Raising the debt ceiling should be simple. We print our own money so in my view we technically can’t default. Thus, this is NOT a solvency issue. We pass the debt ceiling increase, create more money, and pay our bills.
Instead, this is a political issue. The Republicans want cuts in spending in order to raise the debt ceiling. Fair enough, increased spending and excessive money printing certainly have the potential to be inflationary and cause interest rates to rise.
However, neither inflation nor interest rates are an issue now and much of the Federal Debt issue seems to by cyclically induced by the financial crisis and “Great Recession”. This is why I think the spending compromise should focus more on cuts long-term while increasing stimulus spending in the short-term.
So when I take into consideration our current issues with spending (listed above) and the consequences of not passing the debt ceiling, I can’t think a deal won’t get done. Right now we are witnessing a partisan standoff where next year’s election and appealing to ideologues take precedent over pragmatism at the expense of the American people.
Update: A deal is done and Rome lives another day as our heroes save us from disaster.
