Most of the coverage of the current debt limit debates that I’ve seen has suffered from what I consider the single greatest problem with mainstream news reporting. It focuses so much on the here and now that larger story lines are overlooked.
Again and again I’ve heard the situation called “crazy” and the politicians completely incompetent. There’s no question that they’re playing a very dangerous game, but I think some of the underlying reasons are quite sane. While both parties agree that the debt limit should be raised (the Tea Party crowd are a lunatic fringe not worth considering to be rational actors here), there is also general consensus that entitlement reform (e.g. Social Security) has been put off for far too long. Arguments that either of these is a partisan issue don’t really hold up; every rational actor in Washington, and every economist, agrees.
The trouble is that entitlement reform is normally impossible for politicians. Anybody who votes for cutting Social Security benefits is vulnerable to outsiders who claim they would have opposed such cuts.
The current “crisis” looks like it’s shaping up to be the perfect (potential) solution. If the only possible way to avoid catastrophic default is to set up a deal guaranteeing major spending cuts, but deferring the details of such cuts until later, and making the default source of cuts entitlements, then everyone can credibly claim that they never supported cutting entitlements at all. When later negotiations to find other cuts fail and entitlement spending goes down, both parties can blame “partisan gridlock” for what happened.
Americans tend to loathe Congress (approval ratings are currently around 20%, with 70% disapproval), they simultaneously like their own congressional representatives (who usually have quite good approval ratings). A “blame the system” excuse is thus a perfectly reasonable re-election strategy, and the most rational approach to passing unpopular but necessary legislation.
Obviously this is wildly inefficient. Obviously it’s a way to end up with cuts that haven’t been thought through (in fact that’s an important part of the strategy). But it’s not crazy and it’s not incompetent. It balances short-term political incentives and long-term national priorities.
Note that I’m not directly suggesting that the rancor is pure theater to cover for Machiavellian back-room dealing. I think the rancor is real, and much of the confusion is real, and the danger of catastrophic economic consequences is real. But there’s a reason (beyond suicidal stupidity) that fiscal conservatives starting wielding the debt limit as a weapon, and there’s a reason politicians will (hopefully) be able to converge on some very unpopular cuts in a last-minute cloud of calamitous panic. There is a way out of this everyone can live with.
Finally, I should point out that my argument above doesn’t mean the process really arrives at something resembling a “moderate consensus”. There’s been a huge amount of collateral damage in the attempt to make any progress at all on the unpopular entitlement consensus, and it’s been inflicted primarily by those on the right of the debate. It’s still entirely possible that the attempt at progress still fails, while the collateral damage still takes place, and the nation really does hit the debt limit. So there will almost certainly be huge amounts of blame to spread around.
I’m just arguing that there’s substantially less pure unadulterated crazy than most of the headlines would suggest.