National Economic Council director Gene Sperling offered yesterday what I think is the most cogent case on the merits for why any fiscal cliff deal must address the debt ceiling issue as well. His point is basically that what’s undesirable about going over the cliff is primarily the “uncertainty” and planning problems doing so would create, but these issues aren’t actually resolved unless the debt ceiling is also addressed:
Make no mistake about it: no budget agreement – however robust – will provide the economic certainty and confidence we aspire to if job creators, investors and working families believe that, after we reach that agreement, just months down the road, we will start the next round of debt limit debacles. As both economist and business leaders have told us, only the greatest national tragedies have competed with the debt limit debacle of 2011 in terms of damaging consumer confidence. So let’s be clear: if we want to see the economic benefit of a bipartisan budget agreement we need to agree that the era of threatening the default of the United States as a budget tactic is over. The full faith and credit of the United States of America is something we should cherish and never use as a bargaining tool by any side. This should be beyond question at this moment.
My view is that if there’s no other way around the debt ceiling, the president can and should deploy the platinum coin option but while that’s certainly better than default it’s a good deal worse from a confidence standpoint than simply addressing the issue legislatively. The Obama administration’s proposal for a permanent McConnell-style solution in which congress gets to complain but not actually block new borrowing is the best path forward.