Life on Capitol Hill is sort of a combination of Chicken Little and the Boy Who Cried Wolf. The sky has been falling for decades, eroding the ability of politicians and the media to distinguish between real and manufactured crises. Or, worse: facilitating efforts to blur that line. So when Politico says that Wall Street should be worried about the looming budget battle, there are a few reasons the financial sector isn't.
The reason the sky is-currently-and-will-still-be-falling next month is a confluence of economic decisions. The debt ceiling — the upper limit on the Treasury's borrowing ability — needs to be raised to meet the government's debts. A government funding measure needs to be renewed. There's the on-going effect of the across-the-board cuts from sequestration. It's possible that there will be debate over a new chair of the Federal Reserve. On top of all of this, a faction of conservative members of Congress are demanding that the government be shutdown if any funding measure includes money for the implementation of the Obamacare. (Including, for some reason, Marco Rubio.)
Politico, standing ringside, is the hype man for the fight. Noting a similar set of events in 2011, Politico assures us that "this time — wait for it — could be different. Really, seriously different." Really. Seriously. There's a wolf, we promise.
The House GOP is hopelessly fractured on spending strategy. Senate Republicans who might otherwise broker a deal face primary challenges that make compromise potentially deadly. Other Senate Republicans are jockeying for 2016. And congressional Democrats have no appetite for any bargain — grand or otherwise — that cuts entitlement spending.
The article is predicated on explaining why Wall Street, which isn't worried, should be. The financial sector's attitude is summarized at Business Insider. "Of course the street expects that everything will get resolved at the last second (like it always does)."
This expectation has generally proven to be warranted. During the height of the economic crisis, the financial industry was moved to the front of the line for assistance. Over the weekend, the Times explained how the sector is doing what it can to maintain that position: campaign donations.
Political action committees — set up by lobbying firms, unions, corporations and other groups trying to push their agenda in Congress — have donated more money to Financial Services Committee members in the first six months of this year than to members of any other committee. The $9.4 million total is nearly $2 million more than the total for the Armed Services Committee, the only House panel with more members.
According to OpenSecrets.org, no industry contributed more to campaigns than the financial / insurance / real estate sector over the 2011-2012 cycle.
The point of this graph is not that Wall Street can buy the decisions it wants on Capitol Hill. The point is, however, that there is an inextricable and powerful relationship between the two. And Wall Street has watched Capitol Hill go through this before.
Even in 2011, when the government came within hours of a shutdown and Standard and Poor's downgraded the country's credit rating, Wall Street barely stumbled. Shortly after the downgrade, the Dow dipped below 11,000 — and then quickly recovered. It hasn't been that low in almost two years. Shortly after the downgrade, the chief of ratings agency told ABC News that there was a one-in-three chance of an additional downgrade over the next six to 24 months. For what it's worth, that 24-month window closed yesterday.
If we've learned one thing over the past few years, it's to never assume that Congress won't work itself into an extricable position from which neither side wants to budge. The sequestration itself was meant as a poison pill both sides would do anything to avoid. Clearly, that didn't work.
Politico's right about one thing: Sometimes, the sky falls. The problem is how often that's because Congress has been pulling at it.
This article is from the archive of our partner The Wire.
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