Common Conviction

If the United States posts a default on U.S. Treasury debt, it would be a catastrophe.  Such words are overused, but this is the type of situation that the word exists for. 

Those who follow these matters have heard the prognostications of financial chaos and economic collapse, and the blow to U.S. geopolitical influence.  This catastrophe goes even beyond the direst of those forecasts.  If America cannot govern itself competently, we suggest that people need rulers who carry overriding authority, to secure those same people’s best interests.  If government elected by the governed doesn’t work, perhaps rights, which we expect government to secure, are not inviolable.  But this nation founded itself on a creed of unalienable rights and government by consent of the governed.  If we can’t govern ourselves, our founding premise looks like an indulgence of fantasy.  If that is the case, can this nation, conceived as we are, endure?

Incompetence always occurs, but the debt ceiling issue is not some matter of bad bureaucracy.  It sits at the core of the government’s functions, and failure has material consequences that could actually dwarf many of the disaster scenarios.  The questions we highlight in our disjointed conduct already raise doubts and challenges.  A landmark failing like a default will increase those greatly, and could spark precipitous disasters.  So yes, interest rates could spike; and we cannot be sure they won’t go to Weimar Republic levels.  Yes, the benchmark “risk free rate” of investment might disappear – it will at least come into some question – and financial instability could go so far as full-blown chaos.  Yes, the dollar could lose its “international reserve currency status” – most likely over time but that much more likely than without a default.  U.S. abilities to finance federal deficits would then erode, budget costs would grow, and sanctions on the bad actors of the world would lose their clout.  These effects could lead to anything from more difficult economic and international conditions to systemic crises.  And yet again, even the most cataclysmic of these setbacks are far exceeded by the discredit to the American experiment.  All because political posturing overrides competence in Washington.

We have had budget and debt ceiling standoffs before, most notably in 2011.  The politics of this potential deadlock are familiar – one side blames the other for risking a default and the other side cites the budgetary indiscipline that leads to ever higher debt levels.  We have grown accustomed to government shutdowns running a few days or so, ended by a deal in Congress.  But if we become complacent that shutdown will always lead to deal, both sides become emboldened at least to pose as intransigent.  Every standoff becomes harder to reconcile, and it takes fewer and fewer disruptive legislators to torpedo any deal.  January’s election of the Speaker of the House demonstrated this effect, the two parties’ unwavering stances made the whole process hostage to a small clique.  

America needs Democrats to start devising serious debt reduction strategies, and Republicans to vote to raise the debt ceiling.  Now.  We need both sides offering, seriously, to meet the others’ demands, not to continue demanding acquiescence from each other.  

We all know how unlikely this is.  The legislative maneuvering and the partisan blame continue as usual.  The media misses this forest for the trees, not understanding that even big trees like the SVB collapse are really distractions.  But the American people have everything to lose, even the basis for our national legitimacy, if we don’t get a debt ceiling. While there is always the chance, as we implicitly expect, that there will be a deal, the stakes and the risk will only grow the next time, and if we don’t change our political M.O., there will be a next time.  And failure will all the more clearly show government by consent of the governed to be not only incompetent but untenable.

That said, if somehow Americans of all political leanings see this fundamental common interest, and if we find ways to show unity in this need, the politicians will follow.  How that happens remains an unknown, but it is the only way to ensure against the kind of risk we face, right now.

And if somehow we can force our titular leaders to serve the deep interests of we the governed, we prove the viability of this kind of government.  If we think America has influence today, which stems from economic and military power and ties among a community of Liberal-ish elites, that influence will skyrocket when ordinary people see ordinary –free – people use their freedom to govern successfully.

The risks may not come to pass immediately and the upside is unlikely.  But the latent danger will increase without this kind of outcome.  And if we can pull it off, freedom will show itself all the stronger, and the future will take on a whole new tint.  

But we need a deal now.  It’s an existential matter for our nation and for freedom itself.