Skip to content


Debt Limit Chicken

Professor Bainbridge takes a game theory approach, wherein the Republicans must persuade the Democrats that they really are crazy enough not to raise the debt ceiling, barring serious spending cuts.  Last time, given the election schedule, I thought the deal was defensible.  But Bainbridge’s reasoning now is sound:

So there are the GOP’s choices:

  1. Give Obama his way on the debt ceiling, in which case the USA accelerates towards becoming Greece and the GOP become pointless as a political party.
  2. Fight but cave, as they have done so often, in which case the USA accelerates towards becoming Greece and the GOP become pointless as a political party.
  3. Find a way to throw the steering window out of the window of their car.
  4. Convince Obama that they really are crazy (like a fox).

In the long run, options 3 and 4 are not just brave politics but also good economic policy….

The last time we went through this exercise, I counseled the GOP not to play chicken with Obama. But when facts change, I change my opinions. It’s become clear that Obama and the Democrats cannot be trusted to cut spending. It’s become clear from what Obama and Schumer are saying that the Democrats are going to insist on turning the debt ceiling into a chicken game.

The Republicans have been forced into playing chicken over the debt ceiling, The only question now is whether they will swerve first. For the sake of the country, I hope not.

This isn’t just a matter of Boehner being weak or strong.  The President and now Chuck Schumer have been talking awfully big recently.  It’s a question of the Republicans being willing to be strong on this long enough to make the Democrats go along with cuts, or even propose some of their own, as part of the “for the good of the hostages country” pose they’ve already taken.

 

Posted in Economics.

Tagged with .