What Are Conservative Experts Saying About Breaking Through The Debt Ceiling?
American Enterprise Institute
Bucking the trend, the American Enterprise Institute put me in touch with Michael Strain. What happens if we go through the debt ceiling? “First thing I’d say is that nobody really knows, and that’s the scary thing,” he told me. He referenced and drew on an LA Times editorial he had just written.
“I think you’d see a spike in interest rates. Though others think interest rates might fall because people would be spooked. Either way, we should consider it a catastrophe. If there’s a default it could cause a credit crunch. If the repo markets don’t consider Treasuries good collateral anymore there could be a panic. There really could be something similar to 2008.”
Could we prioritize payments? “What I would caution is that it is not clear we could do that. So, for example, back in the 1970s Congress waited until the 11th hour to raise the debt ceiling, and we were put into default by errors in execution. I’d caution that if we try and do something cute things can go wrong. And we don’t want to invite error. We saw what happened in 2011 — even with a deal and no default, even doing that really hurts the economy in a measurable way.”
So why is there so much fascination on the right with going through the debt ceiling? “When I do interviews with right-wing media there does seem to be a story that goes like this: They said the sequester would be horrible and the sky didn’t fall, they said that the government shutdown would be horrible, and the sky didn’t fall, and now they are saying going through the debt ceiling date would be horrible and why would we believe them this time? I’ve been trying to push back against this.”
Add to that last part the idea that conservatives are “winning” the shutdown, so why not push their luck and go through the debt ceiling, too? Especially when the majority of people doing the intellectual, “expert” work on the right are describing it as either consequence-free or an opportunity to blame President Obama for something.
Mike Konczal is a Fellow at the Roosevelt Institute.
Cross-posted from Rortybomb
The Roosevelt Institute is a nonprofit organization devoted to carrying forward the legacy and values of Franklin and Eleanor Roosevelt.
Photo: Matthew Bisanz via Wikimedia Commons