Commentary
Let’s get one thing off the table. Putting aside the Biden administration’s fear-mongering, the U.S. government will not substantively default on its debt in June 2023. The game of high-stakes chicken being played right now with congressional leadership will resolve before it is too late. In brief, the administration and Democrat leadership want to raise the debt ceiling, no questions asked. GOP leadership insist, not unreasonably, that there must be spending cuts. The question is, who blinks first? Given the alternative is financial markets armageddon, a compromise will be reached. So everything is fine. Right?
And yet, and yet. This is a critical debate. Financial markets order, economic growth, employment levels, and price stability all hang in the balance. What are the issues at play? Why does it matter whether the debt ceiling is raised, and under what terms?…