Negotiations over the debt ceiling have officially begun

House Majority Leader Eric Cantor kicked off the debt-ceiling negotiations this week with two separate moves. First, he?s going to bring a ?clean? debt-ceiling bill to the floor of the House to show that it will get voted down. Second, he?s asked the Obama administration to ?submit a request outlining the amount requested to increase the debt limit, along with any policy proposals to reduce spending and reform the budget process .?.?. either in legislative form or sufficiently detailed for review and scoring by CBO.?

Let?s take these in reverse order. Cantor?s request for the administration to detail its position is both substantively reasonable and politically smart. It?ll lead to headlines like ?Obama administration asks for $1 trillion increase in the debt limit,? which are not headlines the Obama administration would like to see. Perhaps the Obama administration will simply refuse ? the line that politicians in Washington like to use is that ?nothing is agreed to unless everything is agreed to,? and Cantor is certainly familiar with that position ? but perhaps it will use the opportunity to propose its trigger, which sets a debt target and begins imposing automatic cuts to spending and increases to taxes if we?re not on track to meet it by 2014. It wouldn?t be the worst place to begin the debate.

But Cantor?s plan to bring an increase in the debt ceiling up for a vote only to immediately vote it down is neither reasonable nor smart. What he?s doing, in essence, is signaling to the market: ?Yes, we could vote against an increase in the debt ceiling.? That?s one step closer to the market actually coming to believe that we could default on our debt. And the closer the market comes to believing that, the closer we get to all hell breaking loose. There was a time when Cantor thought ?uncertainty? about taxes and regulations and deficits was a great impediment to economic growth. All of them, however, pale in comparison to introducing uncertainty over whether the federal government will cease to pay its debts and trigger the mother of all financial crises.

Source: http://feeds.washingtonpost.com/click.phdo?i=41575815aa7f9f06c743a91200b74f4f

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