Republicans Holding America Hostage with the Debt Ceiling

Today the United States expects to hit the debt ceiling currently set at $14.3 trillion as mandated by the US Congress.  While there have been a lot of attempts to fully explain what the debt ceiling actually is, the simplest answer is that the amount of debt that the US Treasury can legally accumulate through borrowing is fixed by Congress through legislation.  After hitting the ceiling the Treasury can get a hit of extra leeway through finessing a few hundred billion dollars extra, but Congress must pass a bill expanded upwards the debt limit for the American federal government.  If they fail to do so, the United States will default on its debt and all kinds of economic nastiness will occur.

With that in mind, the Obama Administration is now facing a game of Russian Roulette with the Republicans and some Democrats in Congress, who apparently are going to use the crisis-like urgency of the current situation as a  means of forcing through significant spending cuts in exchange for their votes.  The debt ceiling has been the subject of a lot of posturing in the past, but as Matthew Yglesias notes here, those episodes never involved the holding of the country's financial health hostage as a means to extract policy on the part of politicians in Congress.

What I'd add is that this constitutes a classic episode of Kleinian shock doctrine.  Use a crisis of some sort, in this case the reaching of the debt ceiling, as a means of passing radical market reforms to the economy over the heads of the mass of the American people.  After all, the urgency in which decisions have to be made naturally precludes much involvement from the citizenry, direct or indirect; hence this is the perfect moment to undertake a market fundamentalist's wildest dreams.

Conceding to the Republicans in this case could potentially create a precedent for the usage of the debt ceiling in the future as a political weapon.  President Obama and his Democratic allies on Capital Hill have to hold firm against the desires of the Republicans and the moral weakness of some Democrats to implement structural changes to the fiscal policy of the US Government.