The Great Chicken Game on the Debt Ceiling is now moving toward a Constitutional crisis. The major players remain at odds. Some Democratic extremists don’t fear default; some Republican extremists actually seem to welcome it.
While Treasury Secretary Tim Geithner, Federal Reserve Chairman Ben Bernanke, business leaders, and Standard & Poor's trumpet stern warnings, the people’s representatives seem strangely eager to march into the valley of death.
Of possible scenarios, the best, and therefore the least likely, is a $4 trillion+ plan like the proposal of the Bowles-Simpson Deficit Commission. No significant negotiator supports it. All would prefer to hide until the next election, and then pummel each other as “tax-increasers” or “benefit-cutters.”
Another unlikely possibility is the cut-cap-and-amend bill which the House expects to pass this week. The Senate and the president will not accept it.
The most likely outcome is a combination of the McConnell plan with the Biden cost cuts. It is a lost opportunity which leaves the hard choices to someone else later. It would postpone the default, but at a terrible future cost. Delaying a solution to the long term debt/deficit problem inevitably means more painful, and more disruptive sacrifices when the cure is finally applied.
The most unhappy choice would be not extending the debt ceiling. It is unthinkable, but it is possible. It would bring immediate pain and suffering as government operations are shut down, plus the disruptive, painful sacrifices when the problem is solved.
Our Madisonian form of government, where every sizable political force has a veto, requires compromise. Instead, we are witnessing the triumph of ideology over statesmanship. It is not a pretty sight.