07/27/2011 01:31 pm ET | Updated Sep 26, 2011

A Washington Credibility Downgrade

We have been told that unless the legislative process is well under way by today, and a bill raising the debt limit is passed and in place by Aug. 2, catastrophe will strike the U.S.

This follows previous warnings of other calamitous deadlines that have come and gone with little tumult, such as Treasury Secretary Timothy Geithner's January claim that the debt limit had to be raised no later than March 31. That deadline passed, followed by a series of other supposed moments of truth in June and July, and most recently, the proclamation by congressional leaders that a deal had to be announced by 4 p.m. this past Sunday before the Asian financial markets opened.

Fortunately, these predictions, so far, have been off the mark. While there may have been market shudders, the predicted Great Panic of 2011 hasn't struck.

Treasury's warnings raise two important questions. Why has it served up visions of the apocalypse time and again and what have been the costs of it being wrong?

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(Originally published in Bloomberg View 2011. Reprinted with permission. The opinions expressed are those of the author)