The White House let it be know that the “cut, cap and balance” scheme would be vetoed if passed. Sam Youngman, The Hill: “In a statement of administration policy, the White House Office of Management and Budget labeled the GOP bill as an ’empty political statement.’ … The president’s veto threat was followed by a full-on assault from administration officials who blasted the GOP proposal as ‘extreme, radical [and] unprecedented.'” Well, yes.
See also “Poll: 71% shun GOP handling of debt crisis.”
Update: Dean Baker writes that there’s no way Wall Street would let the Republicans pull the debt ceiling trigger.
As many have noted, including me, a default on the debt would be an absolute disaster for the financial system. We would see the same sort of freeze-up of lending as we did after the collapse of Lehman in September of 2008, although this time would almost certainly be much worse.
With US government debt no longer the rock-solid pillar of the world financial system, banks would instantly lose much of their capital. They would not only have to write-down the value of government debt, but also all the assets backed by the government, like mortgage-backed securities issued by Fannie Mae and Freddie Mac.
This would almost certainly push the major banks into insolvency. JP Morgan, Citigroup, Goldman Sachs and the rest would suddenly be back in the welfare line. And any rescue would almost certainly not restore them to their former strength and profitability like the last one did. If the government defaulted on its debt, Wall Street would take a shellacking and it would never again be the centre of world finance.
For this reason, Baker says, no one believes Republicans in Congress will allow the U.S. to default. They may be willing to kick poor and working people in the teeth and let seniors rot, but they aren’t about to displease the people who finance their election campaigns.
This makes sense, but it’s congressional Republicans we’re talking about. Baker assumes a majority of them are sane enough to understand the consequences of default. I’m not sure that many of them do.