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July 26, 2011 2:35 PM An ‘economic justification’ for raising the limit once, not twice

By Steve Benen

As truly ridiculous as this may be, one of the key sticking points in the debt-ceiling crisis is the sudden Republican insistence that we go through this process twice, instead of once. As GOP leaders see it, the only legitimate solution is one debt-limit increase now, and another early next year. Democrats and other sane people prefer to just go through this once, taking default off the table until 2013.

House Speaker John Boehner (R-Ohio) has been championed the two-step process, and today, he was backed up by Senate Minority Leader Mitch McConnell (R-Ky.). “There’s absolutely no economic justification for insisting on a debt limit increase that brings us through the next election,” McConnell said, adding that Democrats are only concerned with politics.

Republicans said the opposite as recently as last month, but let’s put that aside for now.

Instead, let’s just look at McConnell’s argument on the merits. Is there an economic justification for extending the debt limit through the end of next year? Of course there is. Here, for example, is the chief executive officer of NASDAQ, testifying to the Senate this morning.

If you can’t watch clips online, CEO Robert Griefeld told lawmakers, “Markets certainly want to feel certainty…. [T]he longer the deal the Congress makes, in agreement with the president, the better markets will feel about it.”

He’s not alone. Standard & Poor’s is threatening a credit-rating downgrade if there’s a short-term extension and the CEO of PIMCO warned against such an approach.

I have no idea if Mitch McConnell believes his own nonsense. I also can’t say why in the world he’d want to go through this entire mess all over again early next year. But if he thinks there’s “absolutely no economic justification” for a longer debt-limit extension, McConnell need only call one of the many Wall Street lobbyists he keeps on speed dial to get a very different opinion.

Steve Benen is a contributing writer to the Washington Monthly, joining the publication in August, 2008 as chief blogger for the Washington Monthly blog, Political Animal.

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  • Mike on July 26, 2011 2:45 PM:

    Steve, with all due respect, stop being dense. As you've noted many times before, Republicans are basically getting everything they've asked for at this time by holding the debt ceiling hostage. Why wouldn't they want to do this again next year? They'd probably just get even more. It's called leverage.

  • Rochester on July 26, 2011 2:49 PM:

    I agree with Mike. You're intentionally not stating the obvious, that any 8yr old could figure out...

    ...the GOP wants to smack us in the face again with this stick next year.

    Of COURSE there's political motivation, but not in the way they're claiming. (Which is always the case. Meh.)

  • JS on July 26, 2011 2:50 PM:

    Why kill the hostage if you can get half payment now by sending the hostage's arm back, but promising not to kill him - yet?

  • Rick Taylor on July 26, 2011 2:51 PM:

    "I also can’t say why in the world he’d want to go through this entire mess all over again early next year."

    Why the hell wouldn't he? Republicans have managed to get significant concessions while giving up nothing, and the next time they might even be able to get concessions on entitlements.

  • DTTM on July 26, 2011 2:54 PM:

    All of this stuff is getting confusing, but it is imperative that Boehner's plan fails tomorrow. Club for Growth just came out against it. A very good sign for failure. I certainly hope not one Democrat votes for it.

  • Texas Aggie on July 26, 2011 2:59 PM:

    What Mike just said.

    And you really don't wonder if they believe their own talking points. By now you and everyone else realize that they don't believe anything. The concept of true vs. false depends on being based in reality, while living in fantasy means the concept doesn't even exist.

    For someone in a fantasy novel, whatever they wish for is real at that moment, and it can change 180˚ in a split second. Therefore your question is meaningless. As Humpty Dumpty said, "When I use a word, it means just what I choose it to mean — neither more nor less." The same thing applies to everything the right wing says at the moment they say it. Later, who knows?

  • Danp on July 26, 2011 2:59 PM:

    Robert Griefeld told lawmakers, “Markets certainly want to feel certainty…. [T]he longer the deal the Congress makes, in agreement with the president, the better markets will feel about it.”

    Bad example. NASDAQ hasn't show the least amount of jitters so far. And frankly the "certainty" argument is absurd anyway, since traders live off risk, especially NASDAQ investors.

  • John Dillinger on July 26, 2011 2:59 PM:

    Its not like the House Republicans have alot they can accomplish otherwise. I'm surprised that they don't do these every couple of months.

  • Kathryn on July 26, 2011 3:02 PM:

    I think it goes down. Isn't Club for Growth Norquist's group? Last night, he was supposedly calling teatards to convince them to vote for Boner's bill. Maybe that's not his group. These lunatics (Walsh % co. are drunk on power), they answer to no one just point them to the nearest T.V. camera and the cables are glad to oblige.

  • Gridlock on July 26, 2011 3:04 PM:

    In the meantime, the "Do Nothing" Congress is being held hostage (along with the airline industry) by Republican't demands. This time, regarding the unionization of airline workers:
    http://finance.yahoo.com/news/FAA-shutdown-would-cost-govt-apf-3924932687.html?x=0&.v=3

    See, Republican'ts are addressing the unemployment issue...by creating MORE of it.

