Possible Outcomes of Debt Ceiling Crisis

Tea Party?What if the United States government shutdown and the House Republicans didn’t care? I mean, really: even after a month they didn’t care. They thought it was great! Maybe it would be a good chance to shake up those 47% senior citizens living the easy life with their $1,000 monthly pensions! I really do wonder, because now a government shutdown seems all but inevitable. And I’ve begun to wonder if I wasn’t wrong before about it quickly resolving itself.

An even bigger concern is that the government shutdown will go this way. The press and business communities will freak out. Boehner will go to his caucus and say, “This is bad for us.” Then he will offer them what he’s been offering all along, “Pass the continuing resolution and then we’ll push our case over the Debt Ceiling.” My hope was that a government shutdown would scare the Republicans away from the Debt Ceiling showdown. But now I think a government shutdown is at least as likely to lead to a Debt Ceiling crisis.

The current situation reminds me very much of the film The Rock. John Boehner is General Hummel, who is trying to blackmail the government but has no intention of killing the hostage (basically, the people of San Francisco). “This mission was based on a threat of force. I’m not about to kill 80,000 innocent people. Do you think I’m out of my fucking mind?!” I’m afraid that it will all play out as it does in the movie. Right after giving that speech, the others mutiny and soon everyone is dead.

It is not like a government default is all bad. As I’ve noted before, it will most likely destroy the Republican Party as a going concern. And Adam Davidson offers an even better silver lining in, Our Debt to Society. He argues that defaulting on our debt will cause other countries to stop seeing the dollar as a reserve currency. This will devalue the dollar. That would be great! It would increase the cost of imported goods and lower the cost of exported goods. It would create a hiring boom and do a lot to help our flagging manufacturing sector.

Of course, the rich hate such an idea. For those who already have lots of dollars, seeing them go down in value is a bad thing. But a lower valued dollar is just what the doctor ordered. Currently, we import more than we export. Normally, this offset would be fixed by our dollar sinking in value compared to the money of the countries we are importing from. But because of the United States’ role in providing the reserve currency, our dollar stays artificially high. (It is also the case that since the Clinton administration, the government has tried to keep the dollar overvalued because it cares a whole lot more about the rich than the poor.)

The other side of default is that Thomas Frank may be right in The Wrecking Crew. In that book, he argues that the Republicans keep political advantage by destroying everything whenever they are in power. They run up big debts so that when a Democrat gets into the White House, he has to work on the debt rather than improving social programs and the economy. (I don’t think they actually have to, but that’s a subject for another day.) The truth is that a government default would increase government borrowing costs. This would put yet more pressure on the government to cut services. So even if the Republicans get booted out of power, the conservative movement could be the ultimate winner.

I don’t know what’s going to happen. But I know that disruption is usually a bad thing, regardless of how things get sorted out in the end. And I really feel that the Republicans are more serious about this fight than is good for a democracy.

This entry was posted in Uncategorized by Frank Moraes. Bookmark the permalink.
Avatar

About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

Leave a Reply

Your email address will not be published. Required fields are marked *