26th July 2011
Even financial markets are calm.The New York Times put it this way over the weekend, commenting on yet another collapse of a potential deal: "The breakdown of negotiations Friday has jolted that sense of equanimity, wrenching the worst-case scenario from unthinkable to merely unlikely." (See, "Default Seen as Unlikely, but Markets Prepare.")
Yes, "unlikely" – but not for any inability to imagine financial catastrophe. Most people think default would be disastrous, if only because it would dramatically increase the cost of borrowing and that, in turn, would increase the debt. But that outcome just doesn't jibe with our intuitive grasp of U.S. politics. We feel, correctly, it can't happen.
It's not because our governing institutions and political parties will, in the end, put the national interest ahead of their own special aims. It's because our politics have become all about blame, and the risk of being the party stuck with the blame is just too great. This dance is all about determining which party will be seen to be at fault.
Obama has done a brilliant job of positioning himself as the Great Compromiser, willing to give on the issues central to his own party, standing above the fray. In fact he has risked angering many Democrats with his compromises on Medicare and Social Security. I suspect that is why the Republicans walked away from the latest deal. The President would get too much credit for it – and they, in turn, would seem petty by comparison.
On the other hand, the Republicans have positioned themselves as Anti-tax, always a popular position among American voters. Yes, the tea-party extremists need to be accommodated by the Republican leadership of the House, but if a compromise were to fail because they could not agree to raise taxes on the wealthy, the voters would blame them. Ideological purity goes only so far with the electorate.
But, then, if Obama is forced to act without Congressional support – as some say he has the legal authority to do – no doubt the Republicans can then blame him for increasing the debt on his own. He, in turn, can blame them for being unwilling to cooperate, etc.
We need to reach the point where the chances for blame are equal and "fair." Then action is possible.
At this point it is not possible to see the shape of the deal that will ultimately be agreed to in Washington. But it is not too soon to know that there will be one.
More from Ken Eisold here.
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