By Michael F. Duggan
For several months, I had been rolling my eyes at the artificial debt ceiling crisis forced by House Republicans. Then, a couple of weeks ago, as the June 1 deadline loomed in the near distance, a friend of mine asked me if I thought the whole episode smelled like a red herring. His rationale for calling it a phony crisis is that Big Finance and other powerful economic special interests would never allow far-right, populist extremists in the House to spoil their gig. At a certain point, they would pressure their representatives in the GOP, and if necessary, some Democrats, to avert a national default and the disastrous downgrading of the U.S. credit rating that would follow. Now, Treasury Secretary, Janet Yellen, has pushed back the date of default to June 5 (phew!).
The contrived crisis has some curious aspects that lead to rather obvious questions. Why, for instance, are the Republicans doing this now? The answer to this one is especially self-evident: as with the Soviet Union during the Cold War, Republicans have adopted an attitude of “what is mine is mine and what is yours is negotiable.” Thus, in their estimation it was fine to increase the debt ceiling three times during the Trump administration (adding an additional $7.8 trillion to the national debt), but it is also sound strategy to hold the largest economy in the world hostage and to threaten national ruin under a Democratic presidency.
This is not especially surprising; U.S. politics these days is rife with “red button” wedge issues, and propagandistic interpretations of the dustups and skirmishes of the culture wars by both sides. These are designed to keep people mad at each other and to consolidate the bases of the parties. Division is as good for politics as it is for business.
The next question is: why would President Biden negotiate with hostage-takers, given the dismal record of budgetary brinksmanship on the part of those who initiate these bogus crises? The answer to this question is less clear. Delaying or threatening to withhold routine budgetary functions is an occasional Republican tactic, even though it hasn’t work out happily for the hostage-takers in the past, yet here we are, again (what is it Einstein says about people who keep repeating a failed course of action?). One can only wonder what Biden can gain from negotiations and what he might give away.
This kind of artificial crisis falls under a historical category that Daniel J. Boorstin calls a “pseudo-event.” 1 The danger of fake or unnecessary crises is that they can trigger real debacles. Never underestimate human fallibility and our capacity to blunder and miscalculate. Punctuating this tenet of historical realism is the observation that this “crisis” feels different. As smug and self-righteous as Newt Gingrich and later budgetary extortionists were, one sensed that beyond the cynicism was a current of self-preserving sanity or cynicism (and presumably they were under some control of the party establishment). A cynical political hack can be bargained with. A true believer cannot. Thus the danger of the present crisis.
The $31.4 trillion national debt is an existential threat to the United States. When it balloons even further, it may become apparent that the U.S. will never pay it off, and that our economy has become something like a Ponzi scheme, a great machine that exhales more than it inhales. At that point, it is possible that the Chinese Yuan will supplant the Dollar as the world reserve currency in a global monetary system that is already being de-dollarized as the result of sanctions on Russia. But averting an eventual economic collapse by threatening an immediate one is not a rational means for solving the problem. It is theater that could lead to disaster.
I suspect that a deal will be reached sometime within the coming days or week and the government will agree to pay its bills. Perhaps some Democrats will be enlisted to push it through the House.
Note
1), See generally, Daniel J. Boorstin, The Image, A Guide to Pseudo-Events in America (New York: Random House, 1961).
Postscript, May 28, 2023
Hours after I wrote yesterdays posting, President Biden and Speaker McCarthy reached an agreement on raising the budget ceiling. I am still at a loss to explain why Biden agreed to negotiations in the first place. Perhaps it is a part of a strategy to minimize the extreme right in the House by making cuts that he and the Republican establishment agree upon (thus taking some of the wind out of charges of Democratic budgetary irresponsibility).
Anyone who reads this blog knows that I am in favor of crisis diplomacy and negotiations. But the crisis has to be real, and both sides must be acting on good faith. What Biden has taught the other side is that hostage-taking gets you a seat at the table. It also gets you some of your demands. I suspect that we will see more of this kind of bad behavior in the future.