Economy Held Hostage by Political Suicide Bombers
The Republicans are acting like suicide bombers, threatening to destroy America’s economy if President Obama and his allies refuse to join them in shredding the country’s social safety net.
And they could be maniacal enough to mean it.
Here’s how Nobel prizewinner Paul Krugman sees the picture:
How bad will it be if we don’t manage to raise the debt ceiling in the United States? And what should President Obama’s negotiating strategy be? A few thoughts.
The direct effects of hitting the ceiling would be bad enough — sharp cutbacks in spending, which would undermine essential services, not to mention derail the economy. It’s not clear to me whether there would be some wiggle room through the accumulation of arrears — say, not actually paying workers and contractors, but promising to make it up when sanity returns. But it would be ugly indeed.
What might make it even worse would be indirect effects, of two kinds.
First, government debt plays a special role in the American financial system: Treasury bills are the universal safe asset, the ultimate collateral. That’s why, during moments of financial stress, the interest rate on T-bills has actually gone negative. Make that safe asset suddenly unsafe, and it might cause vast disruption.
Second — and I don’t think this is getting enough attention — failure to raise the debt limit could act as a terrible signal about the American political system….
Failing to raise the debt limit could be widely read as a signal that we are, in fact, a banana republic. In that case, however, what should Mr. Obama do? My answer is that he must not let himself be blackmailed.
Partly that’s because once he gives in the first time, the blackmail will never stop. Once the crazies know that they can get whatever they want by threatening to blow up the economy, they’ll just keep demanding more and more. Mr. Obama can’t let that dynamic get started without setting up an even worse crash down the road.
Plus, the conservatives on the far right may claim that they’re worried about deficits, but they’re actually deeply fiscally irresponsible. Realistically, the budget-deficit plan conceived by Republican Representative Paul D. Ryan would sharply increase the deficit — because its spending cuts are in many cases impossible, and its supposed revenue neutrality is a sham. So giving in to the right would be just as much a signal of banana-republic-hood as a temporary default.
This is going to be very ugly. But I don’t think there’s any way to avoid taking it all the way to the edge, and possibly over it.
You might think nobody would be so insane as to blow up their own country’s economy; it would be like blowing up a boat while you were at sea in it. But the Republicans are in manic mode.
Yesterday, Republicans in the House of Representatives even put forward a bill to raise the debt limit and then defeated it to show they mean business.
Now, the party’s leaders are meeting with the president to demand huge cuts in federal spending. And they won’t hear of cutting oil subsidies or the military budget. What they’re after is Medicare.
This, too, is suicidal – politically. Polls show that 80 percent of Americans want to keep Medicare. Polls also show that Independents are rapidly siding with Democrats now that they’ve seen what Republican policies really are.
Now that the GOP has a majority in the House and control of several states, their objective is obvious: enrich the rich and let the rest of the American population sink into poverty. Despite their campaign promises, they have not created any jobs; in fact, they’re handing out pink slips left and right.
With their Tea Party mentality, it’s entirely possible that they will blow up the American economy so they can claim it;s Obama’s fault. They don’t care what happens to America or Americans, as long as they can be in power.
I hope the president lets the crazies do their worst. It would be a small price to pay to get rid of them once and for all. For you can bet voters will remember their sabotage next November.