What happens when you manufacture potential crisis after potential crisis, and then, every time, avert the crisis at the very last minute? Eventually people stop believing you could ever actually have a crisis.
That appears to be what's happening now with the business community and lawmakers in Washington, on the subject of raising the federal debt limit. There are many reasons to believe Congress and President Obama might not agree on a bill to raise the limit — and avoid a sovereign debt default and potentially catastrophic financial meltdown — by the time the Treasury runs dangerously low on cash next month. But new polling suggests that leaders of mid-sized American companies remain convinced that the two sides will pull this one out in time, again, because ... that's what they always do.
Here's the headline from the survey of 1,000 executives by the National Center for the Middle Market, a joint venture between GE Capital and The Ohio State University Fisher College of Business, which focuses on companies with between $10 million and $1 billion in annual revenues: A little more than one in 10 execs see default as "extremely likely" or "very likely." About six in 10 say it's "not very likely" or "not at all likely."
The simple explanation is that executives remember how 11th-hour deals kept Washington from falling off the fiscal cliff late last year and from defaulting in the debt-limit showdown of 2011. They've heard lawmakers cry wolf on fiscal crises too many times.They also just can't believe that America's leaders wouldn't do something — even absent an increase in the borrowing limit — to make sure the country pays all its debts on time, said Anil Makija, the academic director of the middle market center.
"This type of brinksmanship happened so many times," Makija said, "that people are getting immune to it."
The politics at hand today suggest that this time could be different, and the path to avoiding default much rockier. In which case, well, you remember how the wolf-crying story ended.