Monday, January 14, 2013

Two basic points that should be part of all discussions of the debt ceiling (James Fallows)

James Fallows usefully boils down two central points that should be obvious but that many pundits, politicians, political journalists, and ordinary citizens seem to find difficult to grasp:
Here they are:

  • Raising the debt ceiling does not authorize one single penny in additional public spending.
  • For Congress to "decide whether" to raise the debt ceiling, for programs and tax rates it has already voted into law, makes exactly as much sense as it would for a family to "decide whether" to pay a credit-card bill for goods it has already bought.

  • That is all. [....]
    Failing to raise the debt ceiling  means refusing to let the US government issue bonds with which to pay for expenses that have already been mandated by Congress and signed into law.  It means refusing to allow the US government to meet financial obligations it has already incurred.  Refusing to pay bills that you've already incurred is a good way for an individual, a family, or a country to undermine its financial credibility.  Sometimes countries find themselves in extreme situations where they have to do that, but there are long-term costs when they do.  However, the US government has never defaulted on its debts—which is one reason why people around the world are willing to lend us money at absurdly low rates—and right now the US is not remotely near a situation where necessity would require considering such a step.

    So when the Republicans threaten to block raising the debt ceiling unless they get their way on other issues, they are threatening to destroy the financial credibility of the US government, with all the consequences that would follow, and they are using that threat as a tool of crude political extortion.  They've explicitly threatened to keep doing this indefinitely.

    There may be some of you out there who believe there are serious reasons why this kind of recklessly dangerous political extortion is legitimate and appropriate right now.  (I think such people are not only mistaken but delusional, but let's imagine that they might have serious arguments to offer. And let me say that I can hypothetically imagine historical situations in which policies that radical and extremist might be justified, though this certainly isn't one of them.) But one way or another, it's important to be clear about what's really going on here.  This is not normal political bargaining, nor is it "fiscally conservative" or "fiscally responsible," and no one should pretend that it is any of these things.

    For a few additional remarks by Fallows, see here. For more extensive explications of what's involved in this continuing crisis, see here & here & here.

    —Jeff Weintraub