they care. But American leadership on the global stage rests on certain pillars that took generations to build and strengthen — credibility, reliability, stability, the integrity of our institutions, sound judgment. The Republican Party severely undermined these pillars in the Bush era, most notably in areas of foreign policy and the use of military force. The Republican Party is now severely undermining them again, this time in the area of global finances.
No one can say with any confidence what’s going to happen over the next 17 days, but we already know the world is watching. We also know the world sees the actions of congressional Republicans and suspects the sanity of the world’s greatest superpower is very much in doubt.