Jonathan Chait offers an insightful look at the politics behind the debt-ceiling fight, including this quote from House Majority Leader Eric Cantor: “The reason this debt limit fight is different is, we don’t have an election around the corner where we feel we are going to win and fix it ourselves. We are stuck with this government another three years.” The consequences for the economy are less examined in the press but serious.
The truth is that the deficit is falling. As University of Oregon economics professor Mark Thoma writes, the real reason the debt ceiling is not being routinely raised, as was done in the past, “is not, of course, a fight about how much government debt we should have.” Rather, it is a battle about “the size and role of government.” But if the dispute isn’t resolved, the Bipartisan Policy Center predicts that sometime between October 18th and November 15th, the Treasury will exhaust its borrowing power. The consequences for the economy, already growing only slowly, will be dire. A default would have world-wide repercussions, as the stock market is already sensing.
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