Lots of smart economists are worried about what will happen if the US federal debt ceiling is not raised by August 2, which is when the Treasury Department has estimated that it will bump up against the $14.2 trillion limit. The worst-case scenarios include a run on Treasuries and a collapse of the financial system. I don’t have any special insight into what will happen, but I think my perspective as a political economist gives me a contrarian view. I’d probably vote against an increase in the debt ceiling if I were in Congress, though not for reasons that any current member of Congress would be likely to endorse.

The fight over the debt ceiling is widely viewed as an argument over the size and scope of government. Superficially, this is correct: the Republicans have little political power with which to prosecute the argument, so their best strategy is to act erratic and crazy, and to threaten mutually assured destruction if Democrats do not agree to their terms. Democrats are trying to determine exactly how much of Republicans’ behavior is an act, and how much is due to their actual craziness, which one imagines is difficult to disentangle, particularly since accusations of craziness are fashionable in modern politics and it’s difficult at some point not to believe your own PR. It is basically right to characterize the argument over the debt ceiling as a slow-motion game of chicken.

But on a deeper level, there is much more going on. While the argument over the debt ceiling is about the size and scope of government, my thoughts on this issue are much more colored by the scale of government. If we think about the scope of government as the spheres over which the government has influence, and the size of government as the percentage of GDP that is constituted by the public sector, the scale of government is the denominator of the size variable. How much territory, how much economic activity, how many people should be united under a single government?

While people have differing ideological priors about the optimal size and scope of government (full disclosure: my priors are small to none), I don’t think there is nearly the same partisan disagreement over the scale of government. Republicans and Democrats agree: the optimal scale of government is basically the status quo United States of America. This agreement can hardly be claimed to be the result of any serious reflection by either party. Yes, there are disagreements about federalism and nation-building, and these have some bearing on the effective scale of government. But neither party wants to split the USA in two, or to take over the rest of North America; this is simply not an issue that is very salient in modern politics.

While the observed size and scope of government gets worked out through political wrangling, the observed scale of government comes about more indirectly. There are conquests, and the EU, and decisions to secede, and to some extent these are intentional, but for the most part the scale of government is a product of human action but not of human design and also of real economic forces; if your mind immediately goes to political transaction costs, value heterogeneity, etc., you are on the right track.

What we have in the debt ceiling fight is not just a political argument, but a political-economic equilibrium working itself out. Whatever your views on the proper size and scope of government, the scale of the US government is probably too big for the institutions that compose it. There are too many heterogeneous values, too many interest groups, too many hold-up problems. When politicians play chicken with financial markets on the line, that’s a sign that politics is pretty dysfunctional. My point is not to castigate the politicians involved but to draw attention to the fact that such games of chicken are exactly what you would expect to observe if the scale of government were too big.

Failing to approve an increase in the debt ceiling gives politicians the chance to prove me wrong. If forced to come together and work out a deal to balance the budget in a hurry, could they do it? If so, then great. If not, then the inevitable day of fiscal reckoning has come; better for it to come now than later when an irreparably dysfunctional political system has made the problem even worse.