In the spectacular Republican burnout at the end of the October government shutdown, it was easy to miss that America came within just hours of a full economic meltdown.
The brinksmanship over the demand to defund Obamacare or at least completely maim it lasted for 16 days and cost an estimated $24 billion. But if the standoff had gone on just another day longer, the debt ceiling would have been breached, causing economic chaos.
It’s difficult to predict what kind of damage the economy might have suffered, because no Congress had ever been stupid enough to default on our debts on purpose. The debt limit crisis of 2011 cost the stock market thousands of points and stunted job creation for months. There wasn’t a similar effect in 2013 because Wall Street assumed the GOP was crying wolf, and they were right.
But one mistake, one procedural error, one coup against a congressional leader could have sparked the beginning of a default. And many economists believe the results would have resembled the 2008 financial crisis — but worse.
As she’s sold the budget deal she negotiated with House Republicans that doesn’t extend the debt limit, Senator Patty Murray (D-WA) has said, “We have brought certainty and stability.”
And the economy does seem to be more stable since the GOP capitulated in October. “The volatility of the U.S. dollar in the last 90 days fell to 4.93 percent on Dec. 13 from a yearly high of 7.34 percent in September as a shutdown and debt ceiling crisis loomed, according to the Bloomberg U.S. Dollar Index that represents 10 major currencies weighted by liquidity and trade flows,” Bloomberg‘s Derek Wallbank and Kathleen Hunter noted.
But Murray’s partner, Rep. Paul Ryan (R-WI), seems intent on disrupting that stability.
“We don’t want nothing out of this debt limit,” he told Fox News Sunday.
In other words, House Republican demands are forthcoming. The last time they put together a list of such demands, it was an insane laundry list of right-wing wishes cribbed from the Koch Brothers’ letter to Santa. Somehow being the party held responsible for the greatest financial crisis in a half-century has given Republicans the freedom to boldly threaten a return to such a crisis again and again, without fear of destroying their party.
The president offered, in return, nothing. Obviously regretting setting the precedent that the economy could be held hostage, President Obama has vowed never to negotiate over the debt limit again.
With Republican factions warring with themselves and everyone in Washington seeing their approval ratings shrink, would they dare play chicken with the economy as the midterm elections rapidly approach?
Paul Ryan knows he can’t afford not to at least seem as if he’s willing to do so without losing the Tea Party support that makes him such an asset to House Speaker John Boehner (R-OH). And the president knows he can’t afford to give in.
The result is that another crisis has been averted, but a far worse one looms.