Here's the thing: there are a bunch of Republicans running around saying that breaching the debt limit is no big deal, because...oh, I don't know, it's all just nonsense. Here's one. Jamelle Bouie had a great line about it, comparing them to the bomb-worshiping mutants in Beneath the Planet of the Apes.
So my question: suppose that there is a debt limit breach, and it in fact delivers a major economic shock.
My question is: will the GOP line be that it's Barack Obama's fault because he forced the debt limit breach by not going along with totally reasonable GOP requests, or that it's Barack Obama's fault because the breach would have been harmless but he handled it wrong? Both? Something else?
By the way, as a non-expert on this (and therefore my opinion is pretty useless), my guess is that if it happens there will be damage, and that there is severe downside risk, but most likely the worst fears won't actually happen. Incredibly irresponsible of the GOP to expose the nation to the damage and the downside risk, of course.
Tuesday, October 8, 2013
Subscribe to:
Post Comments (Atom)
Posts
My predictions:
ReplyDeleteThey will simply say this "short-term" pain is good for us; that we as a nation simply shouldn't be borrowing any more money.
They will say this even as millions are laid off, banks fail, people starve, and the economy tailspins.
The vast majority of them will still be easily re-elected next year.
It looks to me that the best way to understand what the Default Disaster Denialists are saying and what Obama is doing is to see this is a game of chicken.
ReplyDeleteWhen Obama says he won't mint a platinum coin or that he doesn't have the authority under the 14th amendment to issue new debt, he's effectively throwing the steering wheel out of the window and tries to establish a credible commitment in not giving up.
When Republicans say that reaching the ceiling isn't a big deal, they are trying to establish a credible commitment that they are crazy. And in this case it matters because if they can convince the other side that they are crazy for real, they re relying on the reason of the other side to back down before the crazy people throws us all into disaster.
So, may be they truly believe it. But it seems to me they have a pretty good strategic reason to present themselves that way
Schelling at work!
DeleteI wonder if someone more expert in IR (Scott?) might chime in as to whether this might constitute a better or worse test of Schelling and related theories of deterrence than the examples from the Cold War.
My thinking is: no, they would not.
I guess the partial rebuttal to the "Obama is throwing away the steering wheel" line is that one could argue that the platinum coin or the 14th Amendment solution are illegal. I know that conservatives already believe that Obama has no respect for the Constitution or separation of powers, but if we presume that Obama does not want to break the law--not an unreasonable presumption--then that effects how he handles this.
DeletePersonally, I think Clinton is probably right when he suggested that it'd better just do do it and dare the courts to stop him. However, it doesn't automatically imply that he's just playing chicken if Obama genuinely believes that he's doing what he can do obey the law, and that this is really Congress' issue to fix and not something he can do by unilateral fiat.
I agree that this is a chicken game. The Republicans, however, in order to prevent a panic in the stock markets, admitted that they can't allow the US to default. In theory, that pretty much destroyed the strategy of threatening default to get their way. But, as they say, in theory, theory and practice are the same, but in practice, they're different. Rather than give up, they're now trying to rebuild some of their bargaining leverage by convincing people that they really didn't mean it and really don't think default would be so bad (but not too much because you don't want to panic the markets). Overall, I think their credibility is pretty much shredded. On the other hand, the credibility issue may then give way to a control issue. Unless I'm forgetting something (which is more than likely), Schelling deals with players as single entities and doesn't really address issues of control or principal-agent problems. Boehner may not want to default, but does Boehner really control his caucus? Some of them probably really do believe their own spin, but how many? Could they really prevent Boehner from allowing an open vote? Could Ted Cruz get away with a filibuster? Probably not, but here--unable to throw the steering wheel completely out the window--they might be trying for Schelling's risk that leaves something to chance.
DeleteI like Monje's idea that this is just posturing to try and recreate some sort of credibility after Boehner announced he wouldn't allow a default. But one of the reasons why I really like JB's "dysfunctional party" formulation is it helps explain why the GOP can be so self destructive. They are holding a hostage here but have already told us that they will and will not shoot the hostage if they don't get what they want. In addition, they are not clear at all about what they actually want. According to WaPo today Boehner has demands but has decided on keeping them secret. I mean imagine if someone did kidnap your spouse and the kidnapper sent you four different ransom demands that were contradictory and one where you had to meet secret demands they wouldn't tell you! Even if you wanted to surrender you can't, because its not clear what surrender would actually entail.
DeleteGame theory can't address madness, stupidity and dysfunction.
This comment has been removed by the author.
ReplyDeleteJapan and China have already said that they will start moving money out of US debt if this charade continues much longer. Without these kind of deep-pocketed creditors to rely on, US debt costs will rise rapidly and dramatically.
ReplyDeleteSo if you think the federal budget is a disaster now, all I can say is that you have seen nothing, yet, because our debt costs are still reasonable.
Debt default deniers are disputing causes and effects. It's an ongoing show of stupidity, financed by groups that believe themselves to be inviolate.
Its one thing for the Japanese or Chinese to use ominous rhetoric in defense of their massive investment in treasuries.
