Debt-Ceiling Chicken

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Pundits on MSNBC were astounded that 62% of Americans were against raising the debt ceiling in the new NBC/WSJ poll because they say the poll explained what would happen if the debt ceiling was not raised. Here's a thought. All networks calling themselves news should have been explaining in detail what the debt ceiling is and what it would mean to the US if we failed to raise the debt limit for some time now so Americans truly understand it.

Here's one pretty basic explanation, but there are tons to choose from:

In short, if lawmakers fail to raise the ceiling this year, they will have two choices, both awful.

They could either cut spending or raise taxes by as much as $738 billion just to cover the period from April 1 through Sept. 30, which is the end of the fiscal year. Or they could acknowledge that the country would be unable to pay what it owes in full and the United States could effectively default on some of its obligations.

The first option would be impossible to execute without negative economic repercussions.

And the second option could cripple the economy and send world markets into a tailspin.

"Not only the default but efforts to resolve it would arguably have negative repercussions on both domestic and international financial markets and economies," according to the CRS.

At a minimum, a default could hurt U.S. bonds, the dollar and investors' portfolios. "Our bond market and stock market would crash," Penner asserted.

Using a poll question as a economic course isn't going to help Americans understand what the debt ceiling means. If polled before 2011, I bet 85% of Americans would have no idea what it means, but since there is so much debt in our country, when the word is used Americans understand only what that word means to them because they see how debt has affected their lives and in a knee-jerk way would naturally oppose increasing it.

When you hear the budget deal passed last week cut $38.5 billion -- well, that is a lot of money to anybody, but when you're talking about our running the country, it's but a tiny fraction of the amount of money it takes to just pay the interest on our loans. Boehner and most Republicans not named Rand Paul or Mike Pence know this, or are just acting like they don't know it.

Jed Lewison:

Today, the White House weighed in with its answer: none.

While Republicans like House Speaker John Boehner are signaling to support raising the debt ceiling -- if spending cuts and entitlement reform are attached -- Democrats say they want a clean debt-ceiling vote.

"We do not need to play chicken with our economy by linking the raising of the debt ceiling to anything," said White House Press Secretary Jay Carney. "We should do that right away."

Carney says the consequences of failing to raise the debt ceiling would be catastrophic:

White House spokesman Jay Carney on Monday said the consequences of failing to raise the debt ceiling would be "Armageddon-like" for the country.

"We cannot play chicken with the economy in this way," Carney told reporters at a briefing. "It's just too darn risky. It's not appropriate."

The debt limit is a big deal because unless Congress raises it, the government will run out of money with which to operate. That would be worse than a shutdown of essential services—we simply wouldn't have enough money to fund even essential services. Worse, it would put the full faith and credit of the United States on the line, potentially setting off a worldwide financial panic.

Nonetheless, Republicans are threatening to deny a debt limit increase unless they get something in return. But that's a bluff, and it's good that the White House is calling them on it.

Oh, I wish it were so. Matt Yglesias says he has a Hostage Rescue Strategy:

As Jon Chait and Josh Marshall write this morning, the way the tax cut deal and the appropriations deal went down makes it clear that the White House needs a better hostage rescue strategy heading into the debt ceiling fight. Fortunately, I think one is on

I gather President Obama will bring this up in his speech Wednesday. Rep. John Boehner has been saying that he's going to kick ass -- and unless the administration starts to stare down the chicken, he'll be right, and the hostage-takers win.

It looks like it won't turn out that well now because the President is Open to Deal on Debt Cap Sigh.

Ezra Klein wonders why Dems didn't do it back in December.

Kevin Drum points out that raising the debt limit is really, really unpopular, so it’s going to be a bit hard for Democrats to position themselves as ‘Team Let’s-Raise-the-Debt-Ceiling!’ And it’s probably all moot, because the Obama administration has already signaled their interest in making this a hostage negotiation situation.

I’m not a negotiation specialist, so I don’t really know who’s right here. But what’s always seemed obvious was that the time to raise the debt ceiling was back in December, when Democrats and Republicans jointly agreed to increase the deficit by $850 billion in order to extend the Bush tax cuts and add some further cuts on top of that. When I asked Democrats about this at the time, they kept telling me that Republicans needed to learn the awful and awesome responsibility that was governing. “Let the Republicans have some buy-in on the debt. They’re going to have a majority in the House,” said Harry Reid. “I don’t think it should be when we have a heavily Democratic Senate, heavily Democratic House and a Democratic president.” This made absolutely zero sense to me then, and it makes zero sense to me now.

Democrats didn't want to do anything leading up to the mid terms because the Blue Dogs were afraid to lose their seats as the election neared. They lost them anyway. And Dems didn't want to act in the lame duck either. How's that working out for them now?


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