Is the Debt Ceiling Deal Now Dead?
The financial events of the last few days may have triggered a sea change.
August 9, 2011 - 12:00 am
Is the week-old debt ceiling deal now dead? Will the new promise to cut federal spending by $1.2 trillion over ten years be understood as woefully inadequate? And will conservatives find new political power to force deeper spending cuts?
The events of the last few days may have triggered a sea change. And the catalyst came from Wall Street: Black Monday, August 8, 2011.
We may now be seeing the lowest point in the Obama presidency. Veteran pollster Larry Sabato tweeted during the president’s address Monday: “Obviously this is Obama’s low point.”
President Obama has always had an ambivalent relationship with business. He happily accepted a record amount of campaign contributions from Wall Street. Goldman Sachs employees gave more money to him than any other donor. His White House staff recruited General Electric’s Jeffrey Immelt to join an advisory board.
But in general Obama has been hostile to business. Early on in office he declared open warfare against corporations. His staff declared war on the Chamber of Commerce. His economists hailed from academia and had no experience in writing a financial statement, meeting a payroll, or generating a profit. His regulators followed their anti-business instincts and were given the green light to pummel small, medium, and large businesses.
In the end, the issue of creating wealth in America was some sort of intellectual, textbook exercise. Wealth was bad and the cause of all of society’s problems.
The only time there was a flash of reality about economics was when the Labor Department released its monthly jobless statistics, which have been grim.
For the worker party, that is the Democratic Party, this is troubling. It also is important because many of these people out of work can vote.
So it is interesting that at last the sleeping giant — investors — woke up. These include seniors and young entrepreneurs, people with 401 (k) accounts, and corporate titans. And when they did, they roared. Home Depot co-founder Ken Langone recently underscored America’s antipathy toward Obama’s business hostility, complaining: “He is dividing us as a nation. He’s not bringing us together. He’s willfully dividing us. He’s petulant.”
But few inside the presidential bubble — including the president — could see that eventually economies can break. Regulatory and legislative strangleholds do have consequences.
While in the bubble, the president and his Democratic allies ignored last April’s warning from Standard and Poor’s. The idea of a sovereign debt downgrade was intellectual and a theoretical concept. It had never happened before. The president decided never to issue his own debt reduction plan. He ignored his own debt commission’s recommendations. He declared jihad against Rep. Paul Ryan’s debt reduction proposal. He ignored the bipartisan Gang of Six group that offered serious cost-cutting suggestions.
As a result, for the president this fight over the debt ceiling was merely another political fight like that over ObamaCare. It did not have real-world consequences.
Then came Friday. On Friday, Obama became the first president in American history to preside over a sovereign debt downgrade. Then he went strangely silent for the entire weekend. His only reaction was to send out his Treasury secretary to savage the S&P report. On Monday morning, his press office finally announced there would be some remarks.
While Wall Street tanked, all the cable networks keyed into his speech. The market had dropped 300 points. But the speech was delayed for more than an hour. Most anchors apologized for the delay. Then speculation grew. Why was there a delay? Was there a staff disagreement? Political infighting? Chaos?