If I’ve learned anything from my obsession with raising the debt ceiling, it’s that playing chicken with the full faith and credit of the United States is a very dangerous game. And yet there is a report today that one of the adults on Capitol Hill — yeah, I’m talking about you, Speaker Boehner — is seeking a way out of the rules of the game.
According to an exclusive report from Ben Smith at Politico, the Ohio Republican “has been reaching out to top Wall Street players asking how close Congress can get to the May 16th deadline (or July 8th drop-dead date) for raising the debt limit without seriously unnerving financial markets.” Needless to say, Boehner’s inquiry is unnerving big guns on Wall Street. “They don’t seem to understand that you can’t put everything back in the box,” one executive told Smith. “Once that fear of default is in the markets, it doesn’t just go away. We’ll be paying the price for years in higher rates.”
How big a price? Writing today about the insanity of not raising the debt ceiling, Post columnist Steven Pearlstein points out, “Every one percentage point increase in interest rates would add $140 billion to interest payments every year. . . .” This is most unwelcome news now that the economy is starting to get off the mat.
Jamie Dimon, CEO of J.P. Morgan Chase, issued a warning at a Chamber of Congress event last month. The Wall Street Journal’s Washington Wire blog reports that Dimon said that in the weeks and months leading up to national default (July 8), the consequences of congressional inaction would “start snowballing.” Consequences, such as companies selling their holdings of U.S. Treasuries.
“All short-term funding would disappear,” Mr. Dimon said. “I would have hundreds of [people] working around the world protecting our company from that kind of event. We would get prepared for it way ahead of time. Like, I would be taking really drastic action. It would be really unpleasant,” he said.
“We owe it morally to ourselves to meet our obligations,” he said, saying he just doesn’t understand those who would threaten not to do that. “It’s a moral obligation to ourselves and anyone who holds U.S. debt, they should know that the United States is good for its money. Period.”
Dimon is part of the “catastrophic” chorus, a growing group of leaders admonishing Washington to lift the debt limit or risk economic calamity. “If the United States actually defaults on our debt, it would be catastrophic . . . and unpredictable,” he said. “If anyone wants to push that button . . . they’re crazy.” Boehner’s calls to Wall Street show that if he’s not willing to push that button, he’s more than willing to touch it. And that’s plum crazy, too.