Friday, July 15, 2011

Will the debt crisis end with a bang or a whimper?

There are two opposing views of what is about to happen with regard to the debt ceiling crisis.  One view expects a whimper.  The other thinks that the crisis is destined to end with a great big and very ugly bang.

First the Whimper scenario

NBC’s Chuck Todd, Mark Murray, Domenico Montanaro, and Brooke Brower at First Read say the debt crisis will soon be coming to an end with neither Democrats nor Republicans nor Tea Party nuts admitting anything, losing anything, gaining anything or accomplishing anything but agreeing to just call the whole thing off and resume the fight another day.  They write:

[T]he bipartisan debt negotiations are now essentially over. And we pretty much know how this thing will play out, barring a last-minute collapse: It will be a combination of McConnell’s “Hail Mary punt,” Harry Reid’s entitlement and tax commissions, and some level of the agreed-upon spending cuts. (The one outstanding question: Can this get through the House?) If that’s the eventual outcome, then you could argue that nobody won this fight, but nobody lost, either. And both sides have essentially decided to fight another day, which is 2012. To use a historical analogy, it’s the Korean War or Cuban Missile Crisis -- no one won or lost, and the bigger war (the Cold War) is years away from being decided. In this case, the Cold War is the war over the role of government.

So, all the chest beating and saber rattling we have heard and seen over the last few weeks end in both sides retreating to their respective caves to lick their wounds and prepare to fight another day.  A few sober heads put together an inelegant and rather creaky vehicle to carry us forward so that we avoid total disaster, at least for a year or so, until a new election, until a new Congress, without any hope or expectation that very much will change in Washington or in the country for that matter.  No one is satisfied, no wins, no loses, no advances, no retreats, no glory, no shame admitted, no decision made, no deed truly done good or bad, no single thing accomplished worthwhile for the country.

Then, there is the alternative

The other view is that we could have a wreck as Republicans force the rest of us to join them in riding the train all the way off the rails.

The Economists warns that we should not assume that Republicans will agree to end their great struggle to “starve the monster” so easily and that there are eight valid reasons to doubt whether the Theory of Inevitable Compromise, in which each party gives up a bit fearing that voters will punish whichever proves most stubborn, is true.

First, for the theory to work, both parties need to believe that failing to raise the ceiling will trigger a default and the “huge financial calamity”…John Boehner, the House speaker, is a believer, but the freshmen who bobbed into Congress last November on a tidal wave of tea are not.

Second, the Republicans are divided among themselves. The party’s leader in the Senate, Mitch McConnell, has aired a convoluted last-ditch plan…Senior Democrats have welcomed the idea, but Eric Cantor, the Republican majority leader in the House, has not.

Noises off are the third problem. Outside Congress, the Republicans’ presidential wannabes are taking up their starting positions for 2012. Craving power but not yet possessing it, these hopefuls are not constrained by responsibility

Fourth, the Theory of Inevitable Compromise holds that fear of the voters will push the parties together. But which voters? Candidates in the general election of November 2012 would not want to be thought reckless. That election, however, is an age away. Republican candidates and the new House members are now fixated not on voters in general, who want the parties to co-operate, but on the more ideological ones who will vote in the primaries.

[F]ifth, the theory assumes that voters understand what the debt ceiling is. This assumption is almost certainly false. Many are under the misapprehension that it is a vote to authorize new spending, not permission to pay the bills that this and earlier Congresses have already run up.

The sixth argument against the Theory of Inevitable Compromise is the virtual impossibility in today’s polarized America of shaping a consensus.

Seventh, the listless state of the economy makes it hard for politicians of both parties to do the hard things that are needed to reduce the deficit.

Last, and most important, both sides have made a stand on principles that will be hard to abandon without losing face.

So there you have it.  Could be in the next week or so all of the noise we have being hearing about a debt ceiling crisis will just fade away to a whimper of discontent.  Or, all the faith that cool heads will prevail and that Washington will find a way to avoid a national economic disaster will prove to have been just wishful thinking and the skeptics will be proven right when they claim that Washington is now totally dysfunctional and that the country has finally and totally lost its way. 

Hope that the folks at First Read are right and that the folks at the Economist are wrong..hell, don’t just hope, pray they are.

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