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Apocalypse Not: Debt Ceiling Will Be Raised

Apocalypse Not: Debt Ceiling Will Be Raised

By David Paul Kuhn - April 12, 2011

Sen. Kay Bailey Hutchison, a Texas Republican, warned Friday on CNN, "The debt ceiling is going to be Armageddon." White House spokesman Jay Carney chose similar eschatological terms on Monday. "The consequences," Carney said, "of failure to raise the debt ceiling would be Armageddon-like in terms of the economy."

No need to consult Revelation. We are not on the cusp of fiscal end times. Washington politics is unusually dysfunctional even by Washington standards. But it's not suicidal. The debt ceiling will be raised.

Consider Friday's budget deal. The consequences of a partial government shutdown are small bore beside Uncle Sam defaulting. Yet the fear of a temporary shutdown was enough to force an eleventh hour compromise.

Congress will have to decide by May 16, at the latest, whether to increase the amount of money the government can borrow beyond its authorized $14.3 trillion debt. If the debt limit were not increased, the nation would likely default on its debt interest payments by early July (happy Independence Day!).

The United States has not defaulted on its debt since the Great Depression. That streak will continue because it must. Federal Reserve Chairman Ben Bernanke said default would be economically "catastrophic." One of the world's great bond investors, PIMCO founder Bill Gross, put it this way to the Associated Press: "I'm all for a move to a balanced budget over time. But this is like imposing the death penalty for shoplifting." Neither party wants that death on its hands.

In other words, the risk of playing chicken with the national debt is too great to play chicken. We will see verbal brinkmanship. But the debt ceiling will be raised. And this compromise will likely not take us to the eleventh hour because that would significantly disrupt the markets. Republican leaders have proven especially attentive to what irks Wall Street. And "irk" is an understatement for the market impact, if the debt ceiling were not raised until the last minute. You can be sure Wall Street dons have told GOP leaders this much.

On these rare occasions, just enough of our childish lawmakers find their inner adult. We are a shock and awe culture. There is sufficient shock surrounding a potential default to inspire awe.

Americans do oppose raising the nation's credit limit -- or think they do. A recent NBC/Wall Street Journal poll found that only about one in three adults agreed that a debt limit increase was necessary for the country to "pay the nation's bills." But the public also opposed the $700 billion bank bailout. A majority of lawmakers took that difficult step (and it was a far harder vote). In 2008, the economic greybeards said the alternative was a Great Depression. Enough greybeards are offering similarly dark alternatives should the government default. Therefore it will not.

There's an impression that the budget compromise served as a "dry run for looming fights with higher stakes, particularly the debate over whether to raise the limit," as The Wall Street Journal wrote. But the budget deal was actually the harder run. There was far less at stake. Pragmatism won out when the gamble was smaller. It will win out when the economy itself is on the line.

No lawmaker wants to vote to raise the debt ceiling. The party in power is burdened with the dishonor. Obama himself voted against raising the debt ceiling in 2006. Jay Carney said Monday the president regrets that vote. Indeed, Obama can hardly upbraid Republicans for shirking the hard vote this year. But Republicans control the House. Thus they share the burden.

Democrats supplied nearly all the votes when they controlled the White House and Congress in 2009 and 2010. Republicans control in 2003, 2004 and 2006 meant they cast most of the yea votes. But in 2002 and 2007, the parties split the burden because they split power.

Democrats will supply the 50 yea votes in the Senate. A Republican could filibuster (see DeMint, Jim). But there are enough Republicans to break that filibuster because, as with the bailout, the alternative inspires too much awe.

The hunt for responsible lawmakers in the House will prove more difficult. Speaker John Boehner wants Democratic compromise before his caucus splits the debt burden. Boehner may win some concessions. But he will not push this issue to the brink.

Republican budget guru Paul Ryan has tellingly tipped the GOP's hand. The Wisconsin GOP representative recently described his conservative budget proposal as a "cause" not a budget. Yet Ryan clearly distinguishes between kamikaze and cause. The Wall Street Journal's Paul Gigot asked Ryan in January about raising the debt ceiling.

"It's our watch," Ryan said at the National Press Club. "You can't not raise the debt ceiling. Default is the unworkable solution." Gigot followed with this insight: "Phil Gramm once told me that one of his political rules was never to take a political hostage you're not prepared to shoot."

In the end, Uncle Sam's full faith and credit is one hostage no party is prepared to take.

David Paul Kuhn is a writer who lives in New York City. His novel, “What Makes It Worthy,” will be published in February 2015.

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