DeleteIts another altogether to go out and buy Spanish bonds
They'll claim that if Obama had cut spending, that we wouldn't need to raise the debt ceiling. They'll try to portray this as a Greece-style collapse that they had warned us about.
ReplyDeleteWow, you're exactly right.
DeleteI also think that the effect of a default will not be that bad, for the simple reason that folks like the Japanese and Chinese are currently holding unprecedented amounts of treasury paper - this is surely not because they like us, but because everything else is so much worse.
ReplyDeleteIn the land of the blind, if the one-eyed man gets a mite in his eye, is he not still the king?
Well, now that he can't see, and isn't used to fumbling around in the dark, I think he becomes a fool.
DeleteEspecially if he chose this new way to live for no real reason.
One fact that doesn't get stated enough is that every dime of discretionary spending that is causing us to raise the debt ceiling again was approved by the Republican House.
ReplyDeleteThey'll say it's Obama's fault, because he refused to have a "dialogue" about controlling our spending.
ReplyDeleteSen Ron Johnson:
ReplyDeleteNot handling it responsibly, not addressing our long-term debt and deficit issue, is bad for our economy. The federal government, by being so irresponsible, so dysfunctional, is harming our economy. What we should be doing is responsibly addressing the primary drivers of our debt and deficit issues. And that’s something this administration has utterly refused to do. That is what is causing the uncertainty. That is in the end what will decrease our debt rating if we don’t start grappling with it. It’s not just a momentary event one way or the other, whether we increase the debt ceiling at this particular moment in time. There’s no reason that not increasing the debt ceiling at a particular date should cause any kind of economic calamity. There’s no reason for that whatsoever, if it’s handled responsibly, which it doesn’t sound like the administration’s willing to do – which in itself is irresponsible.
This passage is telling: "That is in the end what will decrease our debt rating if we don’t start grappling with it. It’s not just a momentary event one way or the other, whether we increase the debt ceiling at this particular moment in time. There’s no reason that not increasing the debt ceiling at a particular date should cause any kind of economic calamity."
DeleteRight, because our credit rating got lowered during the last debt ceiling fight just by coincidence?
Debt limit, what debt limit! They'll probably say something like "President Obama's reckless spending spree has finally broken our economy and turned us into Greece! His budget busting Obamacare and tax hikes (tax hikes raise the deficit because everything the Democrat Party does increases the deficit) have destroyed the full faith and credit of our Government. On his watch we've defaulted for the first time in our history! The only way to fix his spending mess is to finally deliver tax relief for ordinary American job creators. Furthermore the Constitution CLEARLY SAYS we must abolish the Democrat Party."
ReplyDeleteOkay maybe not that last sentence but I bet Cantor has been wanting to say that for some time.
JB, you know they will say both. "Devious mastermind" Obama forced the GOP into default, while "incompetent teleprompter buffoon" Obama mishandled the breach. They've had it both ways on every other issue before, why not now?
ReplyDeletePresident Obama will still be the President, and focus on him as the country's leader will give him more opportunities to do what he did today at his press conference: explain what the Rs are doing in common sense language. R extremists can only win a spin war when noone is listening to the President. People will be listening.
ReplyDeleteOn the 14th amendment etc., Pres. Obama said today that it won't work because it will be challenged and litigated, causing the uncertainty in the markets that debts really will be paid, so in effect it won't work.
Nobody can say what will happen if we go down the default path but it seems to me highly implausible that the consequences will be minor. Greece, Italy, Spain, Portugal, Ireland did not default on their bonds but they saw borrowing costs explode. If we default, then interest rates on any loans would at least be in the 12-15 percent range. All the banks have Tbills as the rock solid absolutely safe part of their balance sheets--nobody will be able to say how much those are worth once a payment is missed. Once we stop social security it will blow up ordinary
ReplyDeleteAmericans calculations. We could easily be seeing 25 percent unemployment by Christmas if there is no fix to the default and and assuming there is some solution in November, it would not be unable to undo the default so there would be at least 12-15 percent unemployment for the foreseeable future. The dollar will collapse in value and the cost of gas will sky rocket. Iceland defaulted and it wiped out their banking industry, so there's a fairly recent example. Daniel Gross says it would be Lehman Brothers to the 10th power. It will certainly mean very, very bad times.
Obama care or the affordable care act is a bad idea because we have to borrow money from china to do it. In the years to come we will be so indebted to china that we as American people will be at there mercy to keep our old and sick alive because there the ones paying for. Ever seen " repo men" the movie is what could happen to us in America. Maybe not so literally but something like that when we don't pay our bills. We as American people can support yourself we need to dig deep get to work and support our own communities. Also Obama makes hard working black folks look bad by playing the stereotypical black male role by buying stuff he can't afford and messing up our credit
ReplyDeleteCongratulations, I can't tell if you're a Poe or not.
DeleteThey will say it is caused by a) Obamacare, b) the stimulus, c) raising taxes on the rich earlier this year, d) "the deficit", e) various environmental policies (coal plant regulations, failure to build the pipeline), f) the Obama administration cooking the books to try to cost Republicans votes in the '14 mid-terms....
ReplyDelete