Dan Drezner is skeptical about the role of “credibility” in international relations—for example, the proposition that what happens in Syria now has a big impact on what happens in Iran a year from now. Despite this, he believes credibility does matter in domestic politics:

The importance of credibility gets magnified even further when appreciating that [the] same individuals are going to have to go to the bargaining table again and again and again over the next few years. It is in precisely this set of circumstances — in which the bargaining is ongoing and the individual actors don’t change — that one would expect credibility and a reputation for tough bargaining to be pretty friggin’ important (though I’d really, really like to hear from my American politics colleagues on this question).

I agree, though I’d put it slightly differently. In foreign affairs, it’s very seldom that you see identical scenarios unfold over and over. Everyone accepts that the United States has certain interests, and it’s not hard to recognize that our interests in Syria are somewhat different than they are in Iran. Thus, the fact that we changed course on bombing Syria over a very specific violation of international norms regarding chemical weapons says very little about how we’d eventually react to Iran building a nuclear bomb. Sure, they both involve WMDs in some way, but the similarity ends there. Syrian chemical weapons simply aren’t a big priority for America. Iranian nuclear bombs are. Everyone knows this.

The case of the debt ceiling is precisely the opposite. It’s the exact same scenario every time. If President Obama granted concessions in 2011—which he did—and then grants concessions in 2013 under the exact same conditions, his credibility is unquestionably shredded. There’s simply no doubt that he’ll grant concessions every single time we get close to reaching the debt ceiling. In this case, it really is all or nothing. Obama either has credibility on the debt ceiling or he doesn’t. If he concedes anything at all, his credibility is gone.

Similar situations are very uncommon in international relations. Situations separated in time are almost always different enough that it’s hard to draw any firm conclusions about patterns of behavior, which is why it takes a very long time for credibility to be either established or lost. In domestic affairs, there’s no such fuzziness.

I’ve gotten a bunch of email and comments regarding my post earlier this morning that criticized Jack Lew’s vagueness about how Treasury would deal with a debt ceiling breach. Instead of adding an update to the post, I want to create a whole new one to address them. I think it’s important. Here’s a sampling from the comment thread:

TLM: Of course they have a plan. But telegraphing that plan is a no-win exercise on multiple levels.

histprof1: Why would any functional person give the GOP anything to work with at this point?….I suspect that he has a plan and has his rationale ready. I also suspect that he will let the politics work until past the last minute before he goes legal. In fact, I suspect that his first executive action after the GOP fails to raise the limit will be aimed at making them try again. After that, he goes into emergency powers territory and the checks and balances fun begins.

Jasper_in_Boston: What’s so hard to understand, Kevin? Default would quite possibly be catastrophic, and Lew (and Obama) quite understandably don’t want to give the forces of nihilism any reason to think we can get through it easily.

gyrfalcon: Bingo, bingo, bingo. The GOPers have already glommed onto the idea that we can pay off bonds from incoming revenues, and many of them are positively gleeful at the idea of having the government stiff everybody else, including SS and veterans’ benefits, thinking it will look to the public like Obama’s doing….It flat-out isn’t possible to discuss this honestly with this pack of denialists and nihilists. The admin’s only possible strategy is to keep it as vague as possible.

This is the conventional wisdom, and believe me: I get it. But I think it’s dead wrong. The assumption here is that (a) the alarm level needs to be kept at maximum, and (b) no one will ever find out if Lew was being truthful because the debt ceiling will eventually get raised.

Maybe. But that’s a pretty dangerous assumption at this point. And if we do breach the debt ceiling, and it turns out that prioritization was in the pipeline all along, and Social Security checks were never in danger, and Treasury can in fact choose which bills to pay—in other words, if the alarms turn out to have been overblown—then there’s going to be hell to pay. Republicans will be more convinced than ever that they can’t trust anything Lew or Obama says, and they’ll become even more instransigent about the debt ceiling. In other words, genuine disaster becomes even more likely.

Like it or not, my view is that Lew needs to be rigorously, meticulously honest. He absolutely can’t afford to say anything that might turn out not to be true, or that might eventually be seen as politicization or game playing. That includes making vague statements that later turn out to be deceptive because, in fact, plans were in place and he knew it.

