Wall Street will not let Republicans pull the debt ceiling trigger

It is absurd to think that Republicans in Congress would force big spending cuts cuts by taking Wall Street hostage with the debt ceiling
Barack Obama, John Boehner, Mitch McConnell, Dick Durbin discuss the US debt, 13 July 2011
US debt ceiling: reports of fractious meetings between president Obama and Republicans have added to markets' anxieties. Photograph: Charles Dharapak/AP

on the August 2 drop-dead date. According to Treasury Secretary

of freeze-up of lending as we did after the collapse of Lehman in
September of 2008, although this time would almost certainly be much


This would almost certainly push the major banks into insolvency. JP
government defaulted on its debt, Wall Street would take a shellacking
and it would never again be the centre of world finance.

serious about their threats over allowing the government to default.
shove retirees out onto the street, the Republican congressional
the campaigns?

This meant that the Republicans were always going to fold if President
Obama didn't cave. The only question was when and how.

Republican senate Leader Mitch McConnell gave us the answer to this
question on Tuesday when he proposed a convoluted scheme that would
essentially allow President Obama to unilaterally raise the debt

The price is that Obama would have to propose a set of budget
cuts, totaling $700bn over ten years (at 1.6% of spending),
to congress three times over the next year and half. These spending cut
packages would have to be given a straight up or down vote.

While President Obama may hold out and insist on some further Wall
Street-sponsored crawling by the Republicans in Congress, this deal
looks like it should be enough fun. Senator McConnell's plan lets Obama
put any cuts on the table that he wants. In keeping with the spirit of
this proposal, the cuts in round one could be composed entirely of
spending in McConnell's home state of Kentucky.

If more cuts are needed to reach the $700bn target, he can also
propose gutting spending for Ohio, the home state of Speaker John
Boehner. In later rounds he can include cuts for Virginia, the home
state of the Republicans' firebrand minority leader Eric Cantor. It will
be interesting to see the Republicans vote on these proposed cuts.

the week.

the country's most important programs – social security, medicare, and
medicaid – by taking Wall Street hostage with the debt ceiling is

foremost at Wall Street's head. And, there is no way on earth that Wall
Street is going to let the Republicans pull the trigger.