[P2P-F] McConnell: ‘The debt ceiling will not be clean anymore’

[Kevin Carson]

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.



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