    Captcha: MProper call

  • Old Uncle Dave on July 26, 2011 3:05 PM:

    The public is not buying the GOPs line that it's all Obama's fault.
    Six more months of lies from their media outlets and things might be different.

  • memekiller on July 26, 2011 3:08 PM:

    Of course they want to keep the economy in peril. They're getting so much in exchange for it. And the more we give, the more they'll put our country's future on the line in increasingly dangerous ways. That is, until the GOP marginalizes itself, or Dems hold firm and show there is a point where they will call their bluff.

    Watching CNN, I have lost faith in the belief the village will recognize the error of its ways, and will continue poxing both houses and calling for 3rd parties, anything but agree with the DFHs.

    The stock market is in denial, so a plummet is unlikely until too late. The GOP wants to watch the world burn because the kind of economic stability that led to the rise of fascism, which favors their complete takeover.

    The method to the GOP madness is that their goal is an end to the two-party system. They will contionue until a showdown of good vs. Evil that leaves one party standing. And right now that's the only way I see this end. Hope it occurs in conditions favorable to Dems.

  • T2 on July 26, 2011 3:10 PM:

    "I also can’t say why in the world he’d want to go through this entire mess all over again early next year."

    Jeezus H. Christ - are you serious???? You don't know why they would want to do this all again right in the middle of the Presidential Election time?
    Maybe this was a joke statement? Otherwise, Mr. Benen, it's highly uninformed (with all due respect).

  • Texas Aggie on July 26, 2011 3:14 PM:

    NASDAQ may be reasonably stable, but since last Thursday the Dow Jones Industrial Average has been all over. Right now it's down from Thursday and way down (~220) from it's high on Friday.

    So far most investors don't believe that Congress will be so stupid, but they're starting to wonder. If they don't go with just one rise in the debt ceiling, the next time the markets will know for a fact that the republicans are quite capable of killing the hostage and will react accordingly.

  • Neil B on July 26, 2011 3:16 PM:

    Today's Repugs are so deranged they won't even listen to the NASDAQ CEO, like their patrician predecessors would.

  • Anonymous on July 26, 2011 3:18 PM:

    If he agrees to the whole two-step process he will be stuck in Washington next year talking about the deficit, while Mitt will be in swing states bashing him on jobs. YMeanwhile the GOP will drag out the next round for another 7-8 months. If he dares move an inch outside of DC to campaign, he will be attacked relentlessly for putting his election ahead of the emergency created by the GOP. Brilliant. What has he been doing for the past few months? Not talking about jobs or creating them, but tied up with the leadership of the GOP. What will be doing next year? The same thing. And why would the GOP do anything differently next year, when they got everything they want? Obama looks reasonable; The GOP gets everything they want. Bush could have never pulled this off!!

  • Perspecticus on July 26, 2011 3:20 PM:

    "I also can’t say why in the world he’d want to go through this entire mess all over again early next year."

    Steve, I enjoy your blog and often agree with your analyses but with all due respect, I cannot believe this is even remotely true. Even if you are trying to avoid speaking to someone's motives, McConnell has said enough about his motives in all of this to fairly accurately assess why he wants another vote in January and, likely, a third vote in August. Obviously, he still fully believes he can hang all of this around Obama's and dem Dem's necks straight through to the next election. If Obama allows him to do so, I believe Obama stands a fair chance of losing his re-election bid. That, of course, ignores the abysmal candidate the GOP will be presenting (whoever it is).

  • Jjm on July 26, 2011 3:24 PM:

    Why would the GOP want to come to power once the US goes into steep economic decline after a default?

    Because they are priming for us to opt for a dictator, a 'savior,' the way the Germans did following the depression caused by the same guys that back the GOP.

    Worldwide, this default would have the same consequences as the depression did in the 1930s, and if you don't think that is what Bush and Co. had in mind when they caused the disaster, and why the GOP HATES Obama for salvaging our economy, you have another think coming.

    These are deep fascists, and they aren't ever going to play fair.

    Expect more Breiviks on the scene, with the blessing of Glenn Beck and Pat Buchanan.

  • JM917 on July 26, 2011 3:27 PM:

    In the very likely event that the two houses of Congress can't or won't agree in raising the debt ceiling through the post-2012 election, I am almost certain that Obama will do so unilaterally, citing his constitutional duty. That will reassure the markets, which are grasping at straws to believe that sanity will prevail in Washington, and though the House will immediately impeach him, that farce will go nowhere. I believe that such a presidential act will galvanize support among all non-Tea Party Americans.

    This is Obama's big trump card, which he can't play as long as their is any chance that Congress will act. When Congress proves its impotence and the markets start to belch and heave--that's when Obama pulls out the trump card. Not until.

    And if he loses his nerve... Well, then God help us all!

  • Elie on July 26, 2011 3:28 PM:

    There are some people on this thread who have been smoking or sniffing something.

    The Repubs have won nothing. What assumption do you make that redoing the debt ceiling in 6 months is a go when there hasn't even been any approval of any plan?

