When did you stop worrying about the latest debt ceiling dust up?
Was it a “nail-biter” for you until June 3, when President Biden uncapped his fountain pen, signed the Fiscal Responsibility Act of 2023 into law, and narrowly avoided “a devastating default”?
Or maybe you had been pacing nervously until the Senate passed the bill two days earlier, averting a “calamitous” default by beating back insurgents who grumbled that the deal shortchanged the Pentagon?
Maybe you stopped pacing the floor May 31, the day the House approved the bill by a wide, bipartisan margin, avoiding a “catastrophic” default by overcoming fringes on the left and right who apparently would have derailed the legislation.
Perhaps you had been confident ever since May 28, when Democratic and Republican negotiators, led by President Biden and House Speaker Kevin McCarthy, agreed to the compromise that eventually became law, or the day earlier, when McCarthy said he and the President had agreed “in principle” to raise the debt ceiling.
But maybe you were comforted long before that, back in April, when McCarthy ventured to lower Manhattan for the express purpose of publicly reassuring Wall Street and the financial world that “defaulting on our debt is not an option.”
Or maybe, like me, you were never worried and consider the entire fiasco yet another demonstration of the apparently limitless capacity of the media and the political class to turn anything into a breathless, life-and-death partisan struggle.
This was an entirely manufactured crisis, the ultimate result of which was never in doubt. Despite the incessant hyperventilating, there was never a serious risk that 2023 would be the first time in history the United States couldn’t pay its bills. At the margins, the federal budget is always the subject of intense political negotiation and compromise—that’s what divided government means—but some of the largest structural components of the federal budget were never seriously in play, including Social Security, Medicare, and military spending. And McCarthy quickly relented on GOP threats to most discretionary spending, including cuts to Medicaid, which follows a broader trend in Republican states.
At the same time, there is an overwhelming elite consensus that the United States cannot be allowed to default on its debt. The economic and psychological consequences, and therefore also the political risk, are thought to be too catastrophic even to entertain the notion. I’m not saying this consensus is correct; I think it is but I’m not an economist and don’t specialize in this area. But the prediction of catastrophe doesn’t need to be true to be influential; it only needs to be widely shared by those whose voices are trusted, and that is undeniably the case when it comes to the fallout from a default. Very few serious thinkers accept default as a genuine option.
Taken together, this combination of a largely untouchable budget and an elite consensus about the danger of default meant the whole fracas was—and was always going to be—a whole lot of foot-stomping and pot-banging but nothing more, all of which was abetted and encouraged by a media hopelessly addicted to blame and crisis. As William Gale, a senior fellow in economic studies at the Brookings Institution aptly put it, “the ratio of political theater to economic change in this discussion is enormous. The economic change is just not very big relative to the baseline. It’s relatively close to the status quo.” The insignificance of the imbroglio is the best explanation for why the whole affair, which only yesterday sucked every last molecule of oxygen out of the public square, has now completely disappeared from the news.
Everyone should draw their own lessons from this made-up mess, but here’s my takeaway. First, and this is true as a rule, don’t believe the hype. What most pundits and journalists call a crisis, isn’t. It doesn’t mean there are no emergencies. Climate change, for instance, is a global emergency, which helps explain why McCarthy also relented on GOP threats to Biden’s green energy tax incentives. After all, they disproportionately benefit Republican-led states. But calling it a crisis, a looming catastrophe, or an imminent disaster doesn’t make it so.
Second, if we understand the structural forces that make crisis-speak so irresistible, we are less apt to be sucked into its vortex. Fear and rage are among the most powerful human motivators, which means that businesses dependent on viewers, readers, and clickers will always be drawn to hyperbole. Even as the debt ceiling fiasco unfolded, Slate ran a story with the ominous headline, “The Ticking Time Bomb in America’s Downtowns.” The bomb? It seems the owners of some office buildings are underwater on their mortgages.
But the allure of crisis-speak is not explained simply by the media business model. For politicians in a divided land, there is great value in preserving a condition of perpetual emergency that can be blamed on your political opposite. Politicians, in other words, often get more from preserving a crisis than by fixing it. The debt ceiling is a perfect example of this idiocy.
In November 2022, when Democrats still controlled the House and Senate, Treasury Secretary Janet Yellen urged Democrats to raise the debt ceiling precisely in order to avoid the ruckus that just concluded. If Democrats had viewed the debt ceiling as a genuine threat to the economy, presumably that would have been the perfect time to do something about it.
They demurred. Of course, they did. Had Democrats unilaterally raised the debt ceiling (no Republican would’ve voted for it), they alone would have been responsible for the debt and would’ve handed the GOP a cost-free campaigning point. The very suggestion was ludicrous, and if Yellen was serious, then she doesn’t understand politics.
On the other hand, by waiting until the last minute—that is, by courting the “crisis”—Democrats get to paint Republicans as heartless bastards and economic saboteurs. Since the ultimate outcome was never in doubt—the U.S. was never in fact going to default—why would Democrats pass up this opportunity? Why not force Republicans to share in responsibility for the debt? And though they couldn’t have predicted in November how the negotiation would eventually unfold, in the end Democrats can say they beat back Republican threats to Medicaid, green energy, and most discretionary spending, all of which are broadly popular with voters. Compared to resolving the crisis in November, preserving it until June ended up being a huge win for Democrats.
And that brings us to the most serious problem with pinballing from one manufactured crisis to another. Secretary Yellen is absolutely right: We should eliminate the debt ceiling; that’s the best moral and economic policy. Instead, every few years and for no good reason, we waste inordinate time and energy fighting a pointless battle, the outcome of which is already known to insiders before partisans ever grab a microphone. No one benefits except politicians who get to point fingers and publishers who get to fan flames.
And of course, what is true for this particular debate is true for much of what takes place in politics today. The nation has problems aplenty, which we are structurally induced to preserve and enflame rather than solve. Meanwhile, it’s on to the next crisis.
