Why We are Closer to Default Than You Think
President Biden is doing everything he can, but the conditions that fostered solutions in the past are no longer
The debt limit crisis is closer than anyone imagined. Last week, Treasury Secretary Janet Yellen sent a letter to Speaker McCarthy that read:
After reviewing recent federal tax receipts, our best estimate is that we will be unable to continue to satisfy all of the government's obligations by early June, and potentially as early as June 1, if Congress does not raise or suspend the debt limit before that time.
In other words, the United States of America could run out of cash in less than a month. This is not fear-mongering from the Biden Administration to pressure Congressional Republicans to do their job. The Congressional Budget Office concurred with Yellen’s estimate.
Later today, President Biden will meet with Congressional leadership to discuss the debt ceiling and the dangers of default. Not much is expected to come out of that meeting.
This is the third time in twelve years that a Republican House majority has tried to use the debt limit to extort a Democratic president into adopting unpopular policies that the GOP failed to enact through normal political means.
I worked in the White House during the last two extortion attempts. Both times, default was avoided. But just barely, and with real damage done to the economy. Default was avoided in the past, and that optimism has colored the coverage of this crisis. Most of the press and political observers assume that somehow, some way, people will come to their senses before the first-ever default in U.S. history.
I’m not so sure.
The conditions that fostered solutions in the past are no longer. Here’s why this is the most dangerous debt limit battle yet.
The McCarthy Problem
Kevin McCarthy is drowning. He has no plan, no principles, and no idea how to get out of the mess he created for himself. Obama dealt with John Boehner in 2011 and 2013. Boehner was a vulnerable leader with limited control over his unruly caucus of self-proclaimed Tea Partiers, but McCarthy makes Boehner look like LBJ on steroids.
Boehner knew default would be a disaster for the country and his party. He kept an open channel with Obama, tried to steer his members, and landed the plane without too much damage. Boehner’s strategy aimed to hold the middle and sideline of the Far Right of his party. McCarthy’s strategy is the exact opposite — empower the extremists at the expense of everything else.
McCarthy serves at the mercy of people like Marjorie Taylor Greene, Paul Gosar, and Matt Gaetz. Any one of them could end his reign as Speaker by calling for a vote of no confidence. McCarthy cares more about keeping his job than helping his country or even his political party.
Read this anecdote from the New York Times and tell me if you feel comfortable trusting the global economy in this guy’s hands:
A person familiar with Mr. McCarthy’s thinking compared his strategy to an episode of “Seinfeld” in which George Costanza decides to do the opposite of his instincts and routines. Whatever Mr. Boehner did, the person said, Mr. McCarthy would do the reverse.
Kevin McCarthy is just dumb and narcissistic enough to stumble ass-backward into blowing up the global economy.
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