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Wall Street must push Republicans to avert economic catastrophe [1]

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Date: 2023-05-04  

“I think some of our members may have thought the default issue was a hostage you might take a chance at shooting,” McConnell said after nearly defaulting the nation while facing off against then-President Barack Obama. “Most of us didn’t think that. What we did learn is this—it’s a hostage that’s worth ransoming. And it focuses the Congress on something that must be done.”

It’s a decade later and for Republicans, this is no longer just about ‘ransoming’ hostages: House Republicans want to shoot the hostage. They have supposed “policy advisers” telling them to do it because they believe that “the debt ceiling can be breached with only minimal economic impact.” They, including former Trump Office of Management and Budget chief Russ Vought, argue that it’s more important to slash spending and reduce the deficit than pay the bills on money already spent.

There are other advisers trying to convince House Republicans they’re playing with fire, including budget expert Bruce Reidl, who used to work for now-retired Sen. Rob Portman of Ohio and at the Heritage Foundation. He’s now at the libertarian-ish Manhattan Institute, and he’s not having much luck.

“You want to write a story about how we’re running over the cliff because nobody cares what we think?” Riedl rhetorically asked The Washington Post. “I end up doing a ton of meetings; I talk to a lot of members and staff. And then they end up going in the exact opposite direction of what I recommend.”

That sounds like a call for help from McConnell and team, the people who know the danger of shooting the hostage. So far McConnell isn’t answering. Maybe Wall Street can intervene, because that’s who really calls the shots with most Republicans.

As recently as three weeks ago, the prevalent assumption was that there was no reason to panic, that Congress and the White House would work it out as usual. That’s changing now that House Speaker Kevin McCarthy’s passed a ludicrous bill that raised the debt ceiling in exchange for spending cuts, and it’s clear that the Freedom Caucus is really in control. It spells chaos for the economy if either the default or the draconian cuts the House Republicans are demanding happen.

The markets had their first wobble this week after Yellen announced the new deadline, but there is no panic yet. "The consensus view is we will get some resolve on this ... but the closer we get to that deadline without a resolve, there is a likelihood that this becomes more precarious for equity markets," said Art Hogan, chief market strategist at B. Riley Wealth.

Assuming good faith from House Republicans is a very dangerous consensus view, whether it’s coming from Wall Street or from McConnell and his Senate team. They’re all underestimating the desire of Republican nihilists in the House to blow everything to smithereens, and it will take a united front to stop them.

Can we have fairer, more representative elections in the U.S.? Absolutely, says Deb Otis on this week's episode of "The Downballot." Otis, the director of research at FairVote, tells us about her organization's efforts to advocate for two major reforms—ranked-choice voting and proportional representation—and the prospects for both. RCV, which is growing in popularity, not only helps ensure candidates win with majorities but can lower the temperature by encouraging cross-endorsements. PR, meanwhile, would give voters a stronger voice, especially when they're a minority in a dark red or dark blue area.

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[1] Url: https://www.dailykos.com/stories/2023/5/4/2167293/-Wall-Street-must-push-Republicans-to-avert-economic-catastrophe

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