A little something to put you in the right frame of mind for that big Dem/GOP kumbaya meeting at the White House at 3. He tried to panic the markets to increase his leverage two weeks ago and it didn’t work; two weeks later, with Reid and McConnell in crunch-time negotiations, I guess it was time to try again.
After endless heavy media coverage of the congressional stalemate, no one who’s following the story even casually is unaware of what hitting the ceiling would mean. He’s not imparting useful information to the public by saying this, in other words. What he’s doing is trying to startle investors by suggesting that, behind the scenes, the risk of default might be greater than they know.
Talking to reporters at an event in Washington D.C. Monday, President Obama said the U.S. faces “a good chance at defaulting.”
“This week if we don’t start making some real progress, both the House and the Senate, and if Republicans aren’t willing to set aside their partisan concerns in order to do what’s right for the country, we stand a good chance of defaulting. And defaulting could have a potentially have a devastating affect on our economy,” the president said.
As I write this, after a modest early dip, the Dow has rallied on news of the Reid/McConnell negotiations and is up a few points on the day. Either the market is dismissing his default chatter as the leverage ploy that it is or it simply doesn’t take his pronouncements on this subject seriously enough anymore to let any real money turn on them. What’s risky about him trying to talk down the Dow to light a fire under Republicans in Congress is that, if you’re among the relative few there who think hitting the ceiling wouldn’t be so bad economically or might even be good(!), you might take the fact that markets haven’t blinked at all the doomsaying lately as evidence that technical default wouldn’t be the disaster that experts say it is. So, aces all around here, champ.
You can watch the clip of him talking about default here (at around 2:55) in, but this bit from Rand Paul yesterday is a better use of your time.
Update: Joel Pollak of Breitbart notes that some media commentators are now acknowledging openly what the strategy is here:
Now–with Republicans “on the run” in polls–National Public Radio (NPR), which has been a cheerleader for the Democrats throughout the debate, has admitted that there are attempts to drive stock prices down in an attempt to force a deal. “It’s almost like they’re begging the markets to react today to force the Senate into some sort of action, and then see what the House does,” said Cokie Roberts on Monday morning.
Roberts was describing a meeting of international bankers in Washington that warned of “dire consequences” if the U.S. did not raise the debt limit. Note that none of these government-aligned barons, warning of nascent panic in the financial markets, advised the U.S. to cut spending and manage its long-term debt–even as Democrats added new demands for spending increases. Presumably, that is a problem for a later crisis.
Update: Getting close to a deal?
The White House abruptly canceled a 3 p.m. meeting at the White House among President Barack Obama, Vice President Joe Biden, and congressional leaders amid ongoing discussions on a potential deal to reopen the government and raise the nation’s debt ceiling.
The postponement came about 20 minutes before the meeting was scheduled to start…
Reid told reporters on Capitol Hill Monday morning that “we’re getting closer” to a deal, and that he hopes there will be a deal roughly in place before the meeting.
Update: Do we have a deal? Maybe, says Reuters:
Democratic and Republican senators are working on a fiscal deal that would extend U.S. borrowing authority at least through mid-February and provide government funding until mid-January to end a two-week government shutdown, according to a source familiar with the negotiations.
The tentative framework, which is not finalized and could change, would also set up a new round of deficit-reduction negotiations that would try to strike a bargain by year’s end.
Could that pass the House? According to Guy Benson’s source, no — or rather, not without many, many Democratic votes:
Same House R suggests Boehner might try to attach a conservative sweetener to Sen deal; if/when that fails in Sen, goodbye, Hastert Rule?
— Guy Benson (@guypbenson) October 14, 2013
Whether Boehner’s willing to violate the Hastert Rule and pass a Senate bill before Thursday is one of the two remaining big questions. The other is whether Ted Cruz or Rand Paul or Mike Lee or anyone else will halt the Senate in its tracks by objecting to Reid’s motion to waive the 30 hours of required debate after the new bill comes to the floor. That would guarantee that we hit the ceiling (unless Treasury suddenly decides that, due to fluctuating revenue figures, we actually won’t hit the ceiling until next week). I’m cautiously optimistic that Cruz et al. won’t object, for the simple reason that they can’t stop the bill entirely by doing so. All they can do by objecting is delay it an extra day or two, which would trigger a destructive technical default while achieving nothing in return. No one wants to be the guy with that on his resume. It certainly wouldn’t help Cruz in a general election down the road.
Update: As of last Tuesday, the Bipartisan Policy Center estimated that the U.S. would hit the debt ceiling somewhere between October 22 and November 1. If Reid’s bill comes to the floor today, not even an objection by Cruz or Paul could slow it to the point where that deadline is threatened — although obviously it would leave Boehner and the House with less time to act. And just as obviously, Treasury would need to endorse the later deadline in order to calm markets as we get closer to Thursday.