There are now just two months to go before all the tricks the Treasury is deploying to keep the government from hitting the debt ceiling no longer work. With luck, negotiations will produce a budget deal big enough to induce a majority of Congress to vote to raise the limit. But just in case you think Congress would never be reckless enough to voluntarily trigger aninternational economic crisis by saying no, let's travel back three years to Monday afternoon, Sept. 29, 2008.
The House was voting on the controversial Troubled Asset Relief Program (TARP) proposal to provide up to $700 billion to try to stem the financial crisis that had already killed off some of the nation's biggest investment banks and was now killing confidence throughout the financial markets. Lending was freezing up across the country. Businesses were in trouble: Main Street storekeepers were having trouble getting the short-term loans they needed to stock their shelves; industrial giants such as GE couldn't float the paper they routinely used to keep running. Credit is the lifeblood of the American economy. It was bleeding out.
This was about as close as the nation had come to a full-blown financial crisis since 1929, but what was largely invisible to most Americans at the time was how terrified people in charge were that a full-scale meltdown was unavoidable, and how desperately they were groping for the right thing to do. Apparently the danger was invisible to a majority of the House as well. Despite pleading from President Bush, Treasury Secretary Paulson, Fed Chairman Bernanke, and then-House Minority Leader John Boehner, R-Ohio, the House said no, as Republicans defied their president and lined up two-to-one against the TARP measure, which failed 205-228.
This was stunning. It was as if the House was off in some parallel universe, where the crisis didn’t exist and there would be no penalty for denying reality. In the real world, though, the judgment of the markets was instant and awful – and visible on cable TV broadcasts that showed the bill and the markets going down simultaneously. The Dow shed 700 points and fear anduncertainty went global (four days later, a sobered House passed a slightlydifferent version of the bill 263-171).
What’s scary about this today is how eerily similar one of the key arguments against TARP sound like a key argument against raising the debt ceiling. Many opponents just didn’t believe the danger was real. The New York Times ran a fascinating piece after the 2008 TARP vote about members who came under huge pressure to switch their votes from no to yes. Some of whatthey told The Times:
Rep. Howard Coble, R-N.C., did not believe “the sky (was) falling,” but that the only peril was political, for anyone who voted yes. Rep. Jose Serrano, D-N.Y., said he didn’t believe White House warnings that an economic disaster was at hand. ''I know a hustle,'' he said. ''And I know a hustler.'' And Rep. Michael Burgess, R-Texas, said he wasn’t sure whether ''dire predictions of a financial Armageddon are accurate ... I hear different opinions.''
Three years later, many in the House and Senate are also hearing “different opinions” about whether shutting down the government’s ability to borrow would really be a disaster. Given that – and polls that show most Americans don’t believe the doomsday predictions, either – it’s a reasonable bet that it will take another failed vote and another collision with reality to find out.
George Hager is a member of the USA Today editorial board.
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