If an enemy declared war on the American economy, the United States would spare no effort to remove that threat to its prosperity and national security. So it was with Osama Bin Laden, who in 2004 described his goal as "bleeding America to the point of bankruptcy." And as it turns out, by 2020 Uncle Sam will have spent roughly $3 trillion on the wars in Afghanistan and Iraq, with the impact on the economy trillions more.
But when the Republican Party threatens--for the second time in a year-- to sabotage the U.S. economy if its debt ceiling demands are not met, the media instead calls that treason a "debate."
Continue reading below the fold.
Last year, Republicans weren't shy about admitting that their hostage-taking of the debt ceiling risked national economic suicide. "You can't not raise the debt ceiling," House Budget Chairman Paul Ryan acknowledged. Failure to do so, Senator Lindsey Graham explained, would mean "financial collapse and calamity throughout the world." And as House Speaker John Boehner also fretted, a default on the full-faith and credit of the United States would trigger "financial disaster."
Nevertheless, the GOPs leaders pushed the United States and the global economy to the brink before voting for the August 2011 sequestration deal they now pretend to have opposed. As Boehner boasted that September:
"I got 98 percent of what I wanted. I'm pretty happy."Boehner may have been happy, but the American people not so much. That's because the same Republican Party that perpetually claims that "uncertainty" hurts the American economy produced exactly that during their manufactured debt ceiling crisis of 2011.
As the chart above shows, U.S. job growth plummeted beginning in May 2011. While worries over Europe were a contributing factor that spring, Speaker Boehner's stark May 9 threat to block the needed $2 trillion increase in the debt limit sent shock waves through the economy:
"Without significant spending cuts and reforms to reduce our debt, there will be no debt limit increase. And the cuts should be greater than the accompanying increase in debt authority the president is given. We should be talking about cuts of trillions, not just billions...As it turns out, the 2011 debt ceiling showdown didn't just cost Americans jobs. Leaving aside the extra $1.3 billion in higher borrowing costs for the U.S. Treasury, American consumer confidence nose-dived during standoff in the summer of 2011:
With the exception of tax hikes -- which will destroy jobs -- everything is on the table. That includes honest conversations about how best to preserve Medicare."
As Reuters explained, the Republicans' debt ceiling debacle was the likely culprit:
A worsening debt crisis in Europe and an acrimonious political fight over U.S. debt, which culminated in the downgrade of the country's AAA credit rating by Standard & Poor's, ignited a massive stock market sell-off last month and sent business and consumer confidence tumbling.The Christian Science Monitor echoed that conclusion:
"The extreme uncertainty over the outcome of the debt-ceiling debate probably did extra damage to the August (job) figures," said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts.
Why has the job market cooled so much? An important factor, many economists say, is that signals from government lately have been hurting rather than helping confidence. The protracted talks over the nation's debt ceiling this summer appeared to dampen the spirits of consumers and businesses alike.The New York Times similarly revealed that "nonfarm payrolls numbers were unchanged after a prolonged increase in economic anxiety in August that began with the brinksmanship in Washington's debt-ceiling debate, followed by the country's loss of its triple-A credit rating, stock market whiplash and renewed concerns about Europe's sovereign debt." Economists, the Times noted, blamed "the heightened uncertainty over the economy's direction for the slow pace of job creation, saying political deadlock was in effect creating economic paralysis." And while the AP reported that "consumer and business confidence has been sapped by the political standoff over the federal debt limit, a downgrade in the U.S. government's credit rating and a debt crisis in Europe," MarketWatch explained:
David Resler, chief economist at Nomura Securities International Inc., who had expected a weak report, blamed it on a "financial wall of worry" in early August.For its part, S&P left little doubt where blame lay for their downgrade of U.S. credit. Noting that "new revenues have dropped down on the menu of policy options" and that "reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process," Standard & Poor's concluded:
Stocks fell sharply during the fractious debate in Congress over raising the debt ceiling and after the U.S. lost its triple-A rating from Standard & Poor's.
