An Observation about the Debt Ceiling Debate

One of the arguments made by the GOP concerning the economy is that a lack of certainty is resulting in lack of spending (and hiring) by businesses.  This argument, which I have not found especially convincing, I must confess, is that the potential for more regulation and taxation has made business skittish and risk averse.  The remedy (at least as I understand it) is purported to be electing Republicans who will lower (or, at least, hold the line) on taxes and regulations.   Now, it seems to me that the problems with the economy are more complicated than that, but fine.

However, I am finding the “it’s the uncertainty, stupid” position to be increasingly hard to take given that the current major strategy of the GOP is to play chicken with the debt ceiling (a position that is creating substantial uncertainty in the bond markets and in the economy in general).   I find it especially hard to take from those who actually want to refuse to raise the debt ceiling (as opposed to those who are just using the deadline as a negotiating tactic) and just to limp along from there (which would create a heapin’ helpin’ of uncertainty).

And yes, the above is an overly simplistic characterization of the situation, but it is the kind of thing I am seeing today from people on the Sunday Shows (such as Mitch McConnell today on FNS).

FILED UNDER: Deficit and Debt, Quick Takes, US Politics
Steven L. Taylor
About Steven L. Taylor
Steven L. Taylor is a Professor of Political Science and a College of Arts and Sciences Dean. His main areas of expertise include parties, elections, and the institutional design of democracies. His most recent book is the co-authored A Different Democracy: American Government in a 31-Country Perspective. He earned his Ph.D. from the University of Texas and his BA from the University of California, Irvine. He has been blogging since 2003 (originally at the now defunct Poliblog). Follow Steven on Twitter

Comments

  1. phreshone says:

    It’s not the “uncertainty”… its the certainty of what the Democrats will do… Small business owners started cutting back in 2008 when it became a high probability that the Dems would control the White House and the Congress…. Tax and Spend was a certainty… (along with the strong signals that Obama made on the stump that energy prices (and thus all costs) would necessarily skyrocket under his administration) And once the Dem’s jacked up Federal spending by over $1 trillion a year, on top of the $.5+1 trillion spent on Stimulus and TARP, everyone knew what comes next…. TAXES… which the Dem’s have been trying to raise since they lost the mid-terms in November. And raising taxes is the dems only play in the debt ceiling, with ZERO movement to normalizing federal spending to pre-2008 levels

  2. sam says:

    ” And raising taxes is the dems only play in the debt ceiling, with ZERO movement to normalizing federal spending to pre-2008 levels”

    Ah, horseshit. See, The Economist, Shame on them: The Republicans are playing a cynical political game with hugely high economic stakes:

    A gamble where you bet your country’s good name

    This newspaper has a strong dislike of big government; we have long argued that the main way to right America’s finances is through spending cuts. But you cannot get there without any tax rises. In Britain, for instance, the coalition government aims to tame its deficit with a 3:1 ratio of cuts to hikes. America’s tax take is at its lowest level for decades: even Ronald Reagan raised taxes when he needed to do so.

    And the closer you look, the more unprincipled the Republicans look. Earlier this year House Republicans produced a report noting that an 85%-15% split between spending cuts and tax rises was the average for successful fiscal consolidations, according to historical evidence. The White House is offering an 83%-17% split (hardly a huge distance) and a promise that none of the revenue increase will come from higher marginal rates, only from eliminating loopholes. If the Republicans were real tax reformers, they would seize this offer.

    Both parties have in recent months been guilty of fiscal recklessness. Right now, though, the blame falls clearly on the Republicans. Independent voters should take note.

    How does anyone deal with a party that issues a report that says, “This is the way to solve the deficit crisis”; the leader of the other party says, “OK, let’s do it “– and the first party says, “No way”.

    Crazy SOBs. As I’ve said before, the House and Senate Republicans resemble nothing so much as a chickenshit Lifetime Channel production of Marat-Sade.

  3. @phreshone: Regardless of what Dems may or may not do (or if they are a good idea or not), the notion that the cutbacks in 2008 were because of a pending Democratic win at the polls ignores a rather small fact: that the Great Recession had already started. I am not an economist, but methinks that that might have had a little something to do with the cutting back of which you speak.

  4. Ben Wolf says:

    @Steven L. Taylor: I expect to see more of phresone’s argument as the election season progresses, a wholesale whitewashing of his party’s role in the Great Recession. And it will probably work, given American voters’ capacity to forget what happened to them ten seconds ago.

  5. Jay Tea says:

    @Steven L. Taylor: Here’s a major source of uncertainty: who will next be the Democrats’ villain of choice and bear their blame for the economy?

    Here’s a partial list of previous “enemies of the state” and their “crimes:”

    Doctors — who perform unnecessary tonsillectomies and amputations on diabetics just to make a buck.

    Medical device manufacturers — who are being taxed heavily to pay for ObamaCare.

    Domestic auto industry — two-thirds of whom were denied bankruptcy and taken under government control, screwing over bond holders (whose rights would have been protected in bankruptcy court) in favor of the unions (a Democratic base constituency). Who the hell in their right mind would buy a GM or Chrysler bond now?

    Las Vegas — whose tourist base was attacked because people in economic crisis shouldn’t “go to Vegas and have fun.”

    Koch Industries — the entire corporate structure is paying for the activism of its founders.

    Corporate jet manufacturers — whose clients are too wealthy and flaunt it too much.

    The uncertainty derives from no one knowing whose turn in the barrel is next. Only that someone new will have to become the newest whipping boy.

    In a case like that, the smartest thing to do is hunker down, try not to draw attention to one’s self, take as few chances as possible, and husband one’s resources until the climate changes. Which, in this case, means “do NOT expand and grow!”

    Simple self-preservation.

    J.

  6. @Jay Tea: So you are arguing that various instances of rhetoric are responsible for the lack of jobs?

    And in regards to the auto industry, you do remember the bailouts, right?

  7. Jay Tea says:

    Steven, I know about the correlation-causation fallacy, but there’s such an exceptional level of correlation in the cases I cited that I don’t worry about it here.

    And the bailouts are precisely what I had in mind. Are you of a mind to buy any GM or Chrysler bonds in the near future, considering that part of the bailout screwed the then-bondholders in favor of the unions? Are you aware that one of the major points of the bailout was to avoid bankruptcy, where said bondholders would have had their rights protected?

    We have a system set up for such cases, and bankruptcy very well might have been better for GM and Chrysler — who are now pretty much right back where they were before the bailout, with unsold inventory levels about the same.

    Time for another bailout? I don’t think there are any bondholders to screw over this time…

    J.

  8. @Jay Tea: I still say that most of what you are referring to is rhetoric.

    And in regards to GM, et al: I think it requires a rather tortured partisan logic to see the policies in question as somehow anti-business/corporate.