Why the debt ceiling drama is so hard to gauge
A lot of politicians are going to be talking about the debt ceiling this spring. Ignore them. Their words — a small part of negotiations that are mostly private — should almost never be taken at face value.Conversations about something that globally important should ideally be as clear and transparent as possible. Instead, we're going to face a barrage of half-truths and tactical equivocation.
. But it's a powerful bargaining chip in high-stakes negotiations where neither side has any incentive to be fully honest about their intentions.Congress generally waits until the last possible minute to do a deal, and the same is entirely possible this time around, too. Someone whoa debt default becomes a world-historical malefactor.possible tools it can use to prevent a default.
Normally, bonds decline in price when the risk of default rises. In this case, however, Treasury bonds might actually rise in price, and fall in yield, as part of a flight-to-quality trade during risky times. That's what happened during the last big debt ceiling fight, in 2011.be, by sheer mathematical necessity.
The core of the argument is always the same, and is pure power politics: "Since you need me to do this, I should be able to extract large concessions from you" versus "Since you have to do this anyway, I don't need to give you any concessions at all."The debt ceiling serves no policy purpose whatsoever. But its sheer legislative voltage tends to electrify politicians, making its abolition effectively impossible.
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