[John] Boehner (left) Says No to Raising the Debt Ceiling … The Speaker says significant budget cuts must come first. The U.S. national debt has reached $14 trillion. By the middle of May, the United States will reach the limit on what it can borrow–$14.3 trillion. Congress is likely to take up the debt ceiling issues soon, but if the government doesn't continue to borrow, "House prices would fall, stock prices would fall, we'd all be a lot less wealthy," Mark Zandi, chief economist at Moody's Analytics, tells Reuters. But Republicans say they will not cooperate unless there are significant cuts to the budget. "There will not be an increase in the debt limit without something really, really big attached to it," said House Speaker John Boehner. – US News and World Report
Dominant Social Theme: Boehner that wide-eyed radical House Speaker is acting crazy again.
Free-Market Analysis: More and more the "new" Congress resembles the old Bush administration. The mainstream media liked to play up George Bush as a radical, tax chopping conservative. Of course he was no such thing. He was unfortunately for the US a warmongering elitist whose sympathies were firmly attached to the City of London.
Bush took a fiat-money budget that was fairly well aligned after the Bill Clinton years (no credit to Clinton) and through the assiduous creation of wars and the application of "compassionate conservatism" created a nation that now teeters of the verge of bankruptcy. The Barack Obama administration, of course, has just made it worse. But the newly ensconced regime of House Republican John Boehner will apparently make it no better.
Boehner is being portrayed as a "crazy conservative," a fellow with radical ideas about cutting government services and spending – much as Bush was until the pretense eventually collapsed under the weight of reality. There is no reason to believe at this point that Boehner will be any more effective at pruning back big government than, say, his predecessor Nancy Pelosi – who was entirely pro big government.
We wrote just yesterday that Boehner's fear of triggering a government shutdown made him ineffective when it came to the recent budget battle. But we didn't realize just how bad the fraud was. The US$39 billion in "cuts" turns out to be more like US$14 billion – and the cuts as astute DB feedbackers have pointed out – are not even real cuts but merely reductions in SPENDING. This is the risible result of the Tea Party revolution that has swept "a new generation" of hard-headed anti-government zealots into power.
Now Boehner is focusing on generating a quid pro quo for raising the US debt ceiling. But who believes Boehner anymore? His big play was going to be, initially, a radically reduced budget. He ended up with very little, basically because the Democrats knew he didn't want a government shutdown; they gave him some dressed-up numbers to provide him political cover and the mainstream media went along by claiming that Boehner had "won" the budget debate. That hardly seems possible, given what's emerged.
This doesn't stop the media and Democrats from playing the same game again. Symptomatic of the Kabuki play is a new editorial in the Washington post by Jonathan Capehart entitled "An expensive, ‘crazy' game of chicken with debt ceiling." Here's an excerpt:
According to an exclusive report from Ben Smith at Politico, [John Boehner] "has been reaching out to top Wall Street players asking how close Congress can get to the May 16th deadline (or July 8th dropdead date) for raising the debt limit without seriously unnerving financial markets." Needless to say, Boehner's inquiry is unnerving big guns on Wall Street. "They don't seem to understand that you can't put everything back in the box," one executive told Smith. "Once that fear of default is in the markets .. we'll be paying the price for years in higher rates."
How big a price? Writing today about the insanity of not raising the debt ceiling, Post columnist Steven Pearlstein points out, "Every one percentage point increase in interest rates would add $140 billion to interest payments every year. . . ." This is most unwelcome news now that the economy is starting to get off the mat. Jamie Dimon, CEO of J.P. Morgan Chase, issued a warning at a Chamber of Congress event last month.
The Wall Street Journal's Washington Wire blog reports that Dimon said that in the weeks and months leading up to national default (July 8), the consequences of congressional inaction would "start snowballing." Consequences, such as companies selling their holdings of U.S. Treasuries. "All short-term funding would disappear," Mr. Dimon said … "If anyone wants to push that button . . . they're crazy."
They're you have it: the Boehner-is-crazy meme. The operative sub dominant social theme is that the Tea Party congressional "inmates" are in charge. In fact, if Boehner was not wiling to risk a government shutdown how is he going to refuse to raise the US debt ceiling? His calls to Wall Street do not indicate craziness but perhaps just the REVERSE. Perhaps he's being judicious. He's finding out how far he can go without ramifications.
Of course Boehner could go too far, or be pushed too far. There is always the danger that events spiral out of control. But more likely the debate will be merely rhetorical and constitute nothing but political theatre. The Tea party types elected to the House will be blamed for putting the nation at risk. Cautious Boehner will be cast as a new anarchist bomb thrower and his metaphorical (nonexistent) arsenal will be portrayed as a threat to the republic. Left wing newspapers and blogs will revile him.
In the end, a new budget ceiling will doubtless be established, and we will certainly be surprised if Boehner breaches the present ceiling to bring it about. Boehner will then claim a great victory of some sort and the mainstream media will go along with it. A new meme will be established but it is not going to be any closer to reality than the one that tried to portray the authoritarian-socialist George Bush as some sort of wild-eyed Jeffersonian republican.
The larger problem with all this as we have pointed out before is that there are REAL problems with what's going on in the US. America so far as we can tell is not in recovery, unless a "jobless" recovery counts. There is real anger out there – anger that will not be assuaged by yet another meaningless promotional melodrama. It is fine to portray John Boehner as something he is not, but doing so doesn't have an effect on what's actually happening.
The 75-plus Tea Party Congress-critters were supposed to move America dramatically to the right. Real cost-cutting was supposed to result. In fact, Republicans are reluctant even to mention military cost cutting, which is half the budget, and Boehner is terrified to take actions that would have a significant impact. Thus he will present the world with a pretense of republican radicalism but not its reality.
The trouble with this pretense is that in our view this is basically the last chance the American political establishment has of getting it right. If Boehner can't deliver and the next election does not provide significant change, including perhaps a presidential change, the US electorate (a significant segment of it) will begin to consider other options.
Yes, Americans could find themselves living in a post-political world, for the first time since, say, the American Civil War. Extra-curricular options shall surely be considered. State secession shall become an increasingly valid option. Tax protests and anger at Federal Reserve policies shall rise even higher. General disaffection with the establishment shall manifest it further. No doubt there will be civil disobedience, if not more. It will surely upset the million-man DC spy community as well, which will lead to further abuses of civil rights thus adding to the spiral of frustration and (potential) national unrest.
John Boehner may believe he can temporize now but there is a price. Tomorrow the very fabric of the nation may come under threat. This is what Boehner should really be worrying about instead of the impact of government shutdowns and the ramifications of debt-ceiling expansions.