Is it possible that being truthful will persuade some of the nutballs that the debt ceiling isn’t actually a big deal? Sure. But they already think that. So who cares? The real audience for Lew’s testimony is the folks who are conservative but not crazy. They’re on the edge already, but if they start to get an inkling that Lew is scaremongering in even the smallest way, they could turn against him.

I understand the arguments about how dangerous it is to run the risk of making a debt ceiling breach seem manageable. But I think it’s a lot more dangerous to be caught making even modestly deceptive statements “for the greater good.” My earlier post wasn’t written just because I’m personally curious about what Treasury’s plans are. It was written because I think Lew is playing with fire.

UPDATE: Just as I finish writing that a debt ceiling increase is a “dangerous assumption,” we start getting reports from Capitol Hill that Republicans are getting ready to pass a short-term debt ceiling increase. Only for a few weeks, though. Stay tuned.

Jonathan Strong says I should read Tim Alberta’s latest piece in National Journal, so I did. And I’m mystified:

In interviews with numerous GOP lawmakers, members spoke with confidence — and acceptance — of the fact that the House will soon approve a short-term deal to raise the debt-ceiling and force Democrats to the negotiating table. Details are still being ironed out, House Republicans said, but they are on track to approve a debt-limit extension — lasting between four and six weeks — that would establish a framework for subsequent fiscal negotiations.

….The particulars of this short-term proposal are in flux, as there are ongoing discussions within the conference regarding which provisions — if any — should be attached. Some members are pushing for commensurate spending cuts, though such a figure could be difficult to calculate. Others are advocating the inclusion of one, or multiple, mini-funding bills that have been passed through the House. A clutch of conservatives, meanwhile, are asking for language that would prioritize Treasury payments.

Am I missing something? The one thing President Obama has said he won’t do is negotiate over a debt ceiling increase. So what do these guys do? Propose a 4-week debt ceiling increase with a bunch of conditions attached.

If I’m reading Alberta’s piece correctly, Republicans seem to think that a debt ceiling increase with conditions attached would be OK with Obama because it’s not actually a negotiation. They’re just telling him what he has to do. So, you know, he could sign it and then start negotiating. Or something.

Either (a) Alberta is reporting this wrong, (b) I’m reading it wrong, or (c) Republicans are even more divorced from reality than I thought. Take your pick.

From Jack Lew’s congressional testimony this morning:

In testimony before the committee, Mr. Lew stressed that the Treasury Department would run out of “extraordinary measures” to free up cash in a matter of days. At that point, the country’s bills might overwhelm its cash on hand plus any receipts from taxes or other sources, leading to an unprecedented default. Mr. Lew said that Treasury had no workarounds to avoid breaching the debt ceiling. “There is no plan other than raising the debt limit,” he said. “The legal issues, even regarding interest and principal on the debt, are complicated.”

He also said prioritizing payments to bondholders or others might not be workable, adding that the Treasury would face significant technical issues in trying to rejigger its complicated automated payment systems to pay certain bills but not others. “Our systems were not designed to not pay our bills,” he said.

Some market participants have suggested that Treasury might simply pull the plug on one or more of its payments systems to prevent money from going out, perhaps telling the recipients of that money that it would pay them when possible. But “I don’t believe there is a way to pick and choose,” except on a broad basis, Mr. Lew said.

I just don’t get this. Maybe this is the best Lew can do, but given all the time he’s had to study this, and the fact that we’re only a week or two away from D-Day, how is it that he doesn’t know (a) how close we are to running out of money, (b) whether prioritization is possible, and (c) if Treasury’s computer systems allow it to choose which bills to pay.

I’m not a nutball Republican denier, but even I don’t believe this. It’s October 10. This is our second go-around with a debt ceiling crisis. We’ve been planning for this one for more than six months. Is it really plausible that Lew still doesn’t know if prioritization is possible? Is it really plausible that there’s still no plan in place? Is there some reason he isn’t telling Congress what that is?

Something doesn’t add up here.

