In their ideological zeal, the new Republicans on Capitol Hill seem eager to gamble everything — the financial reputation of the United States, the international status of the dollar, even the chance of a worldwide depression — on a showdown over the national debt ceiling. What has been mostly a routine if unpleasant debate in years past, with each party blaming the other for the nation’s rising indebtedness, is rapidly becoming a mortal threat to economic recovery.
The Congressional Republican leaders, like their counterparts on the Democratic side and in the White House, all understand that the debt limit must be increased — just as they understood the imperative of the bank bailouts two years ago. But that won’t stop them from indulging in reckless rhetoric — or from seeking to take advantage of the situation in ways that could result in dangerous consequences, as they vow to hold the debt ceiling hostage to enormous budget cuts. These veteran leaders appear to have learned nothing since the debacle of 1995, when then-Speaker Newt Gingrich told the bond industry that he would allow the country to default on its debt unless President Clinton agreed to his plans to slash Medicare and other federal programs. “I don’t care what the price is,” he declared.
That was a very different time — and the price of default would be far higher today, in a world where nations and states on the verge of insolvency continuously threaten to scuttle global recovery. Back in the Nineties, the Clinton Administration was able to outwit Gingrich both politically and fiscally, using tactics that preserved the full faith and credit of the Treasury without capitulating to Republican demands. Clinton forced the Republicans to fulfill their bluff. Now the numbers are bigger, the space to maneuver is smaller, the potential downside is incalculable — and the nihilistic ignorance of the Tea Party faction is the dominant attitude within the GOP.
Even the merest prospect of default would be gravely damaging to American prestige and prosperity, continuing the apparent Republican project of hastening our national decline that began with the invasion of Iraq under false pretenses (and the refusal to pay for that multi-trillion-dollar disaster). So it is understandable that the Obama administration would want to find some way to lure the Republicans and their fanatical minions back from taking us all over the cliff.
What the Republicans have hinted they must have in order to release the debt hostage is a package of budget cuts amounting to at least $100 billion this year — or a rollback of spending on discretionary programs (excepting veterans, defense and homeland security) to 2008 levels — and perhaps a deal to destroy Social Security and Medicare as well. They have carefully refused to offer specific cuts that might anger their own constituencies.
No doubt the Obama White House, which too often prefers “bipartisanship” to principled confrontation, will be tempted to make such a deal. The problem is that cutting the budget so drastically will undo the stimulative effects of the December tax-and-spending agreement — and plunge the economy back into recession. The President loses either way.
Perhaps the time has come for the Democrats to adopt a different strategy. Let the Republicans govern, or misgovern. Don’t rescue them from their own recklessness. Don’t vote to raise the debt ceiling unless and until the Republican leadership supports the bill — and if they refuse, let them take the responsibility for the consequences. Let’s see how long they can listen to the screaming of their major contributors on Wall Street as the world economy shudders. Make the hostage takers surrender this time.