Debt ceiling déjà vu
Figures of Grief and History on the Peace Monument stand near the U.S. Capitol building July 31, 2011 in Washington, D.C. Last summer, the battle over raising the debt ceiling consumed D.C. And guess what -- new battle lines are being drawn again.
Kai Ryssdal: Couple of things to point out about the looming debt limit fight in Washington. 1) Why, yes, it has been less than a year since we last dealt with this. 2) Congressional Republicans are once again insisting government spending be cut just as much as the debt ceiling is raised. And 3) The markets hate this stuff.
Marketplace's John Dimsdale gets us going.
John Dimsdale: If you think you’ve heard this before -- you have.
Old Marketplace clips: Plans call for tens of billions in cuts, so lots of departments are going to get less money… The parties are still far apart… They are trying to reach a broader agreement… There's still a real long way to go before Democrats and Republicans can shake hands on a deal… This is, as they say, the new normal.
That was the way it sounded on Marketplace last summer, when political brinksmanship over the debt ceiling even caused one rating agency to downgrade U.S. debt.
It doesn’t sound like the politicians learned any lessons. Here’s Speaker of the House John Boehner just last week.
John Boehner: When the time comes, I will again insist on my simple principle of cuts and reforms greater than the debt limit increase.
Laying down the gauntlet on spending cuts or tax reforms isn’t starting negotiations off on the right foot for Democrats, like House Budget Committee member Chris Van Hollen.
Chris Van Hollen: We should be coming together to try and find a way out not drawing lines in the sand.
That’s right. They’re at it again. And this year’s negotiations will also have to find a way out of $5 trillion to $7 trillion worth of automatic spending cuts and tax increases if Congress does nothing by January 1st.
Harvard economist Kenneth Rogoff knows markets and credit rating agencies will be watching even more closely this time.
Kenneth Rogoff: Just wishing the problem away, holding your breath until the budget gets balanced, doesn’t seem like a way to do business.
He says another fiscal showdown risks damaging the already fragile recovery.
In Washington, I'm John Dimsdale for Marketplace.