As Lovechilde rightly noted earlier today what used to be something routine has been turned by the Republicans into what could be a major economic disaster for the United States and the entire world. While the Republicans should get most of the blame if this occurs, and polls suggest them will, its still worth noting how we got here. I argued in my very first post here that Obama had made a fundimental mistake in adopting the Republican frame that the budget deficit and not jobs or reviving the economy should be the focus of economic policy. Because of this the only argument we are having is how much to cut, not whether budget cutting in a down economy is a good idea.
Obama has also proved to be a terrible negotiator. He could have demanded a debt ceiling increase back in December in exchange for the terrible tax cut deal, which is part of the reason the deficit is so big, but he did not. Way back then Ezra Klein explained the Democrats' logic and why he thought it was faulty. He doubted that the Democratic Party would have the stomach to face down the Republicans. We don't know how the game of chicken will turn out but I think it is tough to argue that the Dems and Obama would be worse off if the debt ceiling had been raised in December.
But its more than that. Robert Kuttner argues persuasively in the American Prospect today that Obama has encouraged the Republican behavior we are now witnessing by training them to keep demanding more, because he will always give them more. Now it may be that they have finally reached the point where he wont give more, but there is no reason for them to think that. This entire presidency has in some ways been a hostage negotiation. The hostage taker is obviously the most culpable party, but if the negotiator does a terrible job he is not without fault.
As Kuttner argues the dynamic that has been created has led to a truly dangerous situation, one that he analogizes to Europe in August 1914--both sides are convinced the other will blink first. If the Democrats can't give in but the Republicans think they will there is a real possibility that this problem does not get solved and then we get to see what exactly that looks like. I suspect its not as bad as World War I, but its not going to be pretty.