A joke making the rounds among economists explains the financial markets' alarming complacency about the deepening federal debt ceiling stalemate: If politicians deliberately destabilize the global economy by failing to raise the $14.3 trillion U.S. debt ceiling, this would be the first depression in history -- and here's the punch line -- caused solely by stupidity.
No matter how far apart Democrats and Republicans may be, conventional wisdom has been that self-inflicted economic chaos isn't an option, and that Congress will muddle through before the Aug. 2 debt ceiling deadline.
But it's increasingly clear that this confidence is excessive; the threat posed by this standoff has been underestimated. There really are people in Congress willing to risk a potentially catastrophic default to achieve their small-government utopian dreams-- namely, the sizable Tea Party faction led by Minnesota Republican Rep. Michele Bachmann.
Ill-informed ideology needs to be sidelined quickly to avert this crisis. Zero hour is approaching. Right now, there's little agreement on a long-term deal to reduce the deficit -- something that's key to debt-ceiling negotiations.
There also doesn't appear to be a work-around option that could safely clear the U.S. House in time for the August deadline. Even Republican Sen. Mitch McConnell's surprise proposal last week, which would essentially transfer the debt-ceiling decision to the president, may not have enough support from the GOP's House radicals.
As with Minnesota's state government shutdown -- only more so -- even a bad debt-ceiling deal beats no debt-ceiling deal. The risks of a U.S. government default simply can't be taken. Previous political leaders understood this. That's why the debt ceiling has been raised 16 times since 1993. Lifting the debt ceiling doesn't equal authorization for more spending; it just means the nation will pay the bills for the spending Congress already authorized.
It's time for the grown-ups in Congress to assert control over this frightening situation. The onus is on Republicans. They embarked on a dangerous game when their leadership decided to use the debt ceiling vote as a weapon to enforce their rigid no-new-taxes ideology -- even after Rep. Paul Ryan's highly unpopular budget showed how unrealistic an all-cuts approach is.
It's also long past time for the nation's business leaders to wake up and start wielding their considerable influence to avert this crisis. So far, the powerful business lobby has paid lip service to the debt-ceiling issue. What they haven't done yet is unleash their armies of lobbyists or use their personal clout, according to Bruce Bartlett, a respected economics policy expert who served in the administrations of GOP Presidents Ronald Reagan and George H.W. Bush.
"My hope is that Goldman Sachs and others who pull the strings in the Republican Party will get on the phone and start reading the riot act to these guys. Stop screwing around and take care of this,'' Bartlett said. "If enough of those people do this, then maybe this thing will get turned around.'
Responsible leaders also need to quickly quash the reckless idea that the U.S. government can simply pay bondholders and selected obligations after Aug. 2 -- a dangerous idea pushed by Bachmann, now a presidential contender, and seconded by another, former Gov. Tim Pawlenty.
The government may not directly default on its bonds, but stiffing other commitments would still damage the nation's creditworthiness, rattle the markets and increase interest rates, at best. At worst it could potentially trigger a financial panic.
There's no reason to run this risk. Political leaders need to manufacture a solution -- now -- to avoid a manufactured crisis.