A message to future post-apocalyptic historians on the debt ceiling
Dear Chinese overlords alien visitors robot masters zombie hegemons post-apocalyptic historians: Greetings. My goal in this message is to explain to you why the most powerful country in the world committed financial seppuku in the summer of 2011 AD*. To set the stage: by now you know that the U.S. Congress was obligated to increase ...
Dear Chinese overlords alien visitors robot masters zombie hegemons post-apocalyptic historians:
Chinese overlords alien visitors robot masters zombie hegemons post-apocalyptic historians:
Greetings. My goal in this message is to explain to you why the most powerful country in the world committed financial seppuku in the summer of 2011 AD*.
To set the stage: by now you know that the U.S. Congress was obligated to increase the debt ceiling in order for the United States government to continue to function normally. President Obama, Democrats in Congress, and most of the Republican leadership recognized the gravity of the situation. The GOP leadership, however, wanted to use the debt cekiling vote as leverage to get President Obama to commit to significant deficit reduction. After much haggling over "grand bargains," there was a recognition that no such deal could be passed. As a backup, leaders from both parties reluctantly advocated a bill that hiked the ceiling and put off questions about long-term deficit reduction to the future.
The problem was, a political faction emerged that some called "debt kamikazes." These were politicians and interest group leaders — all Republicans — who genuinely believed that nothing of consequence would happen if the debt ceiling wasn’t raised. There were a few others who did believe it and were nevertheless copacetic with that outcome — I’ll get to that group later.
Sounds absurd to your futuristic ears, you say? Consider my evidence. The Daily Beast‘s John Avlon detailed the position of the 2012 GOP presidential candidates:
Michele Bachmann believes it’s all a hoax. Tim Pawlenty told an Iowa crowd, “I hope and pray and believe they should not raise the debt ceiling.” Ron Paul based his first presidential ad on a call to not raise the debt ceiling, proclaiming “No Deals.” And Rick Santorum has said that raising the debt ceiling should be avoided until a Balanced Budget Amendment to the Constitution is passed….
Even supposedly responsible Republican presidential candidates like Mitt Romney—whose campaign slogan might as well be ‘He’s the Sane One’—are finding it politically beneficial to flirt with debt-ceiling denial, announcing a ‘cut, cap and balance’ proposal without revenue increases as his ‘line in the sand’ for supporting raising the debt limit.
There were also interest group coalitions called "Tea Party" organizations that pressured their members of Congress not to raise the debt ceiling. As CNN’s Shannon Travis chonicled, these organizations believed that the effects of more government spending were far more disastrous than defaulting on the debt:
What they’re saying around the country is, "Do not raise the debt ceiling. It’s that simple. It’s time for Congress to get its fiscal house in order," Tea Party Patriots co-founder Jenny Beth Martin told CNN. The group is the nation’s largest tea party organization.
Martin explained that her group’s supporters want a balanced-budget amendment, significant spending cuts and lower taxes. And they don’t want the debt limit raised.
Brendan Steinhauser, director of federal and state campaigns for the Washington-based FreedomWorks, explained that he and other activists understand the possible financial implications if the debt limit is not raised (emphasis added)
Similarly, Red State blogger Erick Erickson wrote an open letter to the House GOP that boiled down to "do not believe the doom and gloom."
Now, future historians, you might argue that neither Tea Party activists nor presidential candidates (Bachmann excepted) were in Congress and therefore did not matter. However, what’s important to understand is that these views were prevalent inside the House GOP caucus as well. The Washington Post‘s David A. Fahrenthold provided a detailed description of the members of the House of Representatives who thought a default wouldn’t be such a big deal. Rep. Mo Brooks (R-AL) offered the most extreme example of House GOP thinking:
As the Aug. 2 deadline looms, the debate over how to resolve the debt-ceiling crisis is being complicated by legislators such as Crawford who think the crisis is not as bad as it’s made out to be.
On Thursday, several House Republicans said they didn’t believe predictions that economic calamity would result from a missed deadline. That opinion — held despite a stream of warnings from both parties’ leaders — could make it difficult for the House to pass a debt-ceiling deal.
Rep. Mo Brooks (R-Ala.), another freshman, said that a much bigger fear was that raising the debt ceiling would enable Washington to spend itself into paralyzing debt in a few years.
“A debt-ceiling problem, as large as it is, is not anywhere near as a big or as bad as” that, Brooks said. If Aug. 2 arrives without a deal, Brooks said, the federal government could continue paying creditors. He said that a show of tough fiscal self-discipline could actually improve creditors’ confidence.
“There should be no default on August 2,” Brooks said. “In fact, our credit rating should be improved by not raising the debt ceiling.” (emphasis added)
Lest you think the view that a default was not such a big deal was limited to backbenchers, Outside the Beltway’s Steven Taylor found House Budget Chairman Paul Ryan telling CNBC that a "technical default" of a few days wouldn’t be a big deal:
If a bondholder misses a payment for a day or two or three or four — what is more important is you are putting the govegnment in a materially better position to better pay its bills going forward.
