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The Unintended Consequences of Debt Ceiling Intransigence


By paul craig roberts



Which party is responsible for intransigence on raising the debt ceiling? Republicans say the Democrats are, and Democrats say the Republicans are.

One could blame both parties equally, as both have their positions, but as I see it, it is the Republicans who are the most intransigent. The Democrats have shown more willingness to compromise, even offering cuts in Medicare and Social Security. Moreover, the Republicans started the fight, whereas the Democrats were willing to just raise the debt ceiling routinely, as in the past, and to get on with things.

The Republicans created the issue, so they are responsible. In fairness to the Republicans, it is a more important issue for them than for Democrats. The Democrats have always been more relaxed about debt than the Republicans. At the present time, the Democrats figure that if the financial crisis is reason enough for the Federal Reserve to lend $16.1 trillion, that is, $16,100 billion to private banks in the US and Europe -- an amount $1.6 trillion larger than the Gross Domestic Product of the US, the US Treasury can afford to borrow another couple of trillion dollars.
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