Why This Default Debate Is Different

Things were different the last time a Democratic president and a Republican House played a drawn-out game of chicken with the “full faith and credit” of the United States. That was the mid-1990s, when Newt Gingrich, then the new Speaker of the House, seemed to see himself as a Man of History. Like today’s tea partiers, Gingrich was supremely self-confident that his party’s decisive takeover of the House represented a broad shift and a mandate for drastic cuts in spending and a balanced budget.

Yet after Gingrich and Majority Leader Dick Armey suggested they might go so far as to allow the government to default on its debt, the political mood changed dramatically. Standard & Poor’s and Moody’s issued warnings and Wall Street, whose views were channeled by then-Federal Reserve Chairman Alan Greenspan in private meetings with Republicans, made its unhappiness known. Following two unpopular government shutdowns, “the idea of default became so politically charged that few people wanted to be associated with it any longer,” former Treasury Secretary Robert Rubin wrote in his 2003 memoir, In An Uncertain World. “At some point, our opponents simply stopped fighting.”