The Economist October 9th 2021 23
United States
Thedebtceiling
Groundhog days
F
or good reason, countries avoid de
faulting on their sovereign debts if they
can. Argentina, Greece and Lebanon can all
attest to the pain of that experience. Amer
ica is exceptional, however. Every few
years, it ends up precariously close to a
partial default, only to yield right before
taking the country’s full faith and credit
(and global markets) over the precipice.
The precipitating events are never eco
nomic, but always political. The most re
cent flareup of this selfdestructive habit
was particularly senseless. And it is almost
certain to not be the last.
The reason is an abstruse mechanism
called the debt ceiling. Since 1917, Congress
has, in one form or another, retained a lim
it on the amount of debt the Treasury can
issue. Because Congress tends to run bud
get deficits, this has needed raising or sus
pension more than 100 times since its in
ception. The only other Western country to
retain a similar debt limit is Denmark,
though it is set much higher than actual
debt and is thus not close to “binding”.
In contemporary America the nearing
of a binding debt ceiling is perversely seen
as a moment of maximal leverage. As the
latest deadline became pressing, Republi
cans in Congress employed the filibuster (a
parliamentary stalling tactic allowed in the
Senate) to prevent Democrats from easily
raising the ceiling. Janet Yellen, the treasu
ry secretary, warned that the federal gov
ernment could be nearing default as soon
as October 18th. The Treasury calls the day
that it no longer has the ability to pay for
both its debt service and essential pro
grammes like Social Security the “xdate”.
Wall Street types cheerily call it the “drop
dead date”. On October 6th, a deal seemed
at hand between stalemated Democrats
and Republicans—who seemed poised to
carry on the game of chicken until the mo
ment of economic cataclysm was nigh—to
push the problem off until December. At
that point, the rigmarole starts up again.
Previous debtceiling fights have been
destructive. In 2011, Republicans brought
the country close to the brink of default in
order to force budget cuts, resulting in a
downgrade to the country’s credit rating
for the first time. Borrowing costs for the
federal government rose by $1.3bn in that
year alone. Another nearmiss came in
2013, when Republicans unsuccessfully
tried to force Barack Obama to defund his
signature healthcare programme. This
time, though, Republicans do not seem to
have any policy objectives.
Before the standoff was put off, Repub
licans were insisting that Democrats trek
around their filibuster using a special pro
cess called reconciliation. This was doable,
though it would have wasted ten to 15 days
of floor time on the Senate in order to com
plete. Mitch McConnell, the Republican
leader in the Senate and the chief architect
of debtceiling standoffs past and present,
had argued against providing any “short
cut” to these procedural hurdles that he
had erected. Reluctant to go that route,
Democrats leapt on Mr McConnell’s later
offer to table the matter until December.
That deal only offers a temporary re
prieve to this maddening cycle. What were
WASHINGTON, DC
Why can’t America quit flirting with financial ruin?
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30 Warfroma distance
31 Lexington: Democratic discipline