The Sydney Morning Herald

By David Smith

In a famous scene in Footloose, Kevin Bacon's character gets involved in a game of chicken. Bacon and his opponent charge at each other on tractors down a narrow farm road, hoping to force the other to swerve or jump first. Bacon gets his shoelace tangled up with the pedals and can't break free.

His opponent sees the futile attempts to jump and realises at the last second that Bacon isn't getting out of the way. He sends his tractor careening into a dam, leaving Bacon accidentally triumphant.

As Republicans and Democrats in Washington bargain over the government debt ceiling, each side is trying to convince the other that they won't jump out of the tractor.

On August 2, US national debt will hit $US14.3 trillion ($13.4 trillion), the legal limit to government borrowing set by the last Congress. Congress has routinely re-raised the ceiling since 1939, a practice the Tea Party says has fed a decades-long addiction to profligacy.

The Republican House majority now insists they won't support any further increase in the debt ceiling without huge spending cuts, even to previously untouchable programs such as social security and Medicare. They refuse to accept any tax increases as part of the deficit reduction plan.

Any plan will require the support of some Congressional Democrats and Barack Obama. The President has been trying to negotiate a "grand bargain" on behalf of congressional Democrats, who frequently contradict him.

While Obama has indicated he would support cuts to major welfare programs, the House Minority Leader, Nancy Pelosi, says any bargain must "protect" Medicare and social security, triggering Republican suspicions that spending cuts Obama proposes will be based on accounting tricks rather than substantive reform. Obama's own line in the sand is on taxes: he insists any agreement he signs must include revenue-raising measures along with spending cuts, preferably closing tax loopholes for the rich (some of which he introduced in the stimulus package).

If the August deadline expires with no agreement the US will default on its debt and run out of money to pay its bills. Treasury has warned that the elderly will stop getting social security payments and military personnel won't get paid. Standard and Poor's indicates it may downgrade the country's AAA credit rating, which could trigger worldwide economic panic. In this game of chicken, failing to strike a deal is the equivalent of crashing the tractors. However, these high stakes don't encourage co-operation.

The leaders of each side are trying to persuade the other that they can't move any further. The hardline pronouncements of congressional Democrats allow Obama to argue he has compromised the Democratic position as far as possible. The Republican House leader, Eric Cantor, claims that he is making a massive concession by even considering raising the debt ceiling. The Republican caucus has plenty of members who say that the ceiling shouldn't be raised at all (though this isn't convincing from Cantor, who voted four times to raise the ceiling as spending ballooned under Bush).

All but 13 congressional Republicans have signed a "Taxpayer Protection Pledge", committing them never to agree to net tax increases. While each side complains about the other's ideological inflexibility, ideological inflexibility is exactly what each side wants to project.

Obama believes the pledge doesn't tie Republicans to an immovable position and has warned Cantor not to call his bluff on taxes, while Republicans know from experience that for all his anti-rich bluster, Obama's commitment to the core Democratic program only goes so far.

And so the tractors roll on. In negotiations, the side with more leverage is the one that would be better off in the event that no agreement is reached. In this case, no one knows who that is. Some Republicans, such as Senator Mitch McConnell, have baulked because they believe the public would blame them for economic collapse, an idea Democrats are encouraging. Others are convinced that the voting public would follow its historical pattern of punishing the President for economic strife.

Then there are those Republicans who say that debt default wouldn't be so bad, especially if it forces the government to reform its wasteful habits. Democrats and most of the media say this is insane, but that might be the strategic point for Republicans. You don't want to keep playing chicken with someone who doesn't understand the consequences of crashing the tractor.

Dr David Smith is a lecturer in American politics and foreign policy at the United States Studies Centre, University of Sydney.