    Steve, you really must manage the Right wingers and PUMAS and the lies they put out here without rebuttal.

    Get your facts straight -- although oops, that is not a feature of right wingers

  • elbrucce on July 26, 2011 3:29 PM:

    The default is a way for big money to jack up the rates on government securities. The securities will still be essentially risk-free, but the ratings downgrade will push interest rates to something more satisfactory to the fat cats.

    and how many Republican sociopaths besides Cantor have bet on default. Every so-called liberal columnist should always use the following phrase when speaking of Eric Cantor:

    "...Cantor, who stands to personally profit in the event of a default..."

  • Live Free or Die on July 26, 2011 3:30 PM:

    I think that I know the root of the problem:

    1) Obama cannot negotiate. He gives Rebups 90% of what they want upfront, then eventually 120% of what they want. Obama needs to take the most leftist position at the beginning, and then force the GOP to move him over.
    2) Obama does not fight for anything. Repubs are fighting for tax cut for the rich, regardless of their popularity.
    3) Obama does not know anything about economics. He said in his speech that by taking money out of the economy, this will create jobs. Not true. There is no data to support this.
    4) He wants to be reasonable. He ends up being the adult in the room, but passes right-wing legislation that Bush could have only dreamed of passing.
    5) He want to do big thing and be transformative. He has already done big things: Health care, Gay rights, and killing OBL. He does not need to do anything else bigger. He just needs to create jobs.
    6) He is scared of losing a fight. Sometimes you have to take chances and go down fighting. People can respect that.
    7) He is listening to Geitnter. Every advice Geitner has given Obama turns out horribly wrong. See Bush tax cuts, debt ceiling. Obama, please stop listing to this mothafucker. He will destroy your presidency

  • Philat on July 26, 2011 3:34 PM:

    As others have noted, the Republicans are not and have not been interested in governing. Their only objective from day one is to try by all means possible to make Obama a one term president. The nation be damned, the economy be damned, and consistency of position be thrown out the window. The only thing that counts for the GOP is their hatred of Obama and their desire to impose a vision of America where those in power and of wealth will receive more, and the rest of us will have to do the best we can without unions, Medicare, Social Security and so on.....

  • zeitgeist on July 26, 2011 3:50 PM:

    While I certainly hope we don't have to go through this again anytime soon, the R's may want to heed the saying about being careful what you wish for. It is quite possible that a new crisis in 6 months would backfire on them rather intensely.

    First, the current crisis does not appear to have done them any favors in the polls; there is no reason to think a reply is any different.

    Second, if anything, the impact should be magnified: (a) the stakes will be even higher as markets and global economies are more jittery than the first go-round; (b) the public will likely remember whose idea it was to do it all over again - if it doesn't work out well, R's likely get blamed; (c) that it is in the middle of an election makes the R's efforts look even more crudely political; and (d) the law of unintended consequences kicks in for the R's as the crisis would arise at the peak of Republican Primary season, really screwing with their presidential candidates.

  • slappy magoo on July 26, 2011 4:01 PM:

    Since Election Day '08, Republicans have been trying to de-legitimize Obama's presidency. Driven by partisanship and racism, the threat (implicit and at times explicit) is that the President is a boy who needs to be kept on a short leash or else all sorts of mischief and deviltry will befall us. To have 2 votes on the debt ceiling between now and 2012, not only do they get another opportunity to browbeat Obama into a piss-poor compromise that damages our economy, they get to show their base that they've got this boy on a short leash and they're not above giving it a good yank if it makes that jig dance a jig. Hyuk.

    Contemptible. But hey, you invite the snake into your sleeping bag, don't be shocked when he bites you.

  • tko on July 27, 2011 2:49 AM:

    It seems this entire debacle would have been avoided if our Great Capitulator had included the debt ceiling in his Bush Tax Cuts capitulation last fall. But who could have possibly foreseen that Republicancers would create another "hostage crisis" to get their way. Meanwhile back at the ranch, the Great Capitulator is offering up Social Security and Medicare "reform". Maybe someone should remind the Great Capitulator which party he is a member of so he would quit validating all of the Republicancer talking points and undermining the social safety nets FDR instituted.

  • Rip on July 27, 2011 7:49 AM:

    The budget fight continues in September, and then the Republicans want another battle over the debt limit in the beginning of the year? Meanwhile the their radical base feels that Obama conned them in the government funding battle last year, and they are splintering over the debt limit battle this time. Polls show the Republicans being blamed for this mess in greater numbers the longer it drags out, and wall street is closing it's wallets to the party.

    I don't buy that this constant creating of one fiscal crisis after another helps the Republicans in the 2012 elections. It will have the effect of reminding voters that Obama isn't the only player in a moribund economy, and that whatever dissatisfaction the nation had with Democrats when they ran the legislative branch, at least they weren't constantly pushing the nation to the brink of economic meltdown.

    I'll go against the prevailing wisdom and state that if the Republicans insist on having a continuous knock down drag out brawl over funding the government for the next 18 months, they will be back out of power by Jan 2013, and Obama will be re-elected easily.

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