Demonstrating that there’s little support for a bill that doesn’t include deficit reductions is not the only — and possibly not even the most important — reason the GOP leadership wants to hold the vote. The leadership may have finally realized that, with polls showing a substantial majority of Americans opposing an increase in the borrowing limit, many House Members — especially middle-of-the-road Republicans — have to be given a chance to vote against the bill now so they will be able to vote for it later. A “no” vote this week — about two months before the Treasury says the government’s cash position will become critical — would allow Representatives to validate their anti-debt-increase credentials for the folks back home but still give financial markets time to recover if they react negatively. Putting that vote on the record should also make it easier for some lawmakers to support an increase in the debt ceiling in late July or early August and, therefore, for a bill to be passed.
Many Members publicly insist that a big “no” vote on a clean bill will have little to no effect on financial markets. But here’s another dirty little secret: There is a growing suspicion that, like what happened the day after the House rejected the Troubled Asset Relief Program in September 2008 and the Dow Jones Industrial Average fell by almost 7 percent, such a vote could quickly change market perceptions of the situation and have a substantial negative effect on interest rates and equity prices.
It’s even possible that’s part of the plan. Former Office of Management and Budget Director Peter Orszag said last week that it is going to be difficult to get Members of Congress to agree to increase the debt ceiling without some kind of “turbulence” in the bond market. A big “no” vote on a debt ceiling increase bill could easily accelerate that type of disturbance in the financial force. Indeed, it might be what’s needed to precipitate it and the leadership may be counting on that happening.
But the most interesting dirty secret is that a “clean” bill sounds so wholesome, pure and valuable that some folks back home may assume it would be wrong for their Member of Congress to oppose it. This is not as far-fetched as it seems. Until the housing crisis became front-page news, a subprime loan, which is now generally considered to be less than desirable, was thought to be a good thing by a substantial percentage of the country because, they assumed, it meant that they were borrowing at an interest rate that was less than prime. If the political theater involved with bringing a clean bill to the House floor isn’t well understood, the scheme of bringing it up for a vote so it can fail could easily backfire.
Stan Collender is a partner at Qorvis Communications and founder of the blog Capital Gains and Games. He is also the author of “The Guide to the Federal Budget.”