Jonathan Chait

GOP Nihilists Slice Off Bond Market's Toe

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Republicans are escalating their demands in return for a debt ceiling vote:

One day after being named to a presidential task force to negotiate deficit reduction, House Majority Leader Eric Cantor fired off a stark warning to Democrats that the GOP “will not grant their request for a debt limit increase” without major spending cuts or budget process reforms.

The Virginia Republican’s missive is a clear escalation in the long-running Washington spending war, with no less than the full faith and credit of the United States hanging in the balance.

In the most recent budget battle over a six-month spending bill Republican leaders carefully avoided threatening to shut down the government. Now, Cantor says he’s ready to plunge the nation into default if the GOP’s demands are not met. People close to Cantor say that he hopes to make clear that small concessions from Democrats, including President Barack Obama, will not be enough to deliver the GOP on a debt increase. 

Heck, why not? Once we've established the parameters that President Obama is responsible for the massive financial consequences of failing to raise the debt ceiling, why not raise their demands up to the point where they're just slightly less harmful, from Obama's point of view, than default itself?

The current negotiations allow John Boehner to credibly threaten to wreck long-term havoc on the U.S. economy while privately assuring Wall Street he intendeds to do no such thing. He can demand the money while Obama freaks out that the Republicans are going to kill the poor bond market:

Walter is right here. The hostage takers are actually bluffing. but the bluff has been shockingly effective. If the House can threaten to use its power in ways that cause what even Congress views as massive harm in order to win policy concessions, then Republicans will have seized unprecedented power through a sheer imbalance of nerve.

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