I’ve been reading all day that Republican favorability ratings plummeted in the latest Gallup poll, but I didn’t think much of it. After all, favorability ratings for both parties have been pretty low for a while. But when I finally clicked through to look at the actual numbers, it was a lot more dramatic than I thought:

Wow. Republican favorability ratings have been hovering within a few points of 40 percent ever since 2006. Then Ted Cruz mounted his filibuster, Republicans starting threatening to crash the economy, and their favorability crashed ten points to 28 percent, the lowest in history. As we all know, the Crazification Factor is 27 percent, which means that literally nobody sane approves of the Republican Party any longer.

This demonstrates a surprising amount of common sense among average Americans. In a way, I’m heartened.

After five months of agitation, the leaders of the University of Chicago have finally agreed that their sensibilities will not be too badly offended if they occasionally end up sharing an elevator car with a blue-collar maintenance worker. Corey Robin has the story here.

Remind me again which century we live in?

So there’s a weird thing going on with the Republican hostage-taking strategy. All of them agree that taking hostages is hunky dory, but there’s a split over which hostage should be taken. Some Republicans think the party should go ahead and fund the government and then have an all-out fight using the debt ceiling as leverage. John Boehner, Charles Krauthammer, and Marc Thiessen are in this crew. On the other side, we have Republicans who think we should go ahead and raise the debt ceiling and use the government shutdown as leverage for conservative demands. Tea party firebrands Erick Erickson and Matt Kibbe are on this team.

Here’s the weird part: The (relative) moderates want to rely on the debt ceiling for leverage, even though breaching the debt ceiling would be far more catastrophic than a government shutdown. The (relative) extremists are shying away from the horror of a debt ceiling breach and just want to continue the shutdown. Doesn’t this seem backward?

It depends on what the real motivations are. Team Boehner claims that they want to use the debt ceiling as a hostage because it’s better leverage. But Team Erickson doesn’t believe them. They apparently think this is just cover. The moderates know perfectly well that a debt ceiling breach would cause a market panic that in turn would force Republicans to cave in. So they’re only pushing this line because they want a way out of the fight, and this will do it. Conversely, a fight over the government shutdown could go on for a long, long time, and eventually Democrats might end up caving in.

That’s my take on the oddness of which players are on which team, anyway. Is it correct? I’m not sure. I need Dave Weigel or Robert Costa or someone like that to help interpret the wall posters here.

A few days ago David Segal wrote a story in the New York Times about the latest in sleazy internet rackets: companies that post mug shots from arrests and make money by charging people to take them down. Maxwell Birnbaum, a college freshman who got caught with a few Ecstasy pills in his knapsack, will soon have a clean record in the eyes of the law, but not anywhere else:

In the eyes of anyone who searches for Mr. Birnbaum online, the taint could last a very long time. That’s because the mug shot from his arrest is posted on a handful of for-profit Web sites, with names like Mugshots, BustedMugshots and JustMugshots. These companies routinely show up high in Google searches; a week ago, the top four results for “Maxwell Birnbaum” were mug-shot sites.

The ostensible point of these sites is to give the public a quick way to glean the unsavory history of a neighbor, a potential date or anyone else. That sounds civic-minded, until you consider one way most of these sites make money: by charging a fee to remove the image. That fee can be anywhere from $30 to $400, or even higher. Pay up, in other words, and the picture is deleted, at least from the site that was paid.

But that’s not the end of the story. Segal followed up with credit card companies, and they all agreed to shut down the mug shot scammers:

“We looked at the activity and found it repugnant,” said Noah Hanft, general counsel with the company. MasterCard executives contacted the merchant bank that handles all of its largest mug-shot site accounts and urged it to drop them as customers. “They are in the process of terminating them,” Mr. Hanft said.

PayPal came back with a similar response after being contacted for this article….American Express and Discover were contacted on Monday and, two days later, both companies said they were severing relationships with mug-shot sites. A representative of Visa wrote to say it was asking merchant banks to investigate business practices of the sites “to ensure they are both legal and in compliance with Visa operating regulations.”

