GOP Arson Squad Assumes Control

On July 15, 2011, a commentator for the New York Times reported that: "Not only is Michele Bachmann, a leading Republican presidential candidate, saying a government default is nothing to worry about, but a core group of 59 House Republicans have indicated they will not raise the debt ceiling under any circumstances, according to House Speaker John Boehner." Right now, however, it appears that there may be even more votes in favor of default. Speaker Boehner has his hands full getting any plan to raise the debt ceiling through the GOP controlled House. So, yesterday Boehner was forced to withdraw his plan to raise the debt ceiling for lack of support from his own party in the House which he nominally leads. This morning, Boehner was supposed to present a new modified plan that could attract more support. As of now, Boehner has failed to put together any debt ceiling proposal that can pass the House. There are 100 votes in the House that appear determined to induce default and throw the economy into chaos. These 100 votes want to amend the Constitution as a condition to averting default!

Conservatives will come to regret the rise of this extremist even nihilistic wing of the GOP. Their investment portfolios will get hammered if the government defaults, by a far greater amount than their precious tax cuts. Market instability is just beginning to take hold and over the next few days more people will come to realize the magnitude of the budget impasse and the huge error of ever tying such massive issues to the heretofore formalistic debt ceiling increase. Our global economy is in a very fragile state (the Eurozone is facing a debt calamity right now) and a U.S. government that is incapable of rational fiscal policy would be a serious setback. But the arsonists threaten far more vast economic pain. Even beyond the carnage coming from instability in financial markets, the loss of demand from dramatic government spending cuts would alone tip our economy into a recession. In sum, this crisis could make the Lehman event look like a cakewalk. (Especially since we failed to enact meaningful financial reforms after the last laissez faire market meltdown).

It may be impossible to avert such a meltdown today, as no lawmaker yet has proposed simply increasing the debt limit and decoupling budget talks (much less a Constitutional amendment) to avoid a default.