Wall Street to Washington: You're Idiots, But at Least You're Predictable Idiots

At least, in eyes of the market.

Yesterday, I guessed that Congress, while immensely silly and mostly broken, was not quite crazy enough to actually blow through the debt ceiling deadline (which isn't technically for another few weeks).

Apparently, I was right. And so was Wall Street. John Boehner is ready to accept a compromise from Mitch McConnell and Harry Reid that would fund the government and raise the debt roof, according to Senate sources.

There isn't much evidence that Wall Street ever thought this eleventh-hour deal wouldn't happen. The graph at the top, via Bloomberg's Nicholas Johnston, shows the gyrations in Treasury bill yields. The debt ceiling showdown sparked fear, then uncertainty, then relief, but never outright panic.

The stock-market story paints a similar triptych: fear, then a breath of calm, followed by outright relief. The S&P is up 40 points (2.4 percent) since the start of the month and has steadily climbed the last few days. Its low point, which mirrors the October 9 spike in yields, was just 2 percent off its September close. Investors didn't quite yawn at the debt crisis, but they weren't exactly sweating spinal fluid, either. Unfortunately, Washington's unusual behavior has become, in the eyes of investors, something like business as usual.

So this debt ceiling fight was no big deal, huh? Not so fast. The shutdown cost the economy billions of dollars, inflicting pointless pain on medical research, government data, public services, and low-income families. Consumer sentiment fell more sharply than any month since the Lehman bankruptcy. Budget crises like this and the 2011 showdown have cost the U.S. an estimated 900,000 jobs in the last three years, which is the equivalent of five extra months of typical job creation.

That Washington is stupid but not quite suicidal is Wall Street's correct assumption. But that is not quite the same as permission.

Presented by

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

Does This Child Need Marijuana?

Dravet Syndrome is a severe form of epilepsy that affects children. Could marijuana oils alleviate their seizures?

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register with Disqus.

Please note that The Atlantic's account system is separate from our commenting system. To log in or register with The Atlantic, use the Sign In button at the top of every page.

blog comments powered by Disqus

Video

Does This Child Need Marijuana?

Inside a family's fight to use marijuana oils to treat epilepsy

Video

A Miniature 1950s Utopia

A reclusive artist built this idealized suburb to grapple with his painful childhood memories.

Video

Why Principals Matter

Nadia Lopez didn't think anybody cared about her school. Then the Internet heard her story.

Video

A History of Contraception

In the 16th century, men used linen condoms laced shut with ribbons.

Video

'A Music That Has No End'

In Spain, a flamenco guitarist hustles to make a modest living.

More in Business

Just In