"Things went into a dead stall," Resler said. Businesses decided to "sit back and see how things shake out."
"We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act."As for the uncertainty the debt ceiling debacle produced, S&P pointed the finger at the GOP, the only party willing to countenance a default by the United States:
A Standard & Poor's director said for the first time Thursday that one reason the United States lost its triple-A credit rating was that several lawmakers expressed skepticism about the serious consequences of a credit default -- a position put forth by some Republicans. Without specifically mentioning Republicans, S&P senior director Joydeep Mukherji said the stability and effectiveness of American political institutions were undermined by the fact that "people in the political arena were even talking about a potential default," Mukherji said. "That a country even has such voices, albeit a minority, is something notable," he added. "This kind of rhetoric is not common amongst AAA sovereigns."That kind of rhetoric may not be common amongst AAA sovereigns, but it's all in a day's work for Senate Minority Leader Mitch McConnell (R-KY). As he put it after last summer's debt limit deal:
"I think some of our members may have thought the default issue was a hostage you might take a chance at shooting," he said. "Most of us didn't think that. What we did learn is this -- it's a hostage that's worth ransoming. And it focuses the Congress on something that must be done."And as he later explained to CNBC's Larry Kudlow, McConnell's future hostage-taking isn't a threat, but a promise:
"What we have done, Larry, also is set a new template. In the future, any president, this one or another one, when they request us to raise the debt ceiling, it will not be clean anymore. This is just the first step. This, we anticipate, will take us into 2013. Whoever the new president is, is probably going to be asking us to raise the debt ceiling again. Then we will go through the process again and see what we can continue to achieve in connection with these debt ceiling requests of presidents to get our financial house in order."A new template, indeed. Because while the minority party in Congress has often voted against debt ceiling increases, it never had the either the numbers or the intent to blackmail the President. Until, that is, Democrat Barack Obama entered the Oval Office.
Like its stonewalling of President Obama's judicial nominations and record-setting use of the filibuster, the GOP's debt ceiling brinksmanship was unprecedented. After all, that small government icon Ronald Reagan tripled the national debt and signed 17 debt ceiling increases into law. That might explain why the Gipper repeatedly demanded Congress boost his borrowing authority and called the oceans of red ink he bequeathed to America his greatest regret. As it turns out, Republican majorities voted seven times to raise the debt ceiling under President Bush and the current GOP leadership team voted a combined 19 times to bump the debt limit $4 trillion during his tenure. (That vote tally included a "clean" debt ceiling increase in 2004, backed by 98 current House Republicans and 31 sitting GOP Senators.)
Of course, they had to. After all, the two unfunded wars in Afghanistan and Iraq, the budget-busting Bush tax cuts of 2001 and 2003 (the first war-time tax cut in modern U.S. history) and the Medicare prescription drug program drained the U.S. Treasury and doubled the national debt by 2009. And Mitch McConnell, John Boehner and Eric Cantor voted for all of it. As these helpful charts from the New York Times and the Washington Post show, they built that debt:
Yet a year after the Republican Party nearly brought the U.S. economy to its knees over the debt ceiling, the GOP leadership is promising to do it again. While Mitch McConnell reportedly "burst out laughing" at Treasury Secretary Tim Geithner's request that Congress eliminate the debt ceiling mechanism altogether, Utah Senator Jason Chaffetz said the "President has the gall to actually go out and suggest that we should get rid of the debt ceiling votes and take away Congress' ability to help put a lid on that." For his part, Speaker Boehner this week described his debt ceiling extortion as "leverage."
In 2011, former Bush Treasury Secretary Paul O'Neill had a different term for it:
"The people who are threatening not to pass the debt ceiling are our version of al Qaeda terrorists. Really. They're really putting our whole society at risk by threatening to round up 50 percent of the members of the Congress, who are loony, who would put our credit at risk."And that's not politics as usual. That's treason.