Shutdown is Dead. Long Live Default!

First the good news.  The House passed the budget with a strong bipartisan majority.  That means there will be no further government shutdowns until after the 2014 election.  It also relaxes the sequester somewhat and should have modest benefit to the economy.  In further good news, the economy is looking up, although we have all heard this story before and should know better than to get too excited over it.

The bad news is that the debt ceiling was not included in the deal, so we are still set up for a showdown over that sometime early next year.  During the last showdown, while the Tea Party wing of the Republicans demanded a government shutdown, the "moderate" faction urged them to hold out for now and have their showdown over the debt ceiling, even though a debt ceiling breach was much more harmful that a shutdown. The reason for that appeared to be twofold.  One was nakedly (and short-sightedly) political -- government shutdown polled badly.  Tying a debt ceiling increase to deficit reduction polled well.  That refusal to raise the debt ceiling could have disastrous results was presumably not well-understood by most Americans, although moderate Republicans in Congress almost certainly did understand it.*  The other reason appears to have been that some Republicans were unwilling to raise the debt ceiling under any circumstances whatever, so presenting it as an opportunity to extract a major ransom was an attempt to get Republicans to agree to raise the debt ceiling at all.

For that reason, I favored a shutdown.  My calculation was simple.  Shutdown and default were just over two weeks apart, with shutdown happening first.  Their proximity would inevitably link both events in voters' minds, so that resolving one could easily be associated with resolving the other.  That would give Republicans cover to raise the debt ceiling because most people would confuse it with ending the shutdown. One of the most important concessions Democrats gained in the last standoff was extending spending until January 15 and extending the debt ceiling until February 7.  That ensured that if no deal was struck, shutdown would again precede breach, so the two would be linked in most voters' minds and could be resolved together.

Now a debt ceiling showdown is again looming, with no shutdown in sight.  The two will not be linked in voters' minds because there will be now shutdown.  So we get to play politics with the nation's credit rating once again.  Wheeee!!!

In averting the soonest crisis, Congress might just have made the next one worse.

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*The desire to have a really valuable hostage may also have been a motive there, but I am inclined to give Republicans at least a little benefit of the doubt here.