It’s June. Janet Yellen has just announced that the debt ceiling cliff is less than a day away. Biden and the Democrats are refusing, at least in public, to negotiate. McCarthy is whipping his troops as if his job depends on it, which, of course, it does. He insists that Biden will cave if everyone sticks together. Trump and his burn it down allies sit back and enjoy the spectacle, because they figure they can’t lose: either Biden caves and demoralizes his party, or chaos ensues and Biden gets blamed for it. The rest of us just hold our breath and wait on events.
The spotlight turns to a handful of GOP House members from Biden districts. They tell Biden they are willing to lift the debt ceiling, but only if he gives them something that looks substantial in return. Agreeing to get rid of the new IRS agents is thrown out as a possibility. Mitch and most of the GOP senators are in their camp.
What happens now? If Biden stands firm and the GOP splits, Biden wins a huge victory, and the debt ceiling gun is retired once and for all. If Biden gives in to the GOP moderates, the immediate crisis is averted, but the hostage takers get a small reward, and are incentivized to try again later. If no deal is reached and Biden refuses to pay the bills, markets will crash all over the world, the burn it down folks will be happy, and both sides will point fingers at the other. If no deal is reached and Biden continues to pay the bills, the markets will react strongly, but there will be no crash, and the crisis will be contained.
I have predicted Biden will make a deal with the moderates, but let’s be honest here: I don’t know that for sure, and neither does anyone else, including the players in the drama. All I can say is, don’t wake me up until it’s over.