The Debt-Celing Gamble

Ezra Klein reports that the White House is drawing a line in the sand on the debt-ceiling, and they really, really mean it:

The Obama administration is utterly steadfast on this point: They will not suffer a repeat of 2011, when they conducted negotiations over whether the United States should default. If Republicans go over the cliff and try to open up talks for raising the debt ceiling, the White House will not hold a meeting, they will not return a phone call, they will not look at the e-mails.

The Administration is looking to take the debt ceiling off the table forever.  This is good policy; that Congress should be able to pass laws authorizing spending but not authorizing the required debt is beyond ridiculous.  Also ridiculous – and irresponsible – is the willingness of the Republicans to use the debt ceiling to hold the economy hostage.  Ending this travesty should be a priority for the White House.

Klein adds that the White House is ready for the fight now while their strength is up:

Boehner and the Republicans don’t want to give up the leverage of the debt ceiling forever, or for 10 years, or even, as John Engler, head of the Business Roundtable and a former Republican governor suggested, for five years. But the White House isn’t very interested in compromising on this issue, as they figure that if there needs to be a final showdown over the debt ceiling, it’s better to do it now, when they’re at peak strength, then delay it till 2014 or 2015, when their own vantage might have ebbed.

I would add another advantage.  Better – from a political point of view – to have a recession at the beginning of President Obama’s second term that can be blamed entirely on the Republicans.  A recession in the first half of 2013 means that, most likely, the Democratic presidential nominee can run on the back of an improving economy by 2016.  Alternatively, they run the risk that this recovery, anemic as it is, gets long in the tooth by 2016.  Even worse would be that they agree to let the Republicans once again hold the economy hostage two years from now.  Politically, if I had to pick between a recession now or closer to the next election, I would pick now.

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About Tim Duy 348 Articles

Tim Duy is the Director of Undergraduate Studies of the Department of Economics at the University of Oregon and the Director of the Oregon Economic Forum.

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