
Let me explain. But to do so will require setting three levels of context.
The immediate context is of course the fact that Republicans have created a political crisis by refusing to raise the nation’s debt ceiling unless they achieve their priorities of dramatically reducing government spending—primarily on social programs.
A larger context is the fact that the U.S. is still reeling from an epic credit crunch. During the past decade, home prices were bid up to unrealistic levels and the financial industry magically and dramatically expanded the resulting bubble with the helium of securitization and derivatives. When the bubble popped, government bailouts and stimulus packages were deployed to prevent bank failures and help stanch the exploding levels of unemployment.
The even bigger, and most important, context is that we are entering a new historic era. Oil prices are high due to the ongoing depletion of giant, easy-to-produce oilfields discovered back in the 1950s and ’60s, and the substitution of expensive oil from deepwater drilling and tar sands. Other non-renewable resources are also becoming scarcer. On top of that, the climate is changing and weird weather is helping drive up food prices. Oh, and let’s not forget, the oceans are dying. Altogether, it seems reasonable to conclude that economic growth—fueled during past decades by cheap energy and raw materials, but also made possible by a stable climate—is coming to an end.
So here we are, facing an enormous, unavoidable long-term problem (the need to transition the economy to a sustainable post-growth mode while minimizing the human suffering that is likely to ensue in the interim); a medium-term need to deal with a recession that could at any moment relapse to 1930s levels; plus an optional short-term crisis (the fight over raising the nation’s debt limit).
Okay, that’s enough context. Let’s view the arguments of both sides from this expanded perspective.