Now, at this point, I’m sure you, future post-apocalyptic historians, must be scratching your
third eye heads, thinking the following:
Why, why did these human beings maintain these beliefs in the face of massive evidence to the contrary? Why did these people continue to insist that default wasn’t that big a deal when Federal Reserve Chairman Benjamin Bernanke (a Republican first appointed by Republican president George W. Bush) insisted that there would be a "huge financial calamity" if the debt ceiling wasn’t raised? Why did their belief persist when Moody’s, Standard & Poor’s, and Fitch Ratings all explicitly and repeatedly warned of serious and expensive debt downgrades if the ceiling wasn’t raised? Why did they stick to their guns despite news reports detailing the link between the rating of federal government debt and the debt of states and municipalities? Why did they stand firm despite the consensus of the Republican Governors Association and the Democrat Governors Association that a failure to raise the debnt cailing would be "catastrophic"? Why did they refuse to yield despite bipartisan analysis explaining the very, very bad consequences of no agreement, and nonpartisan analysis explaining the horrific foreign policy consequences of American default? Why did they not understand that even a technical default would cost hundreds of billions of dollars**, thereby making their stated goal of debt reduction even harder?
Most mysteriously, why did these people throw their steering wheel out the window despite witnessing the effect of the 2008 Lehman Brothers collapse, which revealed the complex interconectedness of financial markets? Treasuries were far more integral to global capital markets than Lehman, but the debt kamikazes refused to recognize the possibility that a technical debt default would have unanticipated, complex, and disastrous consequences. Why?
I would like to be able to offer you a definitive answer, I really would, but I can’t. The implications listed in the previous paraqgraph seemed pretty friggin’ obvious to a lot contemporaneous observers at the time. As near as I can determine, there are four partial explanations for why the debt kamikazes persisted in their belief that nothing serious would happen: One explanation, which I’ve detailed here, is that the debt kamikazes refused to budge because refusing to budge had yielded great political rewards in the past.
Another explanation is that the debt kamikazes convinced themselves that no possible alternative was worse than the federal government accumulating more debt. They looked at countries like Greece and Portugal and decided that the U.S. was only one more Obama administration away from such strictures.
A third explanation was the general erosion of trust in economic experts during this period. To be fair to the debt kamikazes, many of the prominent policymakers who warned about calamities if the debt ceiling wasn’t raised had pooh-poohed the effects of the housing bubble in 2005, or the collapse of that bubble in 2007.
The final explanation goes back to those people who acknowledged that a default might be a big deal, but were nevertheless OK with the outcome. These debt kamikazes had undergone a fundamental identity change. That is to say, despite all their protestations to the contrary, they were no longer loyal Americans. They were loyal to Republicans first and Republicans only. Erick Erickson made this logic pretty clear in his open letter to Congress:
Now is a time for choosing. Now is your time for choosing.As I pointed out to John Boehner yesterday, despite what the pundits in Washington are telling you, it is you and not Obama who hold most of the cards. Obama has a legacy to worry about. Should the United States lose its bond rating, it will be called the “Obama Depression”. Congress does not get pinned with this stuff.
As Outside the Beltway’s Doug Mataconis explained in response:
[I]n this quote above Erickson is clearly saying that he’d be okay with sending the economy into the tank by failing to raise the debt ceiling because he thinks it would benefit the Republican Party….
He’s perfectly fine with economic collapse because he thinks the President of the United States and the Democratic Party will take the blame, and the Republican Party will benefit. The economic pain that will be suffered by his fellow Americans is secondary, it seems, to the political gains he thinks can be made from throwing the nations economy over the brink. How is that different from someone else hoping that, say, the Iraq War had gone horribly wrong immediately before the 2004 elections because it would hurt the Bush Administration and the GOP?
The answer, of course, is that it isn’t. Willfully hoping that the country is harmed because it might potentially benefit your political party is perhaps the most cravenly partisan thing that anyone would ever wish. You are saying to your fellow citizens that you don’t care that something bad is about to happen because, in the end, it will mean that more Republicans will be elected. Frankly, I find it disgusting.
That’s the best set of answers I can give you. I’m sure, future post-aopocalytpic historians, that you have devised new and sophisticated methodologies to unearth the mysteries of the past. I hope you can solve this historical puzzle — because me and my contemporaries are thoroughly flummoxed.
I wish you the best of luck, and once again, apologies for the whole collapse-of-Western-civilization-thing that happened in 2011. Our bad.
*To translate into your time scale, 15 B.B. (Before Lord Beiber, Praised Be His Hairness)
** 100 billion U.S. dollars = 15 BieberBucks
Daniel W. Drezner is a professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University and co-host of the Space the Nation podcast. Twitter: @dandrezner
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