Krug gives the clear headed, but unfortunate news that the GOP will not allow a debt ceiling increase because the teabags who call the shots would feel “disrespected” and walk away utter losers – something they are not willing to do. Also – President Obama will not budge on the debt ceiling because our system of government is at stake. So…
As the date approaches, the markets will start to freak out.
The assumption has been that Republicans will finally be moved to act by the market freakout. But given their behavior so far, why would you believe this? I can easily see Ted Cruz making a speech declaring that the freakout is all Obama’s fault, and that what the markets really fear is socialism or something — and the base believing it.
My bet now is that we actually do go over the line for a day or two. And what ends the immediate crisis is not Republican action but a decision by Obama to declare himself not bound by the debt ceiling. He can’t even hint at this possibility until the thing actually happens, because he has to keep the focus on the Republicans, and he has to make them demonstrate their utter irresponsibility before he can take any extraordinary action.
But maybe I’m wrong; maybe Obama’s lawyers have concluded that there’s really nothing he can do. If so, God help us all.
I buy all of that. The GOP isn’t moved by “pressure” because the are so throughly cocooned in a wingnut thought bubble that they actually think they are “winning” this thing. Rand Paul recently told CNN that a “managed” default in which we prioritized payments to Chinese bondholders wouldn’t even hurt the country because we could just tell our others creditors that we are good for the debt. They are not bound by reality.
As for the President’s lawyers – I trust that they’ll have the appropriate arguments at the ready.