Senate Republican leader Mitch McConnell’s chief negotiator in the 2011 debt-limit crisis warned that US political leaders are again likely to take the nation to the brink of a default and that there’s at least a slim chance the Treasury will miss payments.
(Bloomberg) — Senate Republican leader Mitch McConnell’s chief negotiator in the 2011 debt-limit crisis warned that US political leaders are again likely to take the nation to the brink of a default and that there’s at least a slim chance the Treasury will miss payments.
“I do expect that it will take if not to the bitter end then much closer to the bitter end than we all would like,” said Rohit Kumar, who’s now a principal at PwC, said in an interview. “And I just think we all have to be emotionally prepared for that.”
The odds of a US default are “low but not zero,” he added. “Anything above zero makes me worry.”
Here’s how Kumar reads the situation in the wake of the Wednesday passage of a partisan Republican debt-limit bill through the House:
- The risk of Kevin McCarthy being thrown out as speaker by GOP ultra-conservatives is the most significant new factor adding danger this time.
- “In 2011 we spent no time worrying that the way this was going to end was Speaker Boehner being decapitated,” he said. “It’s a new significant structural dynamic.”
- That’s why McConnell, who’s still the GOP leader in the Senate, will be reluctant play the role of deal-maker, even if he may have to in the end.
- “Any deal he cuts — no matter how substantively fantastic it might be — there is a cohort of House Republicans whose vision of themselves is they’re better at this than Mitch McConnell,” Kumar said. “It’s almost automatically going to be unpalatable to some House Republicans.”
- McCarthy and President Joe Biden are likely at some point to reengage in talks.
- “There’s probably a week of mutual recriminations to come and then they find a basis to have a conversation,” Kumar said. “You have to get through the criticizing each other publicly and then criticizing each other privately before you get to the real negotiation.”
- Biden may finesse the start of talks by calling party leaders from both the House and Senate together rather than having one-on-one negotiations with McCarthy — a tactic Barack Obama used in 2011.
- The run-up to the day when the Treasury runs out of borrowing authority will likely provide pressure for a deal.
- “They need the specter of default to justify — partly to themselves but also to their stakeholders — why they did the hard, unpalatable thing.”
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