Congressional Republicans may have leverage in the debt-ceiling debate, but it's an asset that is quickly turning toxic.
President Obama displayed this yesterday in an uncharacteristically frisky press conference, in which he called a breach of the debt ceiling "irresponsible" and "absurd" and warned it could cause markets to go "haywire" and "wreck the entire economy." He also called Republicans hostage takers, accusing them of "negotiation with a gun at the head of the American people'' and warning that "they will not collect a ransom in exchange for not crashing the American economy."
Obama is stealing a note from Karl Rove: Hammering at his opponent's strength until it is a weakness. In this case, the Republicans' strength is their ability to not raise the debt ceiling. The debt ceiling only lets Congress borrow more money to pay bills already racked up, as Obama pointed out. But Republicans see the debt-ceiling vote as a way to extract some spending cuts out of Obama. It's real leverage, but it's getting harder by the day for them to use it. "The escalation (and simplification) of Obama's rhetoric is designed by his own acknowledgement to take the debt limit entirely out of play as a bargaining chip by making it too hot to handle and thus non-negotiable," writes David Lawder of Reuters.
Assisting Obama in this effort yesterday was Federal Reserve Chairman Ben Bernanke, who compared refusal to raise the debt ceiling to a family refusing to pay its credit-card bill. Except in this case the global economy is at stake: "Default would increase our borrowing costs and damage economic growth and therefore add to future budget deficits, not decrease them," Bernanke warned.
Republicans probably won't listen to Obama or Bernanke (or Tim Geithner, for that matter, who issued his own debt-ceiling warning yesterday). But they may well listen to corporate leaders, whose profits were smacked down at least partly by the fiscal-cliff debate at the end of 2012, Bloomberg points out. That could be one reason the Chamber of Commerce has already warned Republicans not to push their luck with the debt ceiling. Without allies, Republicans may be losing the debt-ceiling fight before it has even begun. And that's good news for the economy.