The end game on the debt ceiling

What happened

Fierce negotiations on how to hike the $14.3 trillion debt ceiling were set to go down to the wire as The Week went to press, with just days remaining before the government runs out of cash to pay its bills. Talks between President Obama and House Speaker John Boehner (R-Ohio) broke down last weekend, leaving two proposals from Capitol Hill as the only options to avoid default under discussion. One plan, proposed by Senate Majority Leader Harry Reid (D-Nev.), set out to reduce the deficit by $2.7 trillion over 10 years and raise the debt ceiling to last through the 2012 elections. The other, drawn up by Boehner, aimed to cut spending immediately by $1.2 trillion and raise the debt ceiling only until February. Neither one calls for tax increases, and both would create a bipartisan committee to identify further spending cuts. Some House Republicans said Boehner’s proposal doesn’t cut deeply enough, and Reid said it would be “dead on arrival’’ in the Senate. But Reid’s approach faced stiff resistance, too, leading some to suggest that the best hope lay in melding the two plans together. “The commonality is pretty apparent between the two different proposals,” said Sen. Jon Kyl (R-Ariz.).

President Obama, who could not convince Republicans to back a $4 trillion “grand bargain” of tax cuts and revenue increases, used a national TV address to plead with the GOP to put aside “pride and party” and compromise with Democrats before the Aug. 2 deadline. “The entire world is watching,” he said. In a televised response, Boehner accused the president of demanding a “blank check” to carry on irresponsible spending. “That is just not going to happen,” he said. The prospect of imminent default caused an anxious stock market to fall throughout the week.

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What the editorials said

The country deserves more from its president than political theater, said The Wall Street Journal. That’s all voters are getting from a leader more concerned about the 2012 elections than the country’s fiscal health. Obama used his speech to shift the blame to the GOP if the country slides into default, even though it was his “spending blowout” that got us into this mess. Only the Republicans are serious about getting us out of it.

It was actually the GOP that “ignited this artificial crisis,” said The New York Times, by holding the U.S. economy to ransom. The Democrats have bowed to the Republicans’ every demand, but not even Harry Reid’s “last-ditch surrender” will satisfy them. The contents of the deal have nothing to do with it; it’s the very idea of compromise that they can’t stand. Now, we’re exactly where the GOP wants us—on the “brink of ruinous default.”

What the columnists said

It’s worth looking at how this began, said Felix Salmon in Reuters.com. It dates back to 2001, when George W. Bush squandered Bill Clinton’s “hard-earned fiscal rectitude” on tax cuts. Since then, no Republican or Democrat has worked to shrink the deficit, creating a “vicious dynamic” in which both parties are happy to spend but reluctant to tax. That was bound to “end in tears sooner or later.”

Prepare to shed them now, said Simon Johnson in Slate.com. A government default next week “would destroy the credit system as we know it,” crippling the private sector and causing a run on banks as people desperately withdraw their savings. But we don’t need to default, said Charles Gasparino in the New York Post. Even if the debt ceiling isn’t raised, investors know the Treasury will make essential bond payments and “hold off on sending other checks” until Congress reaches a deal.

Whatever happens next week, said James Surowiecki in The New Yorker, we should abolish the debt ceiling. It’s an anachronism that rewards fanaticism over responsible budgeting. Our economy has enough problems without ones we’ve “created for ourselves.” The damage has already been done, said Jonathan Chait in The New Republic. The GOP has exposed a glaring fault at the center of our political system by demonstrating “the vast power available to an opposition party willing to deploy it.” What’s frightening is that such indiscriminate blocking actions will become a “regular feature of American politics” for many years to come.