U.S. Treasury Secretary Timothy Geithner has warned that the time is nigh for raising the debt ceiling, and so now it's time to worry about how this idiotic and hopelessly misunderstood bit of fiscal ritual might not happen, plunging the global economy into something approaching total FUBAR. What's at stake in the debt ceiling fight? In the video above we provide the basics of what could happen to the economy.
Once upon a time, this whole ritual was something that routinely went off without a hitch. Sure, from time to time, the opposition party would grumble, grandstand, and throw a few protest votes into the mix, but only after it was completely certain that the debt ceiling would be raised and no harm, in the form of fiscal armageddon, would result. But now, the debt ceiling debate has transformed a malformed metaphor into a weaponized threat. So a group of six Democrats are going to just try and get rid of the whole thing, forever. Per Travis Waldron:
A group of six House Democrats will introduce legislation tomorrow to abolish the debt limit, a law they say is “unnecessary and increasingly an impediment to Congress’s ability to further economic recovery.” Reps. Jerrold Nadler (D-NY), Hank Johnson (D-GA), Jim Moran (D-VA), Jan Schakowsky (D-IL), Keith Ellison (D-MN), and Peter Welch (D-VT) will announce the legislation at a press conference tomorrow, according to a joint release, in an effort to “move forward with legislation that actually promotes jobs, economic recovery, and growth.”
Meanwhile, over the weekend, the White House made it clear that there will be no minting of a trillion dollar coin to forestall the possibility of default. And while nixing the coin doesn't deprive the White House of failsafe options, should the GOP's "bath salts caucus" push the country's credit to the brink of default, what President Barack Obama appears to be willing to do right now is sit back and wait for congressional Republicans to blink, raise the debt ceiling, and then get on with the rest of the debate over the long-term budget trajectory.
Nadler -- who was a proponent of minting that platinum coin -- is taking this action after urging it in an op-ed he penned for The Hill in which he attempted to spread a little knowledge about the debt ceiling. "Here is a stubbornly well-kept secret," he wrote, "the debt ceiling is arbitrary, doesn’t affect the deficit, and serves no real function in keeping spending down." Federal Reserve Chairman Ben Bernanke has similarly opined of late: "I think it would be a good thing if we didn't have it."
And on "Meet The Press" two weekends ago, Newt Gingrich pointed out that debt ceiling brinksmanship wasn't even a smart negotiating tactic for the GOP:
The House has no obligation to pass a C.R., a continued resolution, on the president's terms. It has no obligation to pass a sequester in the president's terms. I think those are both much better fights than the debt ceiling. And the debt ceiling guarantees a crisis. It guarantees that the markets will cave in on the Republicans. And the Republicans in the end will give up.
Nadler has tried, and failed, to get legislation to abolish the debt ceiling through the House once before, and while there's no evidence that suggests that he'll be any more successful now, this time around the media seems substantially more willing to refer to debt ceiling hostage-taking as the dangerously stupid idea that it is.
For a deep dive into the "chain of events that would bring about a financial crisis worse than the one suffered in 2008," check out this explainer from Mint.com.
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