Arnold Kling  

Gridlock vs. Compromise on the Deficit

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Reihan Salam writes,


Suffice it to say, the thought of Chinese military officials deciding on how large a military the U.S. is allowed to retain is a sobering thought.

But that, alas, is a foreseeable outcome from the brand of rejectionist politics that has captured the imagination of a growing number of Americans on the right and the left, and which is fueling Newt Gingrich's success in this year's presidential campaign.

Political gridlock is the main theme of the five papers that were written about the prospects for a U.S. debt crisis and that appeared in Econ Journal Watch. All five of us see a debt crisis, if it comes about, as resulting from gridlock.

Ordinarily, advocates of limited government say that gridlock is our friend. But four out of the five of us see it as our enemy right now. The exception is Jeffrey Rogers Hummel, who looks at the bright side of a default. It would truly "starve the beast," because borrowing costs would become prohibitive in the absence of credible commitment to maintain something much closer to a balanced budget. It is an interesting point of view, but I cannot say that I am persuaded that other things will remain equal (what if a default causes an American version of Hugo Chavez to emerge?).

Unlike Reihan, I do not see this issue as affecting my views on the Presidential election. For one thing, I am not sure which electoral outcome is most likely to overcome gridlock on the budget. And I am not even sure that Hummel is wrong. If you want election commentary, instead of looking to me, I recommend Will Wilkinson's take.

Reihan and I hope to record a video conference with two of the other authors later this week. Hummel appears to be unavailable. Nick Schulz should be back joining us.


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CATEGORIES: Fiscal Policy



COMMENTS (3 to date)
Shayne Cook writes:

Arnold:

I watched your video with Salam and Jones a few days ago - thank you for those, by the way.

But I'm not convinced there is as high a probability of default as you postulate. I think the probability of a default event is quite low. And the reason I think that is due to the composition of the current Treasury debt holders - specifically the largest Treasury debt holder (by far). And he declared just yesterday that he won't be demanding a higher interest rate until late 2014.

But I'm in full concurrence with your stated detrimental effect - "Hugo Chavez"ism, for lack of a better term. I'm afraid that particular detrimental effect is already alive and well, completely absent a default event. Except I call it TARPism. Conceptually, operationally and in-effect, TARPism and "Hugo Chavez"ism are identical, by the way.

Thomas Sewell writes:

How do you convince the Democrats in the senate to agree to pass a budget, even when the budget is politically bad for them?

Your best bet for ending gridlock is for Obama to lose along with enough Democratic Senators to enable the Republicans to push through a budget.

The opposite (returning to Democratic control of Congress) is much less likely, with the ratio of Senate seats up for grab this year.

Joe Cushing writes:

A default would be good for unborn children but not for us. Sure government would be forced to get smaller but we would be forced to pay for the largess of my parents and grandparents. I suspect a default would lower our standard of living for at least 10 if not 20 years--as we get less handouts from the government contributing to our well-being but have to pay the high taxes as if we were receiving handouts.

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