Lies, Damn Lies, and Acts of Congress

07/29/2011 11:30 am EST


Igor Greenwald

Chief Investment Strategist, MLP Profits

The debt-ceiling fight rages on, but the final score is not in doubt, writes senior editor Igor Greenwald.

Listening to House Speaker John Boehner describe his debt ceiling bill as a bipartisan compromise yesterday reminded me how dishonest this crisis is.

There is nothing bipartisan about Boehner’s stillborn bit of partisanship, of course, unless he was drawing a distinction between Republicans and Tea Party Republicans. Boehner knew it as he spoke the words, and the reporters listening to him knew it too.

Perhaps Boehner’s plan to extend the debt ceiling by no more than a year of US borrowing needs could garner a Democratic vote or two, assuming it’s even voted on in the face of opposition from Tea Partiers. But that’s hardly the definition of bipartisan.

Beohner wasn’t even lying (pardon me, spinning) to get something done. He was doing it in defense of a bill that will be dead on arrival in the Senate should it ever pass the House, all so the Republicans could be seen as doing something.

The other side in this most dishonest of crises has also been less than straightforward, of course. Democrats have professed concern about the soaring government dent and the huge looming deficits while ruling out fundamental reform of the social safety net that is the national budget’s biggest drain. The White House has said repeatedly the government wouldn’t be able to prioritize its payments to pay bondholders first after the limit is reached even as the Treasury has been making plans to do just that.

And it’s hard to argue that a default would bring about a financial apocalypse and yet oppose a Republican plan simply because it would replay the crisis in a year, instead of the 18 months you would prefer. There’s no principle involved here, only an attempt to keep the debt ceiling out of next year’s political campaign.

How will it all turn out? Like this: The debt ceiling will be raised at the last possible moment, either by Congress or unilaterally by the President relying on the 14th-amendment injunction that US debt obligations must be honored. Soon after, the US credit rating will be downgraded from AAA to AA, the debt ceiling debate having amply demonstrated Washington’s inability to compromise on budgeting in an era of yawning deficits. And bonds will remain in demand because there are not enough good alternatives, and because they’re what the Federal Reserve will buy should it decide to further stimulate a struggling economy.

These are not so much guesses as the facts already on the ground; all that remains is to cross some i’s and dot some t’s (hope you’re not expecting legible handwriting.)

Perhaps Congress will eventually get around to addressing stalling growth and persistently high unemployment. And that could make everyone nostalgic for the time when it had nothing more important than the debt ceiling to lie about.

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