Choose your own debt ceiling adventure
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If you find yourself wondering what’s going to happen at the end of all this debt ceiling hullabaloo, you’re not alone.
Tim Fernholz is a reporter with Quartz. He’s imagining the debt ceiling debate like a choose your own adventure novel. If this happens, then this, or that — you get the idea. (And this is an interview you’ll want to listen to — we’re using some sound effects to help you along. Click play on the audio player above.)
The best case scenario is a deal. The president and Congress would figure out a way to cut the deficit and raise the ceiling. But that’s not very likely.
Another unlikely scenario: The president and the Senate just concedes to House Republicans, and in exchange for raising the debt ceiling, there are widespread cuts, especially to programs for seniors and those covered by Medicare. The cuts would probably also lead to another recession.
A more creative scenario? According to Fernholz, “Assuming that Ben Bernanke and the Federal Reserve would go along with this (which it probably wouldn’t if it wouldn’t take the coin), President Obama could say, ‘Look it, I’m going to put an option on Alaska to sell Alaska”, [he] gives it to the Federal Reserve in exchange for a couple trillion dollars, pay all the bills, avoid a default.
Sounds crazy? Ford Motor Company did something similar with its blue logo during its skirt with bankruptcy a couple years ago.
And maybe earlier this week you heard about this thing, “prioritizing payments.” Under that hypothetical situation, the Treasury Secretary and president could decide who to pay and who not to pay, instead of defaulting on all of our debt. It might be a legal option — but if might not. And even if we could clear up the legalities of the situation, “it might not be possible to change the computer systems and the way we actually do the payments in time to stop that money from going out,” says Fernholz. Foiled — by Windows ’97.
The most likely scenario? Another punt — kicking the can down the road. We wouldn’t default, might get some compromise, but we’d have to have this whole round of talks again…a little later on.
But let’s pretend we do default. Well then, says Fernholz, “there be dragons.” In other words: we really don’t know, but whatever would happen would probably be very, very bad. Fear the unknown, in this case.
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