Friday, July 29, 2011

What Happens if We Don't Raise the Debt Ceiling?

So the tone of my posts railing against default seems to have conveyed one of two false impressions to many of my readers:  that I believe there is now a 100% chance that we will fail to increase the debt ceiling; and/or that I believe a failure to raise the debt ceiling will be a catastrophe on par with 6-mile asteroids and volcanic eruptions the size of modern Iran.

Since neither of these is the case, I thought it was probably time to write down what might unfold over the next few days.

I'll start by saying, however, that I have no idea whether we'll get a deal or not.  There is one thing I'm sure of:  Obama is indeed bluffing with the veto threat, and badly.  They could send him a repeal of Obamacare attached to a debt ceiling increase, and he'd sign it.  He is not going to endanger our credit rating, or social security checks, in order to prove a point.

Beyond that, I have no idea what is going to happen politically.  Either the GOP is going to pass the Boehner bill, go into conference with the Senate, and come out with something Obama will sign--or they won't.  I tend to think they will because it would be so damn crazy not to.  On the other hand, I thought Democrats were going to back off on health care because it was so obviously career suicide to pass the thing.  And I was right--it was career suicide.  But they passed it anyway.  After a certain point, these things take on a life of their own: it's hard to back down when you're so publicly committed--and when something you want so badly feels like it's almost in reach.  So who knows.

Then there's the wild card: will the GOP old guard do a deal with the Democrats if the tea party won't play ball?  I don't know.  It would cost them their jobs, but it would be the right thing to do. But it's hard to get people to do the right thing when it will cost them their jobs.

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