People Get Hurt For Real In Pro-Wrestling Too

Good lord, not another post about the debt ceiling

I have been thinking less about politics lately because I’ve been focused on my film, and it has felt great. And no topic is better for making me feel great about not thinking about politics than the debt ceiling, which is kayfabe in its purest form. Yet this perennial fake fight could nonetheless wind up doing real economic harm.

The economic harm from an actual default would be potentially enormous; it’s hard to quantify the consequences of the government doing something so blatantly self-destructive. But even edging close to one can cause the risk premium for government debt, and therefore for all financial assets, to go up, which exerts a drag on the economy. And on a smaller scale, the various games that the Treasury is going to have to play to keep the lights on now that we’ve breached the formal limit all cost money, money that is entirely wasted.

Those congresscritters who are suiting up for battle will claim that the risks and the costs are worth it because future of the country is in the balance. But what is the actual substance of the debt ceiling fight?

The last time I wrote about the debt ceiling I described it as a fight about nothing. At the time, Republicans were refusing to give Democrats support for a clean increase in the debt ceiling and Democrats were demanding bipartisan support for same. Now, Republicans are demanding concessions of some kind on spending to get an increase in the debt ceiling and Democrats are declaring that they will not negotiate with economic terrorists. That sounds like a substantive fight, but in reality it’s still a fight about nothing.

For one thing, Republicans have no idea what concessions they are asking for. They don’t want to cut Medicare or Social Security or the defense budget and they don’t want to specify what discretionary cuts they want either. It is pretty strange to take hostages, threaten to shoot them if your demands aren’t met, and then refuse to issue actual demands. Republicans voted in significant numbers in just the last Congress for bipartisan bills that increased the debt, and now they want to refuse to authorize the issuance of that debt. That’s not an actual dispute about budgetary policy. It’s pure political posturing.

It’s pure political posturing on both sides, though—which is why I say the dispute is truly about nothing. No, the Democrats haven’t taken any hostages. But they had the opportunity to take the hostage away back when they had control of congress. They could have eliminated the debt ceiling then, or raised it to such a large amount that it became practically irrelevant. They didn’t do that because they think this hostage-taking business will end badly for the Republicans politically, and they want to give them enough rope to hang themselves. Taking the responsible approach might have made it easy for Republicans to demagogue them as the party of fiscal irresponsibility, whereas leaving that tar baby out there in the sun for the Freedom Caucus to grab might eventually force the Republicans to discipline them and behave with a modicum of responsibility.

It’s a game of chicken, with nothing to be won but the honor of victory—but games of chicken sometimes end with neither side swerving. Maybe the folks in congress don’t care, but presumably other responsible parties want to prevent a crash. Can they?

Some pundits have enjoyed speculating on how the Treasury might be able to escape the vise of being required to spend but forbidden to tax or borrow, whether by minting a trillion-dollar platinum coin (which would be legal tender but not debt) or issuing very high-coupon debt to replace normal-coupon debt being retired, thereby lowering the total amount of debt as measured by face amount (which is what is actually limited by statute). Maybe those gimmicks would pass legal muster and maybe they wouldn’t (the latter seems largely unproblematic), but they won’t solve the underlying political problem. They’d just kick it down the road—which is fine if all we need is a few months for normal politics to do its work, as Josh Barro suggests, but not so much if we’ve got an actual hostage situation on our hands.

Other pundits have suggested that President Biden should simply declare the debt ceiling to be a violation of the 14th Amendment’s Public Debt clause. It should be obvious that the existence of the aforementioned gimmicks provide the Court ample opportunity to suggest that the debt ceiling was not literally incompatible with America making the payments it is legally obliged to. Unless one imagines that this Court actively wants to help the Biden administration out of a political bind, which seems highly unlikely, it’s hard to see why it would take its side. So whatever the administration chooses to do it might well be slapped down by the Court—and that also wouldn’t solve the underlying political problem.

The political problem can only be solved by congress. And the best way to solve it is for everybody else to ignore it. The financial press probably can’t avoid reporting on the economic consequences of the standoff, and both the mainstream and right-wing press no doubt need to make a living, which means hyping the prospect of a serious crisis. But the rest of us don’t need to play along. We can just ignore the whole show.

Because that’s what it is: a show. If these kinds of shenanigans didn’t get good ratings, then the congresscritters would go back to asking themselves what industry lobbyists want—and while it isn’t hard to find industry lobbyists who support deficit reduction, there’s no business constituency for dysfunction or default. The more clear it is that the American people aren’t paying attention, in other words, the more obvious it will be to both sides that the thing to do is make a deal. By contrast, if Americans are deeply engaged then the costs of compromise go up. GOP firebrands can hold their leadership’s feet to the fire, and their rank and file will know exactly why they are doing it. And the Democrats’ rank and file will too—and will demand no concessions to the hostage-takers. If the leadership of both parties know they can sell any blather to the folks back home as a victory, then they’ll make a deal of some sort and do just that. If they know the opposite—that the folks back home are watching closely and will check to see whether the hype matches the facts—then they’ll have a harder time making a deal, and the prospect of catastrophe becomes that much more plausible.

I’m not suggesting any kind of moral equivalence here. I am suggesting a kind of political equivalence. This fight is being staged for our entertainment, which for the most politically-engaged Americans is what politics is. But the only way for Americans to win this particular game is not to watch.

So I’m going to go back to working on my film, and trust that, by staying ill-informed, I’m doing my part to keep the American government from blowing itself up over nothing. I trust I’ll find out pretty quick if I was wrong.