Derek Thompson worries about hitting the debt ceiling:
Besides Denmark, no other country I know of asks legislators to vote to pay for something they’ve already voted to pay for. The debt ceiling should not exist. But now that it does exist, it must be said again and again that it does not create new laws. It just affirms that we will pay for old laws. It’s not a smart scalpel for shaving the deficit, it’s a guillotine hanging over the head of the head of the country.
Even when the blade doesn’t fall, it can still have consequences. The Summer 2011 showdown that nearly resulted in default cost taxpayers $19 billion this decade in elevated interest rates as investor panic began to build. That’s the price of playing with the full faith and credit of the United States.
Just imagine what the “largest self-imposed financial disaster in history” would cost us.
Of course, I agree. Unlike today’s GOP, I actually think that fiscal conservatism means adjusting taxes and spending to lower the deficit and debt in the usual budgetary process. Unlike today’s GOP, I believe a fiscal conservative also pays the bills on loans he has already decided to spend. Call me crazy, but that’s where I am. And I sure don’t think that’s somehow not conservative.
Nonetheless, we shouldn’t get carried away and argue that the debt ceiling has never been used as political blackmail. In fact, the Democrats were the first to play this game:
In 1973, when Richard Nixon was president, Democrats in the Senate, including Sen. Edward Kennedy (D-Mass.) and Sen. Walter Mondale (D-Minn.), sought to attach a campaign finance reform bill to the debt ceiling after the Watergate-era revelations about Nixon’s fundraising during the 1972 election. Their efforts were defeated by a filibuster, but it took days of debate and the lawmakers were criticized by commentators (and fellow lawmakers) for using “shotgun” tactics to try to hitch their pet cause to emergency must-pass legislation … [Subsequently], major changes in Social Security were attached to the debt bill; another controversial amendment sought to end the bombing in Cambodia. [Political Scientists] Kowalcky and LeLoup list 25 nongermane amendments (pdf) that were attached to debt-limit bills between 1978 and 1987, including allowing voluntary school prayer, banning busing to achieve integration and proposing a nuclear freeze.
Of course, the brinksmanship now, in a still sluggish economy and with the deficit already falling fast, is playing with economic catastrophe, as Ezra notes:
Let’s say the Obama administration couldn’t get around the debt ceiling and the U.S. government could suddenly only spend as much as it received in taxes. Then outlays would have to fall immediately by 32 percent in October. That would be a huge, sudden shot of austerity and could put a big dent in the economy.
It’s also unclear what would happen if the U.S. government defaulted on a bond payment. Back in January, Michael Feroli, the chief economist of JP Morgan, told me that this scenario ”would be like the financial market equivalent of that Hieronymus Bosch painting of hell.” The global financial markets are structured around the notion that U.S. Treasuries are the safest asset in the world. If that assumption were ever called into question, havoc would ensue.
Barro isn’t sweating the debt ceiling:
Boehner knows that hitting the debt ceiling is a political disaster for Republicans. That’s why he backed down on his debt ceiling demands the last time, and the underlying political dynamic hasn’t changed.
Sometimes, Boehner is forced by his caucus’s unreasonableness to court disaster. But most House Republicans will be grateful if Boehner saves them from a debt ceiling crisis, so his speakership won’t be in danger for averting one—even if House Republicans feign outrage over his cutting a deal with Minority Leader Nancy Pelosi to do so.
Drum suspects that Obama will act unilaterally, if need be:
[I]f the debt ceiling showdown lasts more than a couple of weeks, it’s likely that President Obama will simply order the Treasury to start auctioning bonds regardless. Maybe under the authority of the 14th Amendment, maybe under his authority as commander-in-chief. Maybe he’ll declare a state of emergency of some kind. Who knows? But eventually this is how things will work out, with Obama acting because he has to, and because he knows that courts will be loathe to intervene in a political dispute between the executive and legislative branches.
(Photo by Tony Karumba/AFP/Getty Images)