The clock in Washington is ticking, and we still don't have an agreement to raise the debt ceiling. After weeks of on-again-off-again negotiations that have run into every possible roadblock (Eric Cantor, the Tea Party, Eric Cantor, Democratic mutiny and Eric Cantor, to name a few), it still looked like President Obama and Speaker Boehner would have a deal soon—at least, it did until this afternoon, when the Speaker told President Obama that he was withdrawing from negotiations. Two very angry press conferences ensued and here we are: 11 days away from a default on the full faith and credit of the United States and no deal in sight. To be perfectly honest, you can start to panic now.
Yes, you can call this Angry Obama.
For those who haven't been following the debt ceiling debate (and who haven't been reading this blog), the debt ceiling will be breached by August 2nd; if that happens, the U.S. will no longer be legally allowed to pay off its debt, likely resulting in another economic crisis. No one knows how bad it will be, as it has never happened before, but intuition and two introductory economics courses tell me that when the leading player in the global economy runs out of money, it will be bad. While negotiations have been ongoing for the past few months, they picked up in earnest a few weeks ago when Boehner and Obama began to meet one on one to hash out a deal. Last week, sources claimed that they were close to a “grand bargain” that would result in approximately $4 trillion of deficit reduction over ten years, before House Majority Leader Eric Cantor publicly stated that such a deal couldn't pass in the Republican-controlled House of Representatives. After a few days of meetings in which everyone generally agreed that Cantor comes off as a dishonest prick, Boehner and Obama began meeting again privately. Incredibly, after all the hoops that both had been forced to jump through by their respective caucuses, they were, according to Obama, within $20-40 billion of a deal.
Then, late this afternoon, Speaker Boehner told the President that he was ending negotiations with the White House and that he would work with the Senate to pass a deficit reduction plan instead. A little while later, Obama held an impromptu press conference (see the video above) in which he was angrier than I have ever seen him (and I've seen pretty much every speech of his since 2007). He told reporters that the question now is “What will the GOP agree to?” and wondered aloud if the Speaker even has control of his caucus. After emphasizing that he is taking significant heat from his own party for allowing entitlements like Medicare and Social Security to be cut, he lamented the fact that Republicans won't even begin to compromise on revenue increases.
Afterwards, Speaker Boehner held his own press conference accusing President Obama of trying to sneak new tax increases into the deal in order to satisfy his constituency. (First of all, maybe a package that is 75% spending cuts and 25% revenue increase could use a little more revenue. Second of all, Boehner did the exact same thing when Cantor and the Tea Party derailed the last deal. But, that's neither here nor there.) The point is, the personal and professional relationship between the President and the Speaker of the House has broken down, and at this point, there seems to be very little hope of a deal getting done before August 2nd.
I'm sorry if I still sound melodramatic about this, but if Congress doesn't raise the debt ceiling, then you'd better get used to the way the economy has been for the past two and a half years. If there isn't significant progress on a deal by the time the stock market opens on Monday morning, expect to see a triple digit drop within the first 20 minutes of trading, just due to the fear of default. On August 3rd, if we breach the debt ceiling, get ready to see 500+ point drops. Unemployment will probably go back up to double digits (some economists have predicted upwards of 15%) and will hover there for a little while as the country falls back into a recession. If I haven't made it clear, it won't be good.
The root of this whole debate, and Boehner's inability to pass anything resembling a fair deal, is the Tea Party and its effects on Congressional politics. We have, in Congress right now, close to 90 House members that are serving their first terms as Representatives. Many of them, if not most of them, have little political experience or understanding of the complicated issues which they now have to deal with. Maybe this is just my liberal elitism showing itself, but any serious observer who doesn't believe that failing to raise the debt ceiling will be catastrophic is either delusional or just uninformed (I'm looking at you, Congresswoman Bachmann). Everyone claims to hate career politicians when they're in office—that's a feeling that crosses party lines. But when, as a country, we populate one fifth of our legislature with people who have little to no political experience to speak of, this is what happens. To people who voted for Tea Party candidates in 2010, or Democrats who didn't vote, I say this: you got what you paid for. Or rather, what the Koch brothers paid for.
I try not to make a habit of predicting doomsday based on Congress or the presidency. Honestly, I think that on most issues, very rarely is a single decision going to destroy the Earth, despite what radicals on both the left and right will tell you. There are important votes and even votes that determine the future of the country, but rarely will irreparable harm be done because of anything Congress does or does not do. This, though, may be the exception. You should be afraid of what happens if we don't raise the debt ceiling by August 2nd. I will end this post by saying—with only the slightest hint of hyperbole—that if the United States defaults on its debt, it's a whole new ball game. We will enter a new era of American politics and global relations; those before America chose not to pay its bills, and those after, when we lost respect, standing, and economic stability. That's not the kind of history I'd like to make.
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