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Regardless of what happens to the current budget agreement, the debt ceiling fight is a much bigger deal. Republicans really don’t want to raise it without major concessions, and the stakes are huge, especially since there’s a tiny possibility of a catastrophic outcome (a default).So how will Obama handle this game of chicken?
David Dayen at FireDogLake offers up the liberal dream scenario:
The Republicans should probably have this out with Jamie Dimon. Wall Street doesn’t want to see a stall on the debt limit vote, almost as much as anyone. Treasury actually has some room to manoeuvre to delay the reckoning on the debt limit, perhaps extending the time frame by a matter of months. They can stop payments to the types of vendors that contribute to or have the ability to put pressure on Republicans – for example, defence contractors, or doctors and hospitals through Medicare reimbursements. And a default event, or the threat of one, would wipe out Wall Street, as their bailout supports get kicked out. The strategy articulated by Matt Yglesias is the right one. The White House can just say no to anything but a clean bill for the debt limit, and watch the pressure rise as Treasury stiffs the very people likely to complain to John Boehner and get a meeting.
We’ve heard a lot of people say some version of the notion that, well, big business won’t let the GOP do anything stupid like not raise the debt ceiling. Of course, this rests on the quaint idea that the core of the party listens to Wall Street and big business.
Ultimately, given the way the President has handled the existing fights (the payroll tax holiday, the budget), Obama probably will give a fair amount of ground to get a deal, and Dayen won’t get his dream scenario.