Rollover Risk And American Hegemony

The debt limit will be raised. Neither side will get its way.

The U.S. government always raises the debt limit. How else would the debt and the government have gotten so large?

Not raising the debt limit means that the government takes the road to financial suicide. That step would shock its creditors. The government would increase its own debt costs dramatically. Washington is not that stupid.

After this episode, budget-cutters will seek other remedies to narrow the gap between government spending and government revenues. They should have done that last December. They should have started cutting at that time, but they were naive and afraid of losing votes.

The debt limit threat is not a viable threat for either side. Obama has to sign whatever comes to his desk. The Republicans cannot make draconian cuts without some sort of American consensus. They won’t do it.

Obama wants his way in forging such a consensus. He can’t get it. He’s harping on a non-solution, which is tax increases on higher income Americans.

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