Thursday, July 7, 2011

Solution for the Debt Ceiling Crisis: An Early Vote in Congress

A way to resolve the debt ceiling crisis would be to introduce legislation that would force an early vote in Congress (i.e., a week or so before the August 2, 2011 deadline). Why would this work? Because the Tea Partiers and other conservatives would reject it. The ensuing market consternation would force all concerned to quickly reach an effective compromise.

Recall TARP. On September 29, 2008, the House rejected an initial version of TARP due in large part to anti-bailout sentiment. The Dow Jones Industrial Average dropped 777 points that afternoon, pummeling voters' 401(k) accounts. Public reaction to Congress was swift and not favorable. Four days later, duly woodshedded, the House signed off on an amended version of TARP. Voters, if smacked in the pocketbook, deal with reality and insist on Congress dealing with reality.

An early rejection of a debt ceiling bill would trigger financial market dismay. Perhaps not as severe as the initial rejection of TARP, if the debt ceiling vote were held early enough to allow time for a second vote for the House to get it right. But a moderately melodramatic swoon by the Dow might work wonders in clarifying the thinking of members of Congress up to their left ears in revisionist misinterpretation of the unverified statements of the supposed Founders (not excluding those of elementary school age).

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