Think about what’s happening right now. We have a crisis in which the right is making insane demands, while the president and Democrats in Congress are bending over backward to be accommodating — offering plans that are all spending cuts and no taxes, plans that are far to the right of public opinion.
So what do most news reports say? They portray it as a situation in which both sides are equally partisan, equally intransigent — because news reports always do that. And we have influential pundits calling out for a new centrist party, a new centrist president, to get us away from the evils of partisanship.
This fact is essential in understanding the endgame on the debt ceiling. Suppose that we get to the dates in August when the Treasury has reached the limit of its ability to shuffle accounts and literally can no longer pay its bills. Secretary Geithner will at that point make an announcement that in three days there is an X billion payment on Treasury bonds coming due. He will say that the government does not have the money in the bank and will therefore have to miss this payment.
The markets will then go into turmoil. We will see the same sort of plunge in the stock market that we saw when the House voted down the TARP the first time back in September of 2008. At that point, the Wall Street boys will be screaming their heads off at Speaker Boehner and the rest of the Republican leadership. The news media would all be running clips with depression footage, telling us that another Great Depression looms just around the horizon.
Despite the intransigence of the Tea Party, one cannot underestimate the power of Wall Street. Besides, the Tea Party, despite their populist rhetoric, largely represent strong corporate interests at the end of the day and will eventually be made to bight the bullet and agree to something. They seem to merely be trying to agree to things on their own terms with a compromise only coming once a means of saving face in front of their base can be concocted.