The Markets Lean on Washington

In the weeks leading up to the debt limit agreement between Congress and the Obama Administration, there was some talk about how the stock markets might spark action by lawmakers in terms of a deal on the debt limit.

It didn't really happen then - but it may be happening now.

After years of kicking the can down the road on the budget and deficit, the Congress and the President find themselves in a situation where they may be forced to "react" to events on the markets.

And when the Dow Jones loses over 500 points one day and over 600 points another, the pressure is ramping up, especially on the President.

"The fact is, we didn’t need a rating agency to tell us that we need a balanced, long-term approach to deficit reduction," President Obama said on Monday afternoon.

"And we didn’t need a rating agency to tell us that the gridlock in Washington over the last several months has not been constructive, to say the least," Mr. Obama added.

That gridlock was again demonstrated as the Dow kept dropping and dropping on Monday. The President said he wanted a "balanced" approach, his code word for plans that include new tax revenues.

Speaker John Boehner meanwhile ruled out that idea from Democrats, making clear that "raising taxes is simply the wrong approach."

"I agree with the President that we did not need a ratings agency to tell us America is facing a debt crisis," the Speaker said in a written statement.

The reaction to the President's statement involved not only a bigger drop on the stock markets, but also pointed statements from both parties from their very familiar partisan corners.

"The Tea Party did their part by electing people to stand strong and stop the reckless spending," said Rep. Joe Wilson (R-SC), giving no quarter in this budget fight.

"Blaming the Tea Party for America's debt crisis and downgrade is like blaming the fireman for fires," said Sen. Rand Paul (R-KY).

The President said statements like those are the problem.

"It’s the insistence on drawing lines in the sand, a refusal to put what’s best for the country ahead of self-interest or party or ideology. And that’s what we need to change," said Mr. Obama.

So that's where we stand at this point. Both parties in their corners, pointing the finger of blame at the other.

"Why can't they just compromise?" was the plea that I heard from one of the Capitol Hill police officers guarding one of the entrances to the U.S. Capitol on Monday.

It sounds easy enough, but as the last month or so demonstrates, it's not a simple assignment.

What I have said for many years is that each party in the Congress would resist knuckling under on issues like these until the sky was falling, until there was a larger crisis that was impossible to resist.

Is this the start of that kind of crisis, one that makes people compromise?

Congressional leaders must name the members of a special 12 member House-Senate committee on the deficit over the next week.

They aren't supposed to have their first meeting until September; but if the markets keep sliding, maybe that will move up a few weeks.