Republicans Caused The Great Recession. Feeling They Have Not Done Enough Damage They're About to Cause The Great Recession Part Two
Republicans have been playing a double game with the debt limit debate. On one hand, it’s hard to imagine GOP members of Congress actually blocking a measure that would raise the debt ceiling, because that would lead to sudden, dramatic reductions  in government functions: there might not be money for Social Security payments, Medicare checks, military salaries and more. Worse, confidence in US Treasury bills would be seriously wounded if the debt ceiling isn’t raised by August 2, meaning economic catastrophe . Voters would blame Republicans for this economic catastrophe, polls  show, and House Speaker John Boehner was warned  by Wall Street executives in no uncertain terms that he could not allow this situation to occur.Republicans were willing to increase the deficit - shown by two House votes for the Ryan Plan. Now they say they will accept nothing but spending cuts to balance the budget. In other words Republicans are once again showing their deeply anti-American stripes, the kind of fake patriotism Washington warned us about. Unless programs they have always hated such as Medicare, Social Security, education and just about every other program that keeps seniors and children out of bone grinding poverty are gutted- conservatives are willing to blow up the economy one more time. Republicans might be patriots, we just do not know which country they are patriots of.
At the very same time, this nightmare scenario is the only leverage Republicans have in the debt ceiling debate. They’re asking for a whole host of policy changes—from dramatic spending cuts  to radical changes  to entitlement programs—that would otherwise be non-starters with Democrats in Congress and the White House, but Republicans are refusing to vote for a debt limit increase unless these policy changes are approved. “I must be convinced we have wrung every nickel of spending out of this,” Representative Michael Burgess told  World Net Daily.
So far the strategy has worked well for Republicans. Bipartisan talks between the administration and House majority leader Eric Cantor produced tentative agreements to cut $1 trillion  from the budget, with Vice President Joe Biden saying  he believed the cuts would total as much as $4 trillion. A mandatory and enforceable spending cap may be enacted . Democrats are insisting that tax increases be part of the deal—but only 17 percent  of it. The tax increases are targeted to particularly egregious areas, like ending exemptions for private jets or changing rules that allow hedge fund managers to count their income as capital gains, and even though the Bush tax cuts are the number-one  driver of the debt, the White House will not insist  that a deal that repeals or changes them.
Meanwhile, Obama and Boehner are photographed  playing a friendly, back-slapping round of golf. Nothing to see here, folks—the US government is functioning properly.
But over the past week, several GOP actors have upped the ante and painted a very different picture of a government that might not actually be able to solve this problem. And there are potentially serious consequences to this shift.
Not satisfied with having even 17 percent of the debt ceiling deal include tax increases, Cantor and Sen. Jon Kyl walked out  of the bipartisan meetings with Biden. Meanwhile, SenatorJim DeMint, who holds powerful sway in the Senate, has said he simply doesn’t believe  that the debt ceiling needs to be raised by August 2. This opinion is shared by leaders  of national Tea Party organizations and presidential candidate Representative Michele Bachmann . DeMint also says the only acceptable outcome is the passage  of a balanced budget amendment, an extreme request that’s almost certain to be left unfulfilled.
This is where the political theatre is getting more dangerous every day. There are serious risks attached to even the appearance that a deal may not happen. As Jared Bernstein explains  at his blog, the Treasury Department is currently selling bonds to investors with a relatively low 2.93 percent interest rate. Investors feel comfortable with the low yield because they remain confident that the Treasury bonds are a safe investment. But if that confidence is shaken, investors may demand more, and Bernstein speculates that Treasury might have to add half of a percentage point to the interest rate.
If investors begin to lose confidence in US Treasury bonds like this, there could be serious economic consequences at home, as lending would become even more difficult. At the very least, if the interest rate we’re paying out on Treasury bonds goes up a half-percentage point, that means $50 billion more in annual debt servicing costs—and yes, this would increase the debt and deficit even further.
It’s a bewildering situation. Republicans, who recently voted for a Ryan budget that increases  the debt by trillions, are demanding a debt reduction deal that ignores the largest driver of debt—the Bush tax cuts—and the theatrical process they are using to get what they want may itself end up increasing the debt by $50 billion per year.
There may be a deal in the end. But with every passing day of threats and theatrics, the risks get bigger, the debt may get larger, and confidence in the American political system shrinks—with good reason.
 http://www.treasury.gov/initiatives/Documents/Debt Limit Myth v Fact FINAL.pdf
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