After the American Century
The idea that the US government could choose to default is a fundamental misconception. Government is not a business that can decide to fail. Default is not a valid government strategy. Government is the foundation of society. It is a contract between the citizens that cannot be broken, not a corporation that can be allowed to go broke because people do not want to pay taxes. Talk of letting government fail financially cannot be separated from a more general failure of trust between the citizens. Government is about mutual obligation. It is not an investment that one pulls out of. Government is a contract between the generations, ensuring that pensions are paid, that opportunities such as education remain available, that the infrastructure is maintained, that services such as hospitals and fire departments do not deteriorate. Republicans really do not seem to understand this. They have long argued that government is an evil that should be pared down to a minimum. But the idea that elected legislators are willing intentionally to let the government default goes far beyond that doctrine. Dangerously far.
Americans have lived with a stable system so long that they have no historical experience of the disasters that come with fiscal irresponsibility. Undermine the state government, and you undermine the dollar itself. I am not talking about the dollar losing a few percentage points against the Euro. I am talking about the Japanese and the Chinese deciding not to buy dollar debt anymore, because it is too risky. I am talking about interest rates above 10% that cripple the US economy. For a small inkling, a mere taste of what that might mean, look at Greece right now, with the difference that the EU can bail out Greece. But no economy is big enough to bail out the United States.The US taxpayers have to honor their own obligations.
Americans have lived with a stable system so long that they have no historical experience of the disasters that come with fiscal irresponsibility. Undermine the state government, and you undermine the dollar itself. I am not talking about the dollar losing a few percentage points against the Euro. I am talking about the Japanese and the Chinese deciding not to buy dollar debt anymore, because it is too risky. I am talking about interest rates above 10% that cripple the US economy. For a small inkling, a mere taste of what that might mean, look at Greece right now, with the difference that the EU can bail out Greece. But no economy is big enough to bail out the United States.The US taxpayers have to honor their own obligations.
The dollar has been the world currency for so long that Americans take it for granted. But its hegemony is hardly assured. Other economies look stronger right now. Even to flirt with default will scare away future investments. Should the Republicans get back into power. international investors may head for the exits. Even now, China and Japan will almost certainly plan to dis-invest in US government bonds in order to spread their risk.
The Republican Party once again is showing that it is not fit to rule. It is a reckless party with no fiscal policy, a deluded party that does not understand the dangers of this historical moment when US economic and political power are challenged. The Republicans are a dangerous party that threatens to do lasting damage to US financial security and its standing in the world.
The Republican Party once again is showing that it is not fit to rule. It is a reckless party with no fiscal policy, a deluded party that does not understand the dangers of this historical moment when US economic and political power are challenged. The Republicans are a dangerous party that threatens to do lasting damage to US financial security and its standing in the world.
