Even if the shutdown is resolved, though, investors have a bigger concern on their minds: namely, the possibility that Republicans might actually refuse to raise the nation’s debt ceiling in a couple of weeks. The ceiling is the legal limit on the amount of money that the government is allowed to borrow, and raising it is necessary not just to keep the government running in the future but to allow it to pay for obligations it’s already incurred. As Justin Wolfers and Betsey Stevenson convincingly showed last year, the 2011 imbroglio over the debt ceiling put a significant dent in both business and consumer confidence, held back hiring, and further weakened the recovery. It also sent the stock market tumbling—even though a debt-ceiling deal was eventually reached, the Dow fell almost fourteen per cent in less than a month during the crisis, in part because it made people realize that a U.S. default was no longer unthinkable. (It also led to the first downgrade of the U.S.’s credit rating in history.) So it’s hardly surprising that the standoff in Washington is spooking—if not yet terrifying—investors. Markets dislike uncertainty, and what the Republican hard-liners in the House of Representatives have done, most significantly, is to make the future look uncertain by suggesting that, if they do not get the concessions they want (above all, the repeal of Obamacare) they are willing to let the U.S. default.
What’s painful about this uncertainty, of course, is that it’s entirely self-inflicted. The U.S. has no trouble getting people to lend it money at eminently reasonable interest rates, so the only way we can default is if we simply choose not to pay our bills. And what’s really scary about it is that the concessions Republicans are asking for aren’t concessions that the Democrats can even consider, since they would turn the legislative process on its on head, allowing a minority of lawmakers to rewrite laws as they see fit.
The way you get a law passed (or repealed) in the U.S. is, after all, pretty well laid out in the Constitution: you need a majority in both houses of Congress, and you need a President who will sign the bill. If the President vetoes it, you need a supermajority to override the veto. Obamacare is the law of the land because it cleared these hurdles.
Now Republicans would like to repeal Obamacare. But they don’t have the votes. That’s the simple reality that all the talk about the unpopularity of Obamacare is meant to occlude: Republicans control only one house of Congress. In the past, that would have been enough to end the story. Republicans would have voted to repeal the law (as the House has done innumerable times already), failed to get repeal through the Senate, and moved on, biding their time and waiting for the day they took back the Senate and the Presidency. Self-evident as it sounds, that’s how democracy is supposed to work: you need a majority in order to change the law.
What the Republican hard-liners have decided instead is that even though they don’t have the necessary votes they should still get their way, and, in order to accomplish that, they’re going to hold the economic well-being of the country hostage. This is a radical and far-reaching demand, and acceding to it would in effect mean that controlling one house of Congress would be all you need to set policy. (Had congressional Democrats followed the Republican playbook in the nineteen-eighties, when they controlled the House but not the Senate, they would have demanded a repeal of the Reagan tax cuts in exchange for voting to raise the debt ceiling.)
There’s no obvious place where this process would stop, since there’s no distinct connection between Obamacare and the national debt. (At least the 2011 showdown was over fiscal issues.) Any law that hard-liners wanted to repeal (or pass), from abortion to gun control, could be pegged to a debt-ceiling vote. The ability to push through legislation would no longer be about which party was better at winning elections; it would be about which party was more willing to take the government, and with it the economy, over the cliff. Indeed, if the Republicans were to win this standoff, the result would be far more general uncertainty, since every debt-ceiling increase would become an occasion for rewriting laws.
This is why the Republican approach to the debt ceiling is not, as people like Zeke J. Miller, of Time, have argued, the kind of hostage-taking that’s a “standard way of doing business in Washington.” This is really an attempt to remake the legislative process itself, and to do so by threatening to do something—default—that no one, including the people making the threat, believes to be in the best interest of the United States. We can’t be sure of exactly what would happen if the U.S. stopped paying its bills, but at the very least it would lead to havoc in the bond market and the financial system (which depends on U.S. Treasuries as risk-free collateral), higher interest rates, and an immediate hit to economic growth. It’s not a road that anyone should want to go down.
There’s no problem with House Republicans offering a bill that attaches the repeal of Obamacare to a debt-ceiling increase—as scholars have shown, many members of Congress have tried to attach unrelated provisions to debt-ceiling bills in the past. But when that bill fails to pass the Senate, as it will, the only responsible thing for the House to do is to then pass a clean bill raising the debt ceiling. It would be even better, as I argued in 2011, for Congress to just abolish the ceiling entirely, though that’s probably a bridge too far. Republicans may want a do-over on Obamacare, but risking economic catastrophe isn’t the way to get it.
Original Article
Source: newyorker.com
Author: James Surowiecki
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