At long last, President Obama seems to have run out of patience with the truculent Republicans who have rejected all of his overtures for a budget deal -- just as Moody's and other economic authorities again warned of the potentially catastrophic consequences of a debt default.
On Wednesday afternoon, Obama finally stood up at the bargaining table and walked out of the stalemated budget talks, telling House Majority Leader Eric Cantor, R-Va., that he will "take this to the American people" unless the Republicans showed a real inclination to compromise. Exactly what the president meant by that remark is not yet clear, but some leading Republicans have now realized that pandering to their party's hard-line base could have serious consequences for them as well as for the country.
Political schizophrenia broke out among the Republicans on Capitol Hill even as Obama confronted them in the White House. In the Senate, Minority Leader Mitch McConnell, R-Ky., proposed a near-complete surrender, with a three-step maneuver that would allow the debt ceiling to rise while still permitting the Republicans to pretend that they disapprove.
Seeking to justify this panicky abandonment of his own tough-sounding rhetoric a week ago, McConnell told right-wing radio host Laura Ingraham that blowing the Aug. 2 debt ceiling deadline could lead to the same political result as the government shutdowns of the Clinton era -- only perhaps worse.
A faithful servant of big money, McConnell appears to have realized that a Treasury default -- unprecedented in our history -- could cause permanent damage not only to the nation's credit and the world economy, but might well ruin the Republican Party, too.
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Noting that President Clinton easily won re-election the year after he faced down a Republican caucus in a budget debate that led to two government shutdowns, McConnell predicted that Obama "will say Republicans are making the economy worse. ... It is an argument that he could have a good chance of winning, and all of a sudden we have co-ownership of the economy. That is a very bad position going into the election." Letting America default is a bad idea, he said, because it "destroys the GOP brand."
In other words, American voters might blame Republican candidates for a worsened recession, caused by their ideological obsession and partisan selfishness. Voters might finally express their disgust with Republican legislators who worry more about the mindless raving of Michele Bachmann than the expert opinion of Ben Bernanke, the Federal Reserve chairman who outlined the consequences of default in Congress on Wednesday. As outlined by Bernanke, whose own Republican credentials are impeccable, the ominous storyline should not be difficult to follow even for the average politician.
Bernanke told the House Financial Services Committee that default would cast grave doubt on the value of the Treasury bond, which "is viewed as the safest and most liquid security in the world, and the notion it would become suddenly unreliable and illiquid would throw shockwaves through the entire global financial system."
While Bachmann may disparage such warnings as "scare tactics," the threat that default portends for everyone from grandmothers depending on Social Security checks to the struggling economies of Europe and Japan is real. Indeed, its effects are already being felt.
Where the president's mounting frustration will lead remains to be seen. What did he mean when he told the Republicans not to "call my bluff"? Although Obama, the constitutional law professor, would prefer not to invoke a controversial 14th Amendment power to overrule Congress and raise the debt by fiat, he can now cite McConnell (and many other conservatives) in his defense. Should the Republicans in the House someday seek to impeach him over such a move, he could honestly reply that he was responding to a clear and present danger to the nation and the world -- and that the leaders of their own party in the Senate had agreed with him.
Americans who broadly oppose default, and who overwhelmingly favor increasing taxes on the rich to avoid it, might well be persuaded by that argument.