This Congress can't raise the debt limit. That's bad.

The first day of a new Congress is usually kind of a slow news day. There's a lot of pageantry and ceremony, speeches from the newly selected party leaders and the introduction of H.R. 1 outlining the majority's legislative priorities, whateverthosemaybe. 

Not so today, when the House of Representatives failed to elect a speaker of the House from among its membership on the first ballot for the first time in 100 years (exactly!), initiating a high-wire game of chicken between Rep. Kevin McCarthy, R-Calif., who almost has enough votes, and a never-Kevin faction of his caucus who is insisting on anyone but him.

For all I know — and it would be just my luck — McCarthy will be elected speaker before I'm even done writing this column, so maybe this episode ends up being little more than a really tough Trivial Pursuit question in the years to come. But to me, it raises the question: If the Republican majority is expressing this much inner turmoil on something that should be a formality, what other items of consequence could that inner turmoil stall or destroy?

Bloomberg News

The United States has had ineffectual Congresses before and survived, either by having executive agencies fill in the policy gaps, or more commonly waiting for a moment when the White House and Congress are entirely under one-party control. But there are a small handful of things that the United States really cannot live without: funding the government for one, and even more important, raising the debt ceiling. 

The debt ceiling is kind of like a legislative version of Blackbeard's treasure. First passed in 1917 as part of a law authorizing a bond issue to finance the First World War, the debt ceiling for almost 100 years was a forgotten formality that got raised by both parties because raising it was easier and less politically costly than abolishing it (even though the debt ceiling really doesn't make sense and is arguably unconstitutional). 

Then in 2011 Republicans rediscovered the debt ceiling and began using it as a political bargaining chip to gain concessions on everything from the Affordable Care Act to immigration. Thus began a confrontational back-and-forth between the Treasury Department and Congress about how important it really is to raise or suspend the debt limit. 

That fight has always been dangerous, and it isn't that hard to understand why banks or everyone else should care. The United States' privileged place in the world economy is predicated on its being the sole issuer of this thing we call the dollar, and the dollar is a powerful tool indeed. It is the unrivaled store of value on earth — it's the best money that has ever been. And the reason for that is the United States has the biggest economy on earth, it is a nation of laws and due process, and the dollars it mints are backed by the full faith and credit of the United States. If the United States defaults on its debt, it will be the most costly and irreversible fiscal mistake any country has ever made.

Congress's deepening scrutiny of the Fed might just be getting started

As we learned more than a decade ago, Congress doesn't even have to default on its debt to have the country's credit downgraded — even the suspicion that it might default is enough to get buyers of U.S. debt to start shopping around.

And assuming that this Congress does get around to electing a Speaker of the House — and, keep in mind, literally nothing can happen in the House until it does — there is little reason to think that this Congress will raise the debt limit when the time comes, which is expected to be sometime in July. Rep. Jim Jordan, R-Ohio, rising today to nominate McCarthy for speaker, urged his caucus members to rally around McCarthy so that Republicans can get to work addressing their common interests.

"In two years [since President Biden's inauguration] we have a border that is no longer a border, we have a military that can't meet its recruitment goals, we have bad energy policy, bad education policy, record spending, record inflation, record debt, and a government that has been weaponized against we the people," Jordan said. "We have to pass legislation to address all that."

That doesn't sound like someone who is trying to get to yes on the debt ceiling to me. Perhaps cooler heads will prevail — perhaps Speaker McCarthy or whoever will do what Speaker Boehner did in 2014 and pass a clean bill with the Democrats before it's too late. But it would be better still — for banks and everyone else — if we didn't have to wait and find out.

Earlier in this column I called the debt ceiling fight a game of chicken. That was wrong — it's really more like a game of Russian roulette. The longer we let Congress play, the more likely we are to lose.