There's an interesting analogy here to Peak Oil. Those who say high oil prices are the result of "above ground" factors like speculation rather than declining rates of extraction miss the point: rising speculation, terror attacks on pipelines, etc., are all secondary epiphenomena of the declining rate of extraction. The less elastic supply becomes, the more it becomes in someone's interest to leverage that inelasticity by attacks on supply. The less elastic oil supply becomes, the higher the ROI on terror attacks on pipelines and other obstructions of supply. Likewise, the closer states approach to fiscal exhaustion, the more leverage can be extracted by threats of default. Sent to you by Kevin Carson via Google Reader: McConnell: ‘The debt ceiling will not be clean anymore’ via Ezra Klein by Ezra Klein on 8/2/11 The most honest man in Washington did some more truth-telling on CNBC last night. Speaking to Larry Kudlow, Mitch McConnell made perfectly clear that the hostage situation we just went through wasn’t a one-shot deal. It’s the new normal: What we have done, Larry, also is set a new template. In the future, any president, this one or another one, when they request us to raise the debt ceiling, it will not be clean anymore. This is just the first step. This, we anticipate, will take us into 2013. Whoever the new president is, is probably going to be asking us to raise the debt ceiling again. Then we will go through the process again and see what we can continue to achieve in connection with these debt ceiling requests of presidents to get our financial house in order. Previously, I’ve compared the debt ceiling to a bomb ticking away at the base of the economy. We don’t much notice it because it’s always been there and, despite a couple of close calls, it’s never gone off. But that doesn’t mean it won’t ever go off. Particularly if these sorts of showdowns become the norm. And even if it doesn’t go off, Congress’s decision to make the risk of default more visible might well be enough to scare the markets. If you were an investor, would you want to put your money in a country that regularly held bitter partisan brawls over whether you would be paid back? Or would, say, German bonds begin looking like a comparatively better bet? We have an increasingly polarized country. We have an increasingly dysfunctional Congress. One way to respond would be to make it easier for Congress to operate in a partisan manner and to work to reduce the risk that gridlock and grandstanding could harm the country. But that, of course, won’t happen, as the people who could rewrite the rules are part of that dysfunctional system, and answer to our increasingly polarized political parties. And so we’re raising the stakes rather than lowering them. We’re setting up the exact sort of catastrophe we should be laboring to avoid. Hearing McConnell’s comments last night, economist Jared Bernstein was shocked. “This is not the way of great nations,” he wrote. I disagree. The political system that doesn’t modernize and eventually finds its vulnerabilities exploited by interest-group pressure, internal divisions and reckless politicians? This is certainly the way of great nations. It’s the way they fall. Things you can do from here: - Subscribe to Ezra Klein using Google Reader - Get started using Google Reader to easily keep up with all your favorite sites