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Tuesday, May 17, 2011

"Will the US Have a Debt Crisis?"

Simon Johnson:

...Simply put, America will not score an own goal over the debt ceiling – and Boehner must know it. Symbolic gestures are to be expected, as with the threatened government shutdown earlier this year, which merely created fodder for political advertising by both parties. But any manufactured debt crisis now would deeply antagonize the corporate sector – and most of the electorate. In the wake of economic disaster, the party held responsible would presumably be exiled from power for a generation (the Great Depression kept the Republicans from the US presidency for 20 years).
The Republican leadership is making threats that are not credible. If Barack Obama’s administration plays its hand well, the result will be a last-minute extension of the debt ceiling with no significant concessions. It is unclear how Boehner or anyone else would be able to portray that as a political victory.

The key phrase is "If Barack Obama’s administration plays its hand well." Will the administration play its hand well? I am not encouraged by the administration's record (though Robert Waldmann argues Obama deserves more credit than he is getting for his bargaining skills).

    Posted by on Tuesday, May 17, 2011 at 09:45 AM in Budget Deficit, Economics, Politics | Permalink  Comments (54)


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