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- iHaveNet.com: Politics
by Robert B. Reich
June 1, 2011
Who's more influential in the
Treasury Secretary Tim Geithner warns that if the limit isn't increased by Aug. 2, the federal government goes broke. It doesn't just close down. It stops making lots of payments.
To continue paying interest on the federal debt and avoiding a default, the government will have to cut spending by about 35 percent, or about
Meanwhile, America's creditors are likely to become spooked about the risk of not being repaid in the future. As a result, credit markets could go into free fall. Interest rates would skyrocket. The dollar would plummet.
This would be a nightmare for Wall Street and big business, which depend on smooth-functioning credit markets. They need to borrow all over the world. They and their customers depend on a relatively stable dollar.
So you'd expect the Street and big business to pressure House Republicans to raise the debt limit -- and that would do the trick.
Not so fast. So-called Tea Party Republicans -- including all of those elected to the House last year plus incumbents fearing primary fights with Tea Partiers -- say they won't raise the debt limit unless Democrats agree to their demands. Tea Partiers want huge spending cuts. They propose turning
Wall Street and big business know these conditions are unacceptable to the
But Tea Partiers couldn't care less about the debt limit. To them, the debt limit is a giant bargaining chit to get their demands met. They're not worried about global credit markets. If the full faith and credit of the U.S. government is jeopardized, so much the better.
Tea Partiers hate government more than they hate the national debt. Their real aim is to shrink the government. That's why they refuse to reduce that debt with tax increases, even with tax increases on the wealthy. A tax increase doesn't reduce the size of government.
But the Street and big business dislike the national debt more than they dislike government. They wouldn't even mind a small tax increase on wealthy people like themselves in order to cinch a deal on raising the national debt. They have so much money, they'd scarcely notice.
In truth, government has been good to Wall Street and big business. It bailed out the Street. It saved GM,
Tea Partiers have almost as much contempt for big business and the Street as they do for government. After all, the
This is the heart of the impending civil war in the
So far, the Tea Partiers appear to be winning. In a recent speech to the
Boehner knows the only way to get cuts of this magnitude without increasing taxes on the rich (or cutting defense -- something else the
Why is the
But Boehner and his colleagues are playing with fire. If the debt ceiling isn't raised and the financial system begins to collapse, the
(Robert Reich, former U.S. Secretary of Labor, is professor of public policy at the
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