The Obama administration has been expressing supreme confidence that it will get an agreement to raise the debt ceiling. That confidence seems hard to square with what Republicans are saying. They’re expressing strong resistance to cutting defense:
“Guys like me, I’ll just say no,” said Rep. Duncan Hunter (R-Calif.), a veteran of Iraq and Afghanistan who argues that any reduction in military spending must be accompanied by a detailed analysis of the impact on national security. “Republicans, if they’re not careful, are going to saw off the third leg of the Republican stool. The leg of national security is going to get chopped off.”
So the end result is that the deficit reduction winds up as an unpopular compromise, and you’re simply adding one unpopular vote to another. If the negotiations fail, the Republicans have talked themselves into a position where the leadership can’t fall back on just raising the debt ceiling or else it risks a revolt. And the Obama administration enabled this, first by failing to include a debt ceiling hike in last year’s tax deal, and second by opening themselves up to an unprecedented hostage negotiation. The markets currently seem assured on the understanding that people in power are responsible and know what they’re doing. I’m far less assured.