24/7 Wall St.

In today’s Daily Austerity Watch, we struggled to find an appropriately macho analogy to describe the Republican’s attempts to fight efforts to raise the debt ceiling.   About the best we could come up was “Dirty Harry” Callahan, the vigilante film cop made famous by Clint Eastwood who famously declared:

I know what you’re thinking. “Did he fire six shots or only five?” Well, to tell you the truth, in all this excitement I kind of lost track myself. But being as this is a .44 Magnum, the most powerful handgun in the world, and would blow your head clean off, you’ve got to ask yourself one question: “Do I feel lucky?” Well, do ya, punk?

Callahan was willing to use whatever means necessary to clean up the crime-ridden streets of San Francisco.  Republicans are showing much of the same type of swagger as they tackle the deficit.   Representative  Eric Cantor (R-VA),the House Majority Leader, told reporters yesterday that the Obama administration would have to in the words of Politico include “major spending cuts or budget process reforms” to raise the $14.3 trillion borrowing limit.

What Cantor means by that is not exactly clear.    Democrats are demanding a vote on a debt ceiling bill that is “clean” or free amendments. That is unlikely given that Republican have long argued that Obama is not serious enough about shrinking the size of government.   They are angry that he ignored the suggestions issued last year by his bipartisan Fiscal Commission, which found $200 billion in savings.   Moreover, they are dismayed over Obama’s attacks on the 2012 budget proposal by House Budget Committee Chairman Paul Ryan (R-WI) for benefiting the rich at the expense of everyone else.    The Ryan plan counts on fiscal gimmickry such as the repeal of Health Care Reform to generate the $1. 4 trillion in savings over 10 years.    However, the numbers in Obama’s plan, which seeks to trim the deficit by $1 trillion over the next decade, includes some rosy assumption such as getting Republicans to raise taxes in an election year.

Both Democrats and Republicans are in an impossible situation.   Polls indicate that  Americans are worried about the debt but are against cutting many entitlement programs which experts say are one of the main culprits for it.  They also remain concerned that the fragile recovery may be throttled if government spending is cut too far.

Unlike the last budget fight, which centered on politically explosive but financially insignificant issues such as NPR and Planned Parenthood, the stakes in this battle are much higher.   The fact that the Republicans are even willing to consider allowing default even JPMorgan CEO Jamie Dimon — no screaming liberal — and others are warning of the devastating consequences to the U.S. economy is depressing.   It shows that many in Washington are putting their own partisan interest over the interest of the country, which is what they were elected to do.

Both parties need to resolve their differences over the debt ceiling before the situation spirals out of control.   They have until July 8 to patch up their differences because the last thing that any investor wants to hear from Congress is someone asking them if they are feeling lucky.