This is worthy of applause. And yet….it’s also worthy of a pause. It’s possible that there’s no slippery slope here and nothing to worry about, but it’s worth asking whether we really want credit card companies making moral judgments about which businesses should be blacklisted from doing business on the web. It’s certainly possible to envision a public outcry over something that ends up cutting off a business for unpopular political views, not just semi-extortion schemes like the mug shot guys. It’s worth some thought.

The big news in central banking today is Janet Yellen’s impending nomination to replace Ben Bernanke as head of the Federal Reserve. As lots of people will tell you, she’s fantastically well qualified; she’ll be the first woman to head the Fed; and she’s a monetary dove. (Or an “unemployment hawk” if you prefer.)

That’s the nickel take on Yellen, and so far, in the dozens of pieces I’ve read about Yellen last night and this morning, I haven’t seen anything else about her that’s truly new or interesting. Until now. This is from an interview Jim Tankersley did with Yellen last November:

On using monetary policy to try to get the economy revving:

“There are a lot of things holding back the economy. If one were making a list of the top five or ten things holding back the economy, you wouldn’t say money being too tight, and interest rates being too high were on it. But interest rates and credit conditions are what we can affect. They are not the problem, but they can be part of the solution.”

That’s….remarkable. Yellen doesn’t seem to think that monetary policy even makes the top ten list of things that could help the economy right now. Admittedly, her wording is a little bit opaque. Technically, all she says is that current Fed policy isn’t one of the big things holding back the economy. But the implication is pretty clear: if that’s true, it means that there aren’t any changes to Fed policy that could have a significant positive effect on the recovery.

In one sense, I suppose this isn’t a big surprise. Yellen has been one of the architects of current Fed policy, and nobody thinks she’s the kind of person likely to promote radical new ideas. Still, the fact that monetary policy right now doesn’t even make her top ten list means that she thinks Fed policy right now is essentially ideal. Once you get outside the top ten, after all, you’re dealing with effects so small they’re barely noticeable. Steady as she goes, folks.

I have to give Matt Levine credit for finally promoting a genuinely interesting theory about how to overcome the debt ceiling follies. No platinum coins, no dubious constitutional workarounds, just a simple new kind of treasury bond, which he calls a premium bond.

It’s simple. When an old $1,000 bond matures, replace with another $1,000 bond that sells for $2,000. That provides the government with an extra thousand dollars. And why would anyone buy it? Because the interest rate would be really high, around 20-30 percent or so. Unless I’m missing something, this would be unquestionably legal; the math works out fine for investors; and it provides the federal government with lots of extra money.

Now, as Matt Yglesias points out, whether they’re legal or not, issuing these bonds would almost certainly set off “an avalanche of litigation and uncertainty” about their status. And that might scare off investors. And as Levine points out, this is still banana republic terroritory, but “as lunatic schemes go, it gives off less of a banana-republic-from-outer-space whiff than the platinum coin does.” In other words, in the real world it’s not going to happen.

Why write about it then? Just because it’s an impressive display of human ingenuity and flexibility. It’s amazing the ideas we can collectively come up with once there’s a gun to our heads and we have to.

UPDATE: Since this isn’t going to happen, it probably doesn’t bear too much scrutiny, but as I was eating breakfast I got to wondering about the “unquestionably legal” part of this. If you sell it for $2,000, does that mean it’s a $2,000 debt no matter what denomination you put on the bond itself? I’m not sure! Perhaps some lawyers with idle time on their hands will weigh in on this.

UPDATE 2: A reader emails:

The amount of debt represented by any bond is the amount the bond promises to pay back, regardless of the purchase price. If the bond promises to pay $1000 at maturity, it’s $1000 of debt regardless of whether it sells for $1 or $100,000. In addition, the debt limit statute doesn’t affect the interest rate, which floats independently of the principal. The “premium bond” idea is unquestionably cockamamie, but it has no whiff of illegality about it.

Huh. Well, maybe so. I wonder what a judge would say? In any case, if this is really how it works, why even bother with the $1,000 face value? Why not issue a one mil bond that pays out a million percent interest (or whatever) and sells for $10,000? In other words, basically a guaranteed coupon with essentially no value at maturity at all. That would put the debt ceiling out of business for good.