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The Key to the Debt Ceiling Deal

Gaming out the debt ceiling talks, it seems to me that the most important power dynamic is whether the business community can and will pressure Republicans in Congress to cut a deal. Without business pressure, the GOP has zero incentive to agree. Agreeing means making substantive concessions that enrage the base and potentially end the career of anybody who votes for it. Not agreeing probably means precipitating some kind of financial crisis that harms the economy and thus improves the party's prospects in 2012. Hike taxes or beat Obama? That's a very easy call for Republicans.

The only thing that changes the calculation is if the business lobby, which would sustain enormous collateral damage in the default scenario, intervenes. The extent to which this occurs is far from certain. But we probably need to reach a point where default appears likely before business reacts and forces Republicans to bargain. Otherwise, the incentive isn't there.