House Speaker John Boehner (R-Ohio) has been talking to top Wall Street executives about how far he can push negotiations with the Left over raising the U.S. debt ceiling — a $14.3 trillion cap on the federal government's borrowings — before the financial markets freak out, reports Politico. With the debt already above $14 trillion, the limit will be reached in a matter of weeks, and Republicans are threatening to nix raising the ceiling unless the Left offers major (and unlikely) concessions. But Wall Street is telling Boehner that, if the markets believe the debt limit won't be raised, very bad things will happen to the dollar, U.S. borrowing costs, and global finance. Why is Boehner even engaging in these discussions? Here, four theories:
1. Boehner is playing with a weak hand
"Raising the debt ceiling is unpopular," with both the public and politicians, but it's "life or death for Wall Street," says Matthew Yglesias in ThinkProgress. And the fact that Boehner is asking Wall Street "how much screwing around he can get away with" before raising it — rather than whether raising it is a good idea — means Democrats should be completely unwilling to trade anything for a clean vote. Republican threats are mere bluffs.
"Call the hostage takers' bluff"
2. The GOP doesn't want to lose Wall Street's support
What's on the table here, aside from financial apocalypse, is who Wall Street will back in 2012, says Ezra Klein in The Washington Post. In 2008, the bankers backed Democrats, and in 2010 they swung back to Republicans. Boehner's outreach shows "the GOP would like to hang onto that Wall Street money for 2012, and that won’t happen if they attach so many demands to raising the debt ceiling that the market starts to freak out."
"Wall Street to Boehner: Back off the debt ceiling"
3. Wall Street knows Boehner's bluffing is harmless
I'm "somewhat skeptical" of Wall Street's dire warnings about brinkmanship, says Ryan Avent in The Economist. The GOP's already playing hardball with the debt limit, and the bond market is taking it in stride. You'd "think that if Wall Street were at all concerned it would be bidding in some risk premium." It obviously expects that eventually, the ceiling will be raised, which "suggests that debt-ceiling demagoguery, while annoying, is basically harmless."
"Do as Wall Street does, not as it says"
4. The Tea Party is setting the terms of this debate
It's a pretty impressive show of Tea Party strength that we're even having this fight, says David Weigel in Slate. Many in Congress view a politically-toxic vote on upping the debt ceiling as "somewhere between arsenic and strychnine." And with conservatives demanding unlikely concessions in exchange for their support, it's actually possible that "America defaults on its debt," triggering many "nightmarish" consequences.
"Dancing on the ceiling"
THE WEEK'S AUDIOPHILE PODCASTS: LISTEN SMARTER
- How Ronald Reagan turned America into a nation of children
- The crusade against Iraq War supporters has forgotten someone: Hillary Clinton
- Why Mitt Romney is perfectly poised for a comeback in 2016
- The Nazi smart bomb that inspired China's most dangerous weapon
- Here's the schedule very successful people follow every day
- Why is the West so afraid of Islam?
- This week I learned the moon might be littered with dinosaur fossils, and more
- 8 things the world's most extraordinary survivors can teach you about resilience
- How to make classic pulled pork
- Why scientists can't kill HIV
Subscribe to the Week