Debt Ceiling Countdown #4: The Chicken Game Catastrophe
Joe Biden is running for president, Donald Trump and Stormy Daniels are making global headlines – who opened the multiverse and propelled us all back to 2015???
While the two presidents are fighting for airtime, the emerging debt crisis in the U.S has taken a back seat. The House of the 118th Congress has been one of the least productive in history, and every day lawmakers are getting closer and closer to the dreaded ‘X Date’ – the day when the U.S. treasury won’t be able to meet its debt obligations in full and on time.
What happened to the debt ceiling negotiations? Has Congress lost focus?
Don’t count on a debt ceiling ‘soft landing’
The media are reassuring Americans that Republicans and Democrats will reach an agreement on the debt limit; “we just have to get a little closer to summer time” when the ‘X Date’ is expected to arrive. While I’m not directly opposing this view, I am less cavalier about the process ahead than the consensus view seems to be. The risk of government shutdown in the U.S is at the highest level it has been since the last shutdown in 2013.
Why? Because Democrats have good reason to be confident about their hardline position on a ‘clean’ debt ceiling increase. The Republican hand is weaker, but House Speaker, Kevin McCarthy, is surviving by the good grace of the ultra-conservative, Freedom Caucus (FC), who historically haven’t been discouraged by a majority against them. With Trump cementing his political martyrdom in the courtroom, FC is more motivated than ever to make their swamp-lord proud. They are unlikely to support a debt ceiling increase without concessions.
Democrats and Republicans have laid out their debt ceiling demands: Biden wants to raise the debt ceiling with ‘no strings attached’ and Republicans want a balanced budget in the next 10 years. Both are now playing a high-risk game of chicken, hoping that the other party will agree to their terms if the general public gets a sense that the opponent is at fault for a potential U.S. debt default.
Biden has been winning this PR game, so far. He has exposed the non-credible threats of the Republican party: their insistence on spending cuts while refusing to lay out a spending proposal of their own.
When it comes to the debt ceiling, politicians are not the only ones asleep at the steering wheel. Political commentators, too, seem freakishly calm telling folks that Congress *eventually* has to reach a settlement on raising the debt ceiling. While I don’t disagree with the end-result, it is astounding how few are concerned with the likely government crisis that will unfold before a deal is struck. We are underestimating the power of the Freedom Caucus and overestimating Biden’s willingness to avoid a government shutdown. The cocktail is putting the U.S. on a path towards debt brinkmanship.