John Boehner and House Republicans agreed yesterday to raise the debt ceiling without strings — just as Democrats in Congress did time and again during the last Republican presidency — infuriating Tea Party groups who were trying to instigate another big debt ceiling fight.
In response, the Tea Party movement pledged to recruit challengers for Republican lawmakers who voted to raise the debt ceiling, and provide financial support to their campaigns.
Matt Kibbe, president of Washington-based FreedomWorks, a Tea Party umbrella group, said in an interview, "The House leadership has given up any pretense of fighting for fiscal responsibility."
But the Tea Party has it upside down. John Boehner is the one who did the fiscally responsible — and constitutional — thing by approving a debt ceiling hike without a dangerous and confidence-sapping fight. While Tea Party leaders might like to sermonize on fiscal responsibility, it's the Tea Party that has become grotesquely fiscally irresponsible by flirting with default on the national debt.
The last debt ceiling fight badly hurt consumer confidence and business confidence. The possibility that the government won't pay its bills creates massive confusion and uncertainty in financial markets. As the issuer of the currency, government is always able to pay its debts, unless it chooses not to. This means government debt is treated by the financial system as a safe asset. By raising the possibility that the government might choose to default on its debt, the Tea Party is destabilizing the financial system.
There is a natural debt ceiling that already exists — whether or not creditors will lend money to the government. At present, creditors are willing to lend at very low interest rates, and the deficit has already been cut in half since 2009. This means that, frankly, debt reduction is the least of the government's worries right now. While debt reduction is a long-term goal, economic growth and reducing unemployment remain the two most pressing challenges for the U.S. government. The fiscally responsible thing is to do as much as possible to ensure stronger economic growth and better job creation. That requires government spending on infrastructure, basic research, education, etc, not a slash-and-burn approach to cutting budgets.
Luckily, the Tea Party and their desire to immediately cut government spending at any cost is fading into total irrelevance. When the Tea Party was in its ascendancy, John Boehner and the pro-business wing of the Republican Party could not easily ignore them, because doing so might cost them their jobs. But today, 51 percent of Americans view the Tea Party unfavorably, while only 30 percent view it favorably. The fall of the Tea Party has given the Republican leadership a license to ignore the Tea Party's fiscally irresponsible desire to hold the economy hostage to immediate austerity at any cost.
That is great news for the economy.