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Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Monday, August 7, 2017

Kleinbard: The Debt Ceiling Crisis May Remove Remaining Constraints On Congressional Irresponsibility

New York Times op-ed:  The Debt-Ceiling Crisis Is Real, by Edward D. Kleinbard (USC):

Sometime in October, the United States is likely to default on its obligation to pay its bills as they come due, having failed to raise the federal debt ceiling. This will cost the Treasury tens of billions of dollars every year for decades to come in higher interest charges and probably trigger a severe recession.

The debt ceiling is politically imposed, and the decision not to raise it, and therefore to choose to default, is also political. It’s something America has avoided in the past. This time, though, will be different. ...

First, the administration is confounded by inexperience, incompetence and infighting. ...

[T]he second problem: Congress, and in particular the Freedom Caucus. As the health care fight showed, the caucus is fixated on cutting entitlement spending. It has made it clear that if the House leadership balks on their demands for major cuts in the 2018 budget, they’ll refuse to vote on raising the debt ceiling.

Finally, some conservative policy makers besides Mr. Mulvaney have convinced themselves that crashing into the debt ceiling won’t be a big deal because the government can “prioritize” its bill payments, so that interest on Treasury debt will be paid on a current basis, while other bills sit unpaid. ...

Once the unthinkable happens, no future constraints on congressional irresponsibility with regard to the national debt will remain. Prioritization will constitute the intentional subordination, not just of one claim to another, but of all claims to the pettiness of congressional politics. As a result, the once unassailable credit of the United States will become a perennial hostage to politics, and in response the debt markets will demand much higher interest rates.

These are noisy times in Washington. But even in this context, the awfulness of a debt ceiling crisis should galvanize us. Like an impending execution, it should concentrate our minds — now, while something can still be done.

http://taxprof.typepad.com/taxprof_blog/2017/08/kleinbard-the-debt-ceiling-crisis-may-remove-remaining-constraints-on-congressional-irresponsibility.html

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Comments

This article makes me think that there is a high likelihood of default.

The POTUS is a serial defaulter. He actually proposed it as a negotiating strategy during the campaign. So it's seriously on the table.

The Dems have in the past been resistant to being blackmailed on this. I don't think that the prospect that the Republicans hold a gun to their own heads as a means of taking hostages changes that.

Posted by: Jim harper | Aug 7, 2017 12:59:36 PM

Sadly congressional irresponsibility has gone on for so long that it's a matter of degree of how can it get any worse? And they keep finding new depths to plumb.

Posted by: Steve Odem | Aug 8, 2017 2:00:23 AM

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