Wednesday, September 25, 2013

Jack Balkin — Shutdown versus default

If we hit the debt ceiling and run out of money, uncertainty will reign supreme, people will go crazy, and markets will tank in ways they would not tank if there were merely a government shutdown. (This claim, it seems to me, is what is really at stake in the controversy-- that the market reactions will be much worse in one case than the other)
Why is that so, you may ask?....

In any case, let's assume that's what people are fearing-- that the debt ceiling crisis will not turn out to be the same thing as a shutdown, and therefore will have far worse consequences.

If that is so, the President's correct strategy is fourfold.

(1) announce that you will not bargain over the debt ceiling under any circumstances.(2) make preparations if you can't pay all your bills but don't tell anyone about your contingency plans;(3) emphasize the difference between a debt ceiling crisis and an "orderly government shutdown;" and(4) emphasize how terrible a debt ceiling crisis will be and how unprepared the country is for it. That is especially so even if you have made preparations.

Which, it seems, is exactly what the Obama Administration is doing.
Balkinization
Shutdown versus default
Jack M. Balkin | Knight Professor of Constitutional Law and the First Amendment at Yale Law School
(h/t Kevin Fathi via email)

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