America’s greatest and most immediate concern should be the state of the debt ceiling crisis.
True, big things are going on in the world. Not only in Ukraine and around Taiwan. Who will win the run-off election in shakily-democratic Turkey? How will Thailand’s generals manage the opposition landslide in elections to their lower house? What are the prospects for early talks between U.S. and Chinese officials? Has Ukraine started its counteroffensive? The answers could have pivotal, systemic, global consequences.
For all the weight of these and other matters, if the U.S. Treasury defaults on its bonds, a cornerstone is wrenched from the foundation of global affairs. The immediate tangible effects on that day may be minimal. But they could also be immediate and cataclysmic: The Treasury’s “risk free rate” forms the global benchmark to evaluate every financial calculation, and a default belies that status. It is not wholly inconceivable that a U.S. default might instantaneously immobilize anyone contemplating any financial transaction anywhere on the planet, and cause the whole world to seize up.
Such a cataclysm may be unlikely, but, again, is not beyond imagining. Even much lesser immediate disruptions will generate horrible scenarios later. Whatever the outcome, economies around the world, and particularly America’s, will be deeply disrupted. Americans will lose a deeply engrained psychological marker – not just damage to the dollar’s world currency status but the image of capability that underpins it. America’s influence will lose a primary support pillar. If today we still exemplify power cloaked in the trappings of democracy, a default will lead many to see our power and freedom as illusory, even sham. We ourselves will face the question, whether free people can in fact govern themselves.
So, first, no, no one should be under any illusion that it serves us to allow a default to happen. Second, simply raising the debt ceiling will avoid default in June, but does not address the fundamental problem that government spending outpaces revenues in an unsustainable manner. So, third, no partisan standoff today gives any politician any shred of moral sanction. They – and we the people in whose name they hold office – will be guilty of the grossest negligence if the US defaults.
We need both an increase in the debt ceiling, and a serious, credible commitment to long term but also immediate debt reduction. The latter would start most credibly with entitlement programs like Social Security, with increases in contributions, raising of retirement age, progressive taxation of retirement income, and likely many other measures. In this or any other debt reduction efforts, credibility is only possible if our purported leaders take on the hardest tasks.
The one thing we cannot have is the politics we have now. Two sides demand the other side’s political surrender, subjecting an urgent common need to their trench warfare. It’s hard to envision the kind of change needed for durable credibility, especially change that can happen in two weeks. Right now we can only hope the pols understand they are playing with fire, find some way to mutual climbdowns, and cut a deal.
If the politicians cannot do this much, we the people will need to find ways to throw them all out. 2024 would not be soon enough, and no one in the game, not the incumbents, not the town committees, not the media shills, not the ‘promising candidates,’ not the advocates and protesters, not the ‘Influencers,’ and not the donors, should be left with a political future. We will need true public servants to restore the damage of bankruptcy both monetary and moral.
Conversely, if somehow a deal is made, the greatest credit should go to the ones who cross their political bases and expose themselves to charges of selling their own side out. We should also demand and encourage further renunciations of partisan interest in the future, and ensure that political brinksmanship gains only rejection.
Either way, Americans of every stripe should be screaming from the rooftops – no default, no cavalier politics-as-usual, no game-playing. If a free people can’t exhibit competent self-government, we cast doubt on the idea of our founding.