Web exclusive: default dangers
Now featured on the homepage, Charles R. Morris on what could happen should the U.S. default on its debt:
What is most scary about the possibility that Congress will fail to authorize an increase in the national debt limit is that no one really knows what the consequences might be. But it is not alarmism to fear that such a step could trigger a global recession....
The most immediate impact of a default will be on countries—from the Middle East to East Asia—that currently hold trillions in surplus dollar balances. They will suffer major losses, which will accelerate the move toward trading in other currencies, something long-bruited by countries that resent America’s financial dominance. The United States will be punished as its own cost of borrowing rises substantially, and possibly permanently....
The effect on world trade could be catastrophic, as buyers and sellers attempt to reprice cargoes in midstream. When Jamie Dimon, head of JPMorgan Chase, said that a default “would ripple through the global economy in ways that you can’t possibly understand,” he really meant it.
Though the House did nothing yesterday to address the crisis, the Senate could review and announce a deal today that would fund the government through January 15 (at the levels reflecting the cuts enacted in March) and raise the debt ceiling through February. Sen. John McCain says that, as he predicted, Republicans have lost a battle they never could have won, and Sen. Lindsey Graham says Republicans "really did go too far."
From yesterday's Wall Street Journal:
This is the quality of thinking—or lack thereof—that has afflicted many GOP conservatives from the beginning of this budget showdown. They picked a goal they couldn't achieve in trying to defund ObamaCare from one House of Congress, and then they picked a means they couldn't sustain politically by pursuing a long government shutdown and threatening to blow through the debt limit.
Jonathan Strong at The Corner has an insider's account, quoting a senior GOP aide--"It's all over. We'll take the Senate deal"--and passing this along:
The Christian rite accompanying legislative chaos [Tuesday] was Florida representative Steve Southerland’s rendition of “Amazing Grace” — “all three verses,” said Representative Michael Burgess (Texas) afterwards in amazement. But Southerland is an undertaker by trade, and the song is normally sung at funerals. It’s hard not to see [Tuesday's] failure as the death of the House GOP’s role, in at least this standoff.
About the Author
Dominic Preziosi is Commonweal’s digital editor.