America’s Playing Default Chicken

The Daily Escape:

Ice and clouds, Yellowstone Lake, Yellowstone NP, WY – May 2023 photo by Joethehiker

Wrongo doesn’t know about you, but he’s starting to think that the “bi-partisan” Debt Ceiling negotiations aren’t going to stave off a default on the US’ debt obligations.

Every talking head is still saying that at the last minute, Biden and McCarthy will agree to…something. Something that prevents a government shutdown, and a default on payments for the country’s outstanding debt.

But is that real or hopium? In any negotiation, the idea is to find a point (or multiple points) of leverage that bends the other side toward your viewpoint. That helps the two sides to meet at some place in the middle.

So who’s got the leverage in the current Debt Ceiling negotiation? No one. Biden surely has no leverage over the House Republicans. Republican Speaker McCarthy has some leverage over Biden but has little leverage with his own House members. The Senate leaders, Majority Leader Schumer and Minority Leader McConnell, who normally have leverage to help resolve Debt Ceiling standoffs, are bystanders in this game of Default Chicken.

We’re in a high stakes game of chicken because nobody can deliver their side to the table. Politico reports:

“White House aides privately estimate they may need to deliver as many as 100 Democratic votes to ensure an eventual debt limit deal can pass the narrowly divided House…”

But few Democrats will support the deep cuts to social programs that Biden might be forced to agree to. McCarthy knows that a portion of his GOP House members will vote against ANY compromise bill. House Republicans have already called the legislation they passed last month (lifting the Debt Ceiling in exchange for deep spending cuts) the floor, not the ceiling to the negotiation. Dan Pfeiffer quoted Rep. Matt Gaetz (R-FL):

“I think my conservative colleagues for the most part…don’t feel like we should negotiate with our hostage.”

So Gaetz thinks that Biden and the Democrats are his hostages. If they are, how do they negotiate with the terrorists on the other side?

The positions are clear. The White House is open to budget negotiations but opposed to debt ceiling brinkmanship. Republicans threaten default if their budget demands aren’t met. They’re planning to pull the pin on this grenade and then blame Democrats for making them do it.

Recent polling from ABC and The WaPo gives Democrats a narrow advantage: An equal number of voters from each party—78%—would blame the opposite party for default. While 37% of independents say they would blame Republicans and 29% would blame Biden, with 24% blaming both parties equally.

The Democrats’ negotiating position appears to put them in the worst of both worlds: If the Debt Ceiling is breached, the polls show that they will share the political fallout with Republicans. Otherwise, they may have to agree to significant cuts to crucial programs like welfare and food stamps, which will badly hurt them with their base.

Either way, the Dems will complain about the financial wreckage caused by Republican extremism, and hope voters agree with them. The simplest way out is to agree to a temporary debt ceiling increase as we have many times in the past, to allow both sides to continue negotiating.

Sadly, McCarthy and the House Republicans seem to prefer default to compromise. They’re using passing a new Debt Ceiling as leverage to cut spending for Social Security and Medicare while increasing the defense budget. That’s their idea of “fiscal responsibility”. Sure, our military budget is 10 times Russia’s and three times China’s, but Republicans want grandma to tighten her belt.

At the end of the day, we’re stuck playing Default Chicken: The US must pay the bills it has already incurred as they mature. McCarthy can’t be seen by House Republicans to be giving concessions to Biden. After all, they think their job is to save the country from excess spending, not from the consequences of default. Rep. Marjorie Taylor Greene (R-GA) said on Wednesday that no one in the House Republican conference is concerned about the potential of a US debt default:

“Regular Americans … don’t worry about the government shutting down.”

Negotiating with terrorists is very difficult. The pressure on Democrats to cave to Republican demands for massive spending cuts will become harder to resist. If somehow they do resist, chances are we’ll see America default on its debts.


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