Speaking to reporters at the White House, Press Secretary Jay Carney quoted from a letter written by the president to members of Congress. The consequences of defaulting on the government’s debt, the president wrote, “are impossible to predict and awesome to contemplate.”
It was a sobering judgment, all the more so since the president it came from was not Barack Obama but Ronald Reagan [pdf], the hero of Republican lawmakers who are still threatening to test his dire prediction.
The deadline for raising the debt limit is August 2. After that, the federal government will no longer be able to meet all its obligations. Either it will have to stop sending out Social Security checks and Medicare payments or it will have to stop repaying its creditors. So Reagan was half right: the consequences of default are not entirely impossible to predict, but they are indeed awesome to contemplate, and awful. In the United States, some of the unemployed, the disabled, or the retired might be left without support, while bond markets throughout the world would be thrown into a panic.
In return for not letting this happen, Republicans are demanding another round of deep spending cuts—enough to offset the proposed increase in the debt limit. They’re willing to negotiate with Democrats about which programs to cut (though the Pentagon is apparently off-limits), but they won’t discuss any kind of increase in revenues. It isn’t just tax hikes they’re opposed to. They also refuse to eliminate tax deductions for the wealthy and tax credits for oil companies. In truth, they are only incidentally interested in balancing the budget; the real point is to shrink it. This seems to leave the president and his party with only two options: either let the Republicans reduce spending at a moment when the economy needs all the help it can get, or watch as the most needed spending comes to a painful halt.
The compromises required by democracy often involve some brinkmanship. But many are now worried that the Tea Party has taken possession of enough Republicans to drive the whole party—and with it the country—over the brink. The Treasury Department is worried. The Fed is worried. Wall Street and even the Chamber of Commerce are worried. Brinkmanship is one thing, extortion another. It’s unlikely that most Republican politicians really believe spending cuts would help the economy more than defaulting on our debt would hurt it, but it’s beginning to look as if at least some of them wouldn’t mind seeing the economy continue to limp if it would help them win back the White House and the Senate in 2012. They’re confident voters will blame the president for whatever happens until then. The only constituency the GOP is sure it needs to help before the next election is the one that fills its campaign coffers.
Faced with this intransigence, what can President Obama do? He should start by taking his case to the American people. This is a perfect moment for the president to step into the bully pulpit, a moment when he might be able to persuade most voters simply by informing them. Polling shows that more Americans oppose raising the debt ceiling than favor it, but polling also suggests that many Americans don’t understand what the debt ceiling does. If they knew it would prevent the government from making good on its current commitments, there would likely be broad support for raising it. And a big enough shift in public opinion might force the Republicans to consider a real compromise. If not, a couple of weeks of post-default disarray would probably scare the obstructionists out of their trenches (as the fallout from their refusal to vote for a bank bailout did in 2008). Once elderly voters stop getting their checks, they’re likely to become less tolerant of the GOP’s defiance.
Finally, the president might also consider ignoring the debt ceiling and just order the Treasury Department to continue paying the government’s bills. Several legal experts, including Jonathan Zasloff of the UCLA School of Law, say it’s unlikely the courts would get in his way. The debt ceiling has always been a device of doubtful constitutionality. Once the legislative branch decides how much money the government will spend, it’s the executive branch’s job to make sure the money gets spent, no matter how much of it has to be borrowed. If Congress wants to cut the deficit, it doesn’t need to set itself an artificial limit; it needs to spend less, raise taxes, or both. After all, most of the nation’s $14.4 trillion debt is the result of policies Republican lawmakers voted for: the Bush income-tax cuts, an unfunded Medicare drug program, and two expensive wars. If you want a low ceiling, you don’t build high walls. If you want less debt, you borrow less.