Tom Junod in Esquire—The Debt Debate's Real Doomsday Scenario:
On Tuesday, in the late morning, I asked a banker to explain what will happen if the debt ceiling is not raised on August 2. ... He is a good source, and what he told me should have calmed me down about this whole government-created government crisis, because what he told me was that even if Congress doesn't raise the debt ceiling, the Treasury Department will not stop paying the interest on its debts. The Treasury does not talk about it, he said, because the Treasury doesn't want to get to this point. But if the United States comes to the outer limit of its indebtedness, it will not run out of money; it will simply run out of the money that comes to it through debt, and it will have to start paying the interest on its bonds — along with everything else — out of its tax revenues, which account for about two-thirds of its spending. The Treasury will "prioritize," and make sure that this country's creditors are paid before, say, anybody and anything else. We will not turn into deadbeats.New York Times—Tensions Escalate as Stakes Grow in Fiscal Clash: "The Federal Reserve chairman, Ben S. Bernanke, warned on Wednesday of a 'huge financial calamity' if President Obama and the Republicans cannot agree on a budget deal that allows the federal debt ceiling to be increased. Moody's, the ratings agency, threatened a credit downgrade, citing a 'rising possibility' that no deal would be reached before the government's borrowing authority hits its limit on Aug. 2."
Whew! And here I'd been led to think that what was at stake in this self-inflicted crisis was "the full faith and credit" of the United States of America (and hence our access to other people's money, on the cheap) when really what's at stake is everything else. The only problem, according to the banker, was that everything else really matters, and not just in human terms — in economic ones. The world's largest economy can't just stop spending the trillion-plus dollars it acquires through debt each year without putting itself and the rest of the world in peril. What worried the banker about missing the August 2 deadline was not that it would initiate a credit crisis but rather deepen the recession. ... Congress won't be risking the country's all-important credit rating if it doesn't raise the debt ceiling; no, it will just be risking economic turmoil.
More on that at Bloomberg and at Reuters.
So, that's what at stake. And as for how the actual negotiations are going...? Well, let's just say they could be going better. Ahem.
The Politico—President Obama abruptly walks out of debt ceiling talks:
President Barack Obama abruptly walked out of a stormy debt-limit meeting with congressional leaders Wednesday, a dramatic setback to the already shaky negotiations.The Hill—Obama warns Cantor: 'Don't call my bluff' in debt-ceiling talks:
"He shoved back and said 'I'll see you tomorrow' and walked out," House Majority Leader Eric Cantor (R-Va.) told reporters in the Capitol after the meeting.
Republicans said tense negotiations over raising the $14.3 trillion debt limit at the White House ended when President Obama stormed out of the meeting with a stern warning to House Majority Leader Eric Cantor (R-Va.): "Don't call my bluff."Meanwhile, Sen. Claire McCaskill (D-MO) calls the Republican caucus a "hot, sloppy mess," and Boehner complains that Obama and the Democrats are like Jell-o:
...A Democratic source familiar with the negotiations said the reports of a dramatic or abrupt walk-out by Obama were overblown, but the source acknowledged that the president "said what he was going to say, he got up and walked out."
"The climax of the meeting was the president basically saying 'what's happening in this room confirms what everybody across the country thinks about Washington, D.C.,'" the official said. "Which is that people are more interested in protecting their base and political positioning than solving problems."
House Speaker John Boehner, R-Ohio, criticized President Obama and White House officials for their lack of resolve in negotiations.All the infantile dramatics aside, there is news to report from the negotiations: As Digby notes here, "we know that any 'deal' will be a minimum of 1.5 to 1.7 trillion dollars in cuts," without the addition of any revenue. Which is obviously quite worrisome, given that those cuts will undoubtedly come disproportionally at the expense of people hardest hit by the economy. Starve the beast, etc. D-Day sums up where we are at this point thus: "The next 48 hours will be crucial as to whether we get a distasteful and harmful deal, or something that would at least avert catastrophe."
"Dealing with them the last couple months has been like dealing with Jell-o," Boehner said. "Some days it's firmer than others. Sometimes it's like they've left it out over night."
Boehner explained that talks broke down over the weekend because, he said, the president backed off entitlement reforms so much from Friday to Saturday, "It was Jell-o; it was damn near liquid."
And, just in case you thought the national conversation on the debt negotiations couldn't get any stupider or more irresponsible, cue Sarah Palin to interject her thoughts using a gun metaphor. What a cool lady.