Today, Republicans got a clear boost in the battle over the debt ceiling, when Standard & Poor’s lowered the U.S. credit outlook to ”negative.” House GOPers pounced on the news as proof that Dems are wrong to push a “clean” vote on raising the debt ceiling without also coupling it with long-term reform.
But there’s another piece of news that broke over the weekend that has largely gotten lost in the shuffle, and it should not go overlooked. The Wall Street Journal reported:
During a recent series of meetings and fund-raisers, top Wall Street executives and lobbyists have urged Republicans to resolve the debt-ceiling debate quickly or risk turmoil in the bond market.
In the sessions, House Speaker John Boehner explained the politics of the vote to investors, telling them Republicans won’t approve an increase in how much the U.S. can borrow without a long-term deficit-reduction plan, according to people familiar with his remarks. In turn, the executives said delaying a resolution could unnerve skittish credit markets.
This seems like it should be big news. Business leaders — a crucial GOP power base — have urged Boehner to hurry up and get this resolved, lest the standoff unnerve markets. But Boehner is telling them that the GOP is standing firm in the quest for a long term plan for cuts. Keep in mind that this goes considerably farther than last week’s Politico piece on this, which only alluded to one or two warnings from executives. The Journal paints executive anxiety as a far broader phenomenon.
Boehner spokesman Michael Steel, recounting Boehner’s private conversations with executives, told the Journal: “Boehner has said exactly the same thing privately that he says publicly: the American people will not tolerate an increase in the debt limit without addressing the reasons it needs to be raised by cutting spending.”
Last week I reported here that Dems hope to use the debt ceiling as a wedge issue against the GOP. The goal is to divide the GOP’s Wall Street supporters, who think the party’s brinkmanship with the debt ceiling is endangering the economy, from the Tea Party base, which wants Republicans to use the debt ceiling as hostage to extract more spending cuts. Stories like this will help with that strategy.
The S&P story seems to have given Republicans momentum today in the spin wars over the debt ceiling. And in truth, though Timothy Geithner said this weekend that GOP leaders had assured him that they understood the need to raise the debt ceiling, Dems don’t seem to be drawing as hard a line on a “clean” vote as they might have. The moment for doing that convincingly may have passed. Some kind of compromise in which Dems agree to some sort of spending cut framework appears likely. But the fact that the GOP’s brinkmanship is rattling the party’s corporate benefactors seems kind of important, and should be part of the discussion.
UPDATE: A GOP aide argues to me that both sides are engaged in brinkmanship -- that the S & P story shows that the push for a “clean” debt ceiling vote is its own form of dangerous brinkmanship over whether we are going to reach a long term agreement on spending cuts. Also, the GOP aide argues that it’s unfair to describe generic Wall Street executives as the GOP’s “corporate benefactors,” since Dems take a huge amount of corporate cash, too.