Wednesday, October 2, 2013

The life expectancy of the debt ceiling

Yglesias today, on the importance of not negotiating on the debt ceiling:
Michael Grunwald from Time was on Twitter earlier today pounding the message that ultimately a deal has to be made and Obama should be willing to pay some price in order to avert the disaster of a debt ceiling breach. That's fine if Obama's personal reputation is the only thing at stake. You really don't want to be the guy who presided over an unprecedented catastrophe and might make some small or even mid-sized concession to Republicans to avoid it.  
But from the standpoint of the country as a whole, a debt ceiling breach in 2013 is no more disastrous than a breach in 2017 or 2022. And the problem with "cutting a deal" with Republicans is that it essentially makes an eventual breach inevitable.  
If the hostage-taking gambit works, then it will be used over and over again until it goes wrong. The only responsible thing for Obama to do is to struggle with all his might to take this gambit off the table now and forever. 
Matt's not wrong about the dangers of negotiating.  But I don't quite agree that appeasement leads inexorably to default.  That assertion relies pretty heavily on the assumption that debt ceiling standoffs will replay themselves over and over until someone finally either stands their ground, or alternatively, goofs up the timeline and inadvertently sends the country into default.  Assuming that debt ceiling crises recur, either is plausible, and possibly inevitable.

But it's hard not to think that the debt ceiling itself is in its last years.  At best, it's constant irritant to the governing party, and at worst, it's a ticking time bomb.  The next time either party establishes complete control of both houses and the presidency, I bet the debt ceiling is immediately written out of law, in a safe, non-controversial manner, with no platinum coins or 14th Amendment debates involved.

In that light, Grunwald's strategy looks a little better: he wants us to keep the bomb from going off, until such time as we can disarm it safely.

Broadly speaking, though, I'm still pretty sympathetic to Yglesias's hard-line view.  The problem isn't the unavoidability of default so much as it's the extent of the GOP's demands this time around.  After all, it might be many years before either party is in a position to do away with the debt ceiling.  In the meantime, the GOP has demonstrated that negotiating only leads to greater demands and more frequent standoffs; if we pursue Grunwald's strategy, there's no telling how badly civil society will need to be gutted in order to keep time on the clock. The debt ceiling has a short life expectancy, but a country where the minority rules by crisis-induced fiat has an even shorter one.

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