If you need evidence of how Congress acting irresponsibly can cause a calamity, look no further than the Great Depression.
True, the 1920s were prosperous years for the country as a whole, yet there were early warning signs of catastrophic events to come. Excessive investments spurred high levels of production but it also created unsustainable surpluses and depressed prices.
The commodity sector, in particular, was coping with over-production that had led to sagging markets and widespread foreclosures, setting the stage for a Tea Party-type revolt in Congress to enact a radical tariff bill which eventually led to collapse of the world economy.
By the late twenties, protecting U.S. markets was the banner issue for Republicans, led by Herbert Hoover whose 1928 presidential campaign capitalized on agricultural tariffs. Upon his election, the new president convened a special session of Congress to deal with the tariff issue and suddenly the climate was ripe for Congress to run amok.
The tariff issue also prompted the formation of hundreds of special-interest groups and trade associations to mobilize political support for higher tariffs and other protectionist measures that set the stage for an eager Congress to indulge as never before.
Oregon's Representative, Willis C. Hawley, presided over what was an unbridled frenzy of log-rolling, with Members jockeying to insure the maximum protection for their constituent producers. At the end of the day, the House tariff bill hiked import fees up to 100 percent on over twenty thousand products.
Not to be outdone, the Senate Finance Committee, headed by Utah's Reed Smoot, added 1200 amendments to the tariff bill that were so egregious that Democrat Senator Thaedeus H. Caraway of Arkansas was compelled to say, "I might suggest that we have taxed everything in this bill except gall." "Yes," Senator Carter Glass, a Vriginia Democrat, replied, "and a tax on that would bring considerable revenue."
While President Hoover's intent was for a "limited revision" on a tariff measure, he exerted no leadership to curb the outrageous behavior or threaten to veto any bill that was out of bounds.
What Congress sent to the president so alarmed the nation's leading economists that they signed a petition urging President Hoover to veto the Smoot-Hawley Act. It was also printed in the New York Times and carried signatures from 46 states and 179 universities.
The reaction abroad was quick and fierce. Within months, America's leading trade partners -- Canada, France, Mexico, Italy, Australia, in all 26 countries -- retaliated by passing their own tariff bills.
World trade plummeted by more than half of the pre-1929 totals that, more than anything, led to the emerging Great Depression.
Those fieriest champions of the Tariff Act -- Senator Reed Smoot, Representative William Hawley, and President Herbert Hoover and a host of others -- were defeated in the 1932 election.
What does all this have in common with the current debate on the debt limit controversy?
When Congress puts political demagogy ahead of the national well-being, there are consequences. Today, it is not only the economists, but the chairman of the Federal Reserve Board, Moody's and others in the financial community, the Chamber of Commerce and even China who are issuing warnings about the dire consequences if Congress does not raise the Federal debt ceiling by August 2.
This time it is not about the collapse of the world trading system but the perilous state of America's financial future. Should the GOP leadership and President Obama fail to address this crisis, the impact will likely be similar to what happened in 1929 -- it will gravely threaten the nation's financial well-being and those responsible, Rep. Eric Cantor and his Tea Party colleagues, will suffer the same fate in the 2012 elections.