Sovereign Debt

I have a new paper out, Bankrupt Politics and the Politics of Bankruptcy, that examines state bankruptcy proposals and then uses them as a jumping-off point for sketching out a political theory of bankruptcy as a "creditor's armistice," an unstable political bargain, rather than an economic bargain ala Jackson & Baird's "creditor's bargain."  

There aren't a lot of details about the Gang of Six debt proposal, but apparently it includes cutting or eliminating the home mortgage interest deduction. There's a good case to be for eliminating the home mortgage interest deduction. But regardless of whether the deduction should go, I question the timing. Cutting or eliminating the deduction isn't going to help stabilize the housing market.

From the public signals, it seems as thought the President and Democratic leadership are trying to reach a reasonable deal with the GOP, but are ultimately determined to avoid a default on US debt or ratings downgrade no matter what the price.  They'll agree to huge cuts to Social Security, Medicare, and other parts of the social safety net if that's what it takes to avoid a default.  I sense that part of the GOP gets this and is going to milk them for all they're worth.