More bluster from Boehner
House Speaker John Boehner said Monday that an increase in the federal debt ceiling won't get past him and other Republicans without a whopping $2 trillion in budget cuts to sweeten the deal. He's bluffing, as Jonathan Chait explains: Boehner hopes that by playing tough on the debt ceiling, he can force President Obama to make a deal that gives Boehner cover to enact unpopular cuts to Social Security and Medicare.
What Boehner won't do is actually force the federal government to default on its debt. That would be catastrophic for the U.S. and global economies, and the Republicans--with the possible exception of Michelle Bachman--know it. Federal Reserve officials worry that even if the debt ceiling is eventually raised, all the brinksmanship could cause a lot of economic damage of its own. So far this doesn't appear to be happening, but it could.
Like a lot of economic subjects, the debt ceiling is easy to exploit politically in part because it lends itself to voter-friendly analogies that sound great but happen to be exactly wrong. If your personal finances are out of control, one good solution might be to cut up all your credit cards. But if the federal government immediately stopped borrowing money altogether, we would have a nightmare on our hands.
