Republicans Doing The Unthinkable

Some jokesters once put out a hilarious parody of The New York Post. The huge front page headline read, “Michael Jackson and 10 Million Others Die in Nuclear Attack.” The mentality being skewered has resurfaced in the remarks of House Majority Leader Dick Armey. Except that he appears to be serious.

On NBC’s “Meet the Press,” Armey actually threatened default on the nation’s debt to wring budget concessions from the Clinton administration. A headline came instantly to mind: “Medicaid Entitlements and the Industrial World Perish in Economic Collapse.”

How interesting that the Republican House leadership regarded the integrity of the nation’s credit rating as another item on the negotiating table. U.S. Treasury securities have traditionally been held up as the world’s safest investment.

Actually, the threat is not entirely new. In December, Republican House Speaker Newt Gingrich warned that if President Clinton did not agree to his party’s tax cuts and spending priorities, “you will see interest rates skyrocket and the stock market crash.” The markets ignored the remark. They didn’t believe he possibly could have meant it.

Two weeks ago, Wall Street started thinking that these guys might be for real. The stock market took a 164-point tumble in two days. Interest rates climbed. The two leading credit rating agencies, Moody’s and Standard and Poor’s, notified the world that the “AAA” credit rating of the United States could be in jeopardy.

The jumpy markets have impressed House Budget Committee Chairman John Kasich, Republican of Ohio. He concluded that as a pressure tactic, the option of defaulting on the debt belongs in the folder marked “unthinkable.” On “Meet the Press” two Sundays ago, Kasich said, “My sense is you don’t want to mess around with defaulting here in the United States.” Good man.

Yet one week later, Armey was saying that legislation to extend the Treasury’s borrowing authority would not pass next month unless President Clinton agreed to a variety of conditions. When asked about Kasich’s concern, Armey noted that the Ohioan doesn’t run Congress. And the squad of Republican freshmen also supports rolling out the big weapon.

The plan is to shift blame onto the shoulders of Treasury Secretary Robert Rubin. Over the last months, the hapless Rubin has been moving money around to avoid default on the debt.

Armey charges Rubin with “raiding” government pension funds. Some Congressional firebrands are calling for impeachment hearings against the Treasury Secretary. Rubin could have done nothing, one supposes, and just allowed the economy to go kaboom.

The Treasury secretary’s job is to promote economic stability. Rubin would prefer to be engaged in activities other than having to catch bombs the Republicans are hurling at the economy’s once placid waters. He is now in the unenviable position of calming the nerves on Wall Street while putting some fear into House Republicans that not paying our debts would lead to disaster.

Really, all this brinkmanship is unnecessary. The Republicans and Democrats are fairly close on numbers. They differ mainly on the size of the proposed tax cuts and some spending priorities.

The economy is - or at least was - in good shape. Stocks were hitting record highs. While Republicans were obsessing over their seven-year deadline for balancing the budget, the deficit was already coming down. The shortfall was 5 percent of the nation’s income in 1992. Today it is 2.2 percent.

Republican theatrics over the budget have not impressed economists who watch the numbers. “The people around here are content with the fact that the deficit is on a downward path today,” calmly noted Robert M. Solow, a Nobel laureate in economics at the Massachusetts Institute of Technology. At a recent meeting of the American Economic Association, he said, “What the deficit has become now is a powerful way of saying, ‘I don’t want the government to go on doing as much as it is doing.”’

Well, endangering the full faith and credit of the United States as a lever to eliminate the Commerce Department would seem a bit of overkill. Congressional hotheads who contemplate using such tactics should keep one thing foremost in mind. The electorate is not as nutty as they are.

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