We’re still a good six months away from a “drop dead date” for the U.S. to potentially default on its debt obligations. In the meantime, the Treasury Department moves a few zeroes around the national ledger and writes a few IOUs to other accounts to stave off what many in Washington are saying is something between a crisis and doomsday.
Don’t worry; we’re being assured by experts and most politicians. We’ve never breached the debt limit before and we won’t this time either. Republicans believe that those Democrats — including the president — who are stomping their little feet and saying “no negotiation!” don’t really mean that. And Democrats who are listening to Republicans say that they’re willing to blow up the economy to get meaningful budget cuts will wilt in the face of our united front and meekly accede to a “clean” debt limit vote.
Both sides are full of it, of course. Democrats will eventually come to the negotiating table, and Republicans will huff and puff about a balanced budget, but in the end, they will give in and raise the debt limit. Right?
Right?
While Republicans think they can use debt limit legislation to get policy concessions from Democrats, the Democrats think they can use it to make political gains. White House Chief of Staff Ron Klain reportedly told a top congressional Democrat that the fight could result in what The Post described as “substantial political benefits” for his party.
The Democratic strategy requires that Republicans get nothing, not even something face-saving, in return for raising the debt ceiling, and assumes that voters will blame Republicans for any suffering that the hostage economy endures.
Meanwhile, the Republican “strategy assumes to the contrary that Democrats, as the party in power and the party more supportive of government spending, have a stronger political incentive to get the ceiling raised,” according to the Post.
What if they’re both wrong? What if all this talk about “no negotiations,” and Republicans believing they have the upper hand because Democrats are government-lovers, ends up causing a default for the first time in American history?
An economic advisor to the Obama White House during the last debt ceiling game of chicken, David Kamin, thinks this time is different.
“There’s the potential for it to be very bad,” said Kamin, who also worked for the Biden White House. “We’re back here, and there’s a real risk to the economy on the line.”
“It feels like there’s a desire to get closer and closer to the brink,” said David Vandivier, who was a senior Treasury official during the 2011 negotiations. “At a certain point, you don’t know where the line is.”
The problem, say both men and many others in Washington, is that the GOP is so badly fractured and riven by factions that they may never agree on what constitutes a political victory for them. Republicans are so divided they may not be able to climb down off the perch they’re putting themselves on.
But unlike in 2011, Republicans are preparing to stare down the White House with no clear consensus on what they want in exchange for keeping the U.S. financial system afloat. The prevailing principle, instead, appears to be extracting a degree of political pain for President Joe Biden. And perhaps most worryingly — Democrats, economists and even some Republicans say — there’s little confidence that House Speaker Kevin McCarthy has the influence to successfully steer his conference away from the brink.
Meanwhile, Democrats are predicting the end of the world if we breach the debt limit. The problem isn’t that they’re wrong. The problem is that no one knows if they’re right. And Republicans have 20 or 25 members of Congress who want to experiment with the idea of blowing s**t up. “Hey, kids,” they’re crowing, “let’s see what happens if we breach the debt limit! It will be the coolest thing ever!”
They don’t know what will happen any more than those who are telling us to say our prayers, bend down, put our heads between our legs, and… well, you know the rest.
Uncertainty is the killer. The economy probably won’t collapse, but no one is sure because breaching the debt limit never happened before. And no one from either side is willing to bet the farm on what they believe.
