Adventures with debt-ceiling politics

By Felix Salmon
May 17, 2011
simply don't believe Tim Geithner when he tells them that if the debt ceiling isn't raised by then, we will have some kind of macroeconomic Armageddon.

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As the debate over the debt ceiling has heated up over the past month, the yield on the ten-year bond has plunged, from 3.57% on April 11 to 3.12% today. This is not a market which fears catastrophe come August 2. So it’s easy to see why Republicans simply don’t believe Tim Geithner when he tells them that if the debt ceiling isn’t raised by then, we will have some kind of macroeconomic Armageddon.

Remember, the House Republicans were told in no uncertain terms — by George W Bush, no less — that if they voted against TARP, that would have equally catastrophic consequences. Bush’s threat was more credible than Geithner’s, and the Republicans in the House were less truculent then than they are now. And even so they voted against TARP.

On the other hand, this kind of thing simply is about as far from responsible lawmaking as you can get:

Dennis Ross, a House Republican and a member of the Tea Party caucus, told Reuters: “I’m not an economist, but I have maintained a household. The federal government owns 70 per cent of Utah, for example. There are federal buildings. If you need cash, let’s start liquidating.”

He wants to sell Utah?

The sensible thing to do, of course, is to abolish the debt ceiling altogether — it serves no useful purpose. It’s “a historical relic,” writes Annie Lowrey, “the budgetary equivalent of the appendix”.

At the same time, however, Ross is absolutely right that the sun is going to rise on August 3.

But here’s what I don’t understand: we’ve already reached the debt ceiling. At this point, Geithner can point at just about anything and say that it’s an expenditure we can’t afford right now, and we’ll have to put it off until the debt ceiling is raised. Why doesn’t he just do that with all Congressional salaries? If the House Republicans had to live without pay between now and when the debt ceiling is raised, that would surely concentrate their minds a bit. And it’s got to be a better idea than the current strategy, which seems to involve Geithner all but begging the Republicans to call his bluff and wait until after August 2 to do anything.

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