May 26, 2023
Interviewer: MATTHEW BERKMAN. In a repeat of the debt-ceiling crisis of the Obama years, House Republicans are threatening to maintain the current $31-trillion limit on borrowing by the federal government, thus raising the specter of imminent default. Wharton Professor ERIC ORTS, in a return to the podcast, worries that this time Republican brinksmanship might signal an actual willingness to go over the brink. In his discussion with political scientist Matthew Berkman, he argues that the very credibility of their recklessness might prompt Biden to blink first and give in too much, agreeing to spending cuts that will hurt the most vulnerable Americans. Orts proposes instead that Biden embrace Plan B: executive actions based on his constitutionally mandated responsibility to maintain the full faith and credit of the U.S. Despite legal and political risks, it would be worth it because, while at the moment the implicit consensus among creditors is that the U.S. will not default, if events prove them wrong, the ensuing financial panic and recession may have devastating consequences.