Thursday, September 26, 2013

Commentary: Congress will "Pay the Bills"

by Bill McBride on 9/26/2013 05:09:00 PM

It seems more and more likely that there will be a partial government shutdown starting next Tuesday. This is expensive, dumb and inconvenient (for me, the delayed data releases will be frustrating). But the scary issue is the so-called "debt ceiling". Unfortunately "debt ceiling" sounds virtuous, but it isn't - it is actually a question of "paying the bills".

Sometimes we see articles like this in the NY Times: House G.O.P. Leaders List Conditions for Raising Debt Ceiling

[B]ehind closed doors in the Capitol, House Republican leaders laid out their demands for a debt-ceiling increase to the Republican rank and file.

They include a one-year delay of the president’s health care law, fast-track authority to overhaul the tax code, construction of the Keystone XL oil pipeline, offshore oil and gas production, more permitting of energy exploration on federal lands, a rollback of regulations on coal ash, blocking new Environmental Protection Agency regulations on greenhouse gas production, eliminating a $23 billion fund to ensure the orderly dissolution of failed major banks, eliminating mandatory contributions to the new Consumer Financial Protection Bureau, limits on medical malpractice lawsuits and an increase in means testing for Medicare, among other provisions.
That is foolish. Just tell the "rank and file" the truth - it has to be a clean bill (as Reagan, Greenspan and many other Republicans have said before).  As I pointed out in early January, a poker analogy is that the GOP is bluffing into the best possible hand - and everyone knows it.  They will have to fold, and everything they say is just political posturing.

As Republican Senator Mitch McConnell said in 2011, if the debt ceiling isn't raised the "Republican brand" would become toxic and synonymous with fiscal irresponsibility. Analysts are debating what will happen in the next election if Congress shuts down the government; I think the impact on the election will be minimal if the shutdown doesn't last very long. But if Congress stopped paying the bills - for the first time in 237 years (except some minor glitches) - people will remember. So it won't happen; Congress will pay the bills.

Now if we could just avoid a shutdown ...

Note: I said the thing in 2011, and again at the end of last year. The goods news is the eventual agreement will take the government through 2014 (so it will not be an election issue).