Wednesday, June 29, 2011

Paul Abrams: Only Wall Street Can Resolve the Debt-Ceiling Impasse -- By Pulling Money From Republicans

"I spend most of my time telling people to do the things they ought have the sense to be doing without my telling them" --Harry Truman.

To resolve the (inevitable) impasse on the debt-ceiling, President Obama may have to hold a news conference to exhort Congress and meet with Congressional leaders to demonstrate he is trying, but resolution of the impasse can only arise from his Chief of Staff, Bill Daley's, discussions with Wall Street and the Chamber of Commerce.

In the Biden talks, the conferees have, so we are told, identified $1.3T in cuts over the next decade. The ball is in the Republicans' court.

But, left to on their own, these parties are no more likely to resolve this matter by August 2, or any other date, than the Israelis and Palestinians are to define boundaries, forswear violence, and agree to peace. There are just too many Islambouli and Amir (assassins of Anwar Sadat and Yitzhak Rabin, respectively) equivalents lurking -- e.g., Grover Norquist, the Koch Boys, Freedomworks -- who are prepared to assassinate politically those who stray from party orthodoxy on taxes. Recently re-elected Senators such as Tom Coburn (R-OK) may have a 5-year grace period, but Members of the House are facing re-election in 2012.

Wall Street and the Chamber of Commerce (collectively, "Wall Street") bought this Congress. Fear and delusional beliefs ignited fervor, Wall Street money sustained it, and it worked -- to win.

Governing has been a very different story. Even government spending Wall Street favors -- e.g., infrastructure repair and development -- has fallen prey to extreme rightwing ideology and partisanship. But, since Wall Street and business have been doing well -- the Dow has nearly doubled under President Obama -- Wall Street has felt no acute need to remind Republicans of who pays their campaign bills, and who will employ them with cushy jobs when they leave Congress to "spend more time with their families".

Now there is. [ Anyone who says that defaulting on the debt is "no big problem" cannot make the case that the debt itself is a problem because the only real concern about debt is not paying it off, aka, "default". ]

Indeed, since Wall Street knows that there would be no appetite for even a morsel of bailout when it collapses this time, the stakes for Wall Street are extremely high. Debt default would be kryptonite to the masters-of-the-universe.

One can be certain that, before they act, Wall Street will be looking for concessions -- e.g., a pledge not to appoint Elizabeth Warren, delays in rulemaking under Dodd-Frank, lax enforcement of capital ratios, hands-off oil speculators at the CFTC, and similar "understandings".

Of course, the Administration need agree to none of them. Wall Street's survival is on the line and, as the saying goes, "nothing like a good hanging to focus one's mind". But, with the possible exception of the oil speculators at the CFTC because that has such an impact on the economy, one suspects they will succumb, because the Administration cannot allow those discussions to drag on while Wall Street determines when to tell its lackeys to jump. We all love Elizabeth Warren, but one doubts the Administration would hold firm on appointing her if it can get a decent and timely deal on the debt ceiling.

Wall Street knows far better than this writer what it needs to do to get the debt ceiling raised, and to make clear that it is deadly serious. One might suppose that canceling some fundraisers, and declining to provide any more money to Republican committees and lawmakers, until that debt ceiling is raised, would send a strong message. Agreeing to "be there" when these lawmakers get primaried, with early cash and ads, would provide the carrot along with the stick. [Of course, all of this will be stated in code, so there is no record of a quid pro quo].

So, just as Israel and Egypt, and Israel and Jordan, respectively, required Jimmy Carter's and Bill Clinton's intercessions to make peace, our Congress needs Wall Street to avert an economic crisis that we would otherwise walk into with our eyes open.

Not pleasant to admit that our democracy needs Wall Street to function politically, and I say this only in sad resignation to the truth, but it is what it is, and expecting Wall Street to act in its own selfish self-interest is as good a wager as betting the sun will rise in the East.


Ali Campoverdi Sunny Mabrey Dania Ramirez Brittany Murphy Tricia Helfer

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