In a time that increasingly resembles the Great Depression, Congress shouldn't play politics with raising our debt ceiling
My last post, entitled "The Speech Obama Could Give," was an imaginary presidential address in which Obama announces that if Congress refuses to raise the statutory debt ceiling, he will not observe it, at least to the extent that doing so would require him to default on interest payments on the national debt, suspend payments to Social Security recipients, or withhold paychecks of U.S. troops during Congressionally authorized military action.
The post has drawn some reaction, which I think is a sign of the underlying anxiety people are feeling as Republicans juggle the dynamite of potential default. Emil Henry, a former Bush administration treasury official, calls the ritual of debt-limitation debates a "Kabuki dance." As part of this ritual, my speech was intended to suggest that there are both ramifications and responses to potential default that we may not have foreseen.
As for the consequences, I am a constitutional lawyer, not an economist. But as a matter of common sense, a delay in raising the debt limit may have malign results even if the United States does not technically default on bond-interest payments. I have been reading David Kennedy's Freedom from Fear: The American People in Depression and War, 1929-1945, and I am not sleeping well. The current year seems uncomfortably like 1931, when some brave forecasters still nourished hope that recovery was underway. Shocks to confidence in the nation and the world kept coming, however, until by early 1933 severe recession had become unparalleled catastrophe.