In Cruz vs Boehner, markets could be the winner

December 4, 2014

A month after winning a decisive victory at the polls, the honeymoon is over for the GOP.

While a large majority of congressional Republicans are looking for a way to fight President Obama’s executive order on immigration, most see waiting until they assume control of both chambers of Congress in January as the most politically prudent way to approach the issue.

However, a small faction, led by Sen. Ted Cruz, wants to play the debt ceiling gambit now, hoping to leverage the Dec. 11 expiration date for the government’s spending authority to block Obama’s move to prevent deportation for some 4.7 undocumented immigrants. In 2011, the mere threat of a shutdown caused the U.S. to lose its AAA bond rating, and last autumn’s 16-day shutdown was seen as politically damaging to the GOP.

But as this Reuters graphic shows, prior shutdowns haven’t necessarily spooked the markets; during the 16-day shutdown last year, the Standard & Poor’s 500 showed gains in the 3 percent range, even during the shutdown itself. Earlier historic shutdowns are now at least a couple of decades old—what seems like centuries in political years—but also did not result in rebuke. This makes some sense: If a shutdown hurts bonds, smart money will look elsewhere.

Cruz and his cronies can afford to be myopic; a lot of their states are bright red, and many districts are sufficiently gerrymandered that appealing to the far-right base is their only worry. But in more moderate areas, Republican candidates’ calculations are more complex—not to mention the up-ballot problems that anti-immigration maneuvering could cause for their 2016 presidential nominee.

As we’ve mentioned before, markets affect elections more than elections affect markets. That’s why the debt ceiling grandstanding is a bigger headache for Boehner et al than for their party’s internal tormentors.

GovShutdownSnP

4 comments

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Mike Corones writes:
‘last autumn’s 16-day shutdown was seen as politically damaging to the GOP.’

Base on what was that shutdown seen as politically damaging, last month’s election results?

Posted by chrisgodar | Report as abusive

Yes, well, I am sure the people are worried about the market now that the middleclass is being shrunk to nothing. Your logic goes like this, “The wealthiest people will be just fine if the government shuts down”. That’s great! What wonderful news for the people of the US “Honey, no worries when the government shuts down, because the wealthy will be okay”. “That’s nice dear, just as long as the wealthy are okay”.

Actually, “Cruz and his cronies” care not for anyone except themselves. The lunacy of their base keeps them in and the goal is self enrichment. I would prefer that you not mention the damage to the GOP, because they deserve to be damaged for being such insane people. I also would liken Cruz to Joe McCarthy in that it is irrational fear that he uses to pummel the country for his own personal benefit. It is a special kind of evil that is allowed to pretend it is good, and can fool so many people.

Posted by brotherkenny4 | Report as abusive

Someone needs to demote Ted Cruz and send him home.

Posted by Lilydaisy | Report as abusive

another debt ceiling gambit will cause the markets to go down the toilet, and our credit rating to be lowered again.

so much for GOP fiscal responsibility.

Posted by Leftcoastrocky | Report as abusive