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IPFS News Link • Government Debt & Financing

A Minus and Plus for the Debt Ceiling Crisis

• by Moon of Alabama

The New York Times economy columnist Paul Krugman is aghast that the Biden administration had not prepared for the obvious showdown with the Republicans:

As soon as Republicans took control of the House last November, it was obvious that they would try to take the economy hostage by refusing to raise the federal debt limit. After all, that's what they did in 2011 — and hard as it may be to believe, the Tea Party Republicans were sober and sane compared to the MAGA crew. So it was also obvious that the Biden administration needed a strategy to head off the looming crisis. More and more, however, it looks as if there never was a strategy beyond wishful thinking.

[R]ight now I have a sick feeling about all of this. What were they thinking? How can they have been caught so off-guard by something that everyone who's paying attention saw coming?

I am amused over this. Krugman seems to have believed Biden's election campaign talk about being 'progressive' or on the 'left'. Joe Biden was and is far from that. I for one would characterize him as a centrist with strong leanings towards the right.

The fight over the debt ceiling is arbitrary but a chance for Republicans to threaten some damage. The fear is then used to push for domestic policy concessions:

For those somehow new to this, the United States has a weird and dysfunctional system in which Congress enacts legislation that determines federal spending and revenue, but then, if this legislation leads to a budget deficit, must vote a second time to authorize borrowing to cover the deficit. If even one house of Congress refuses to raise the debt limit, the U.S. government will go into default, with possibly catastrophic financial and economic effects.

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