Saturday, May 20, 2023

Debt Crisis or Not?


The U.S. is about to melt down and a small group of Republicans in Congress are playing their fiddles like Nero as Rome burned.* 

Meanwhile, the headline in the Washington Post read: “World watches in disbelief and horror as U.S. nears possible default.” The story by Rachel Siegel and Jeff Stein revealed that at the meeting of the G7 leaders in Hiroshima, Japan, this week, the finance ministers for the G7—Canada, France, Germany, Italy, Japan, the United Kingdom, and the European Union—have been pulling U.S. Treasury Secretary Janet Yellen aside to ask her what is going to happen.

“Around the world,” Siegel and Stein write, “experts have been watching in disbelief as the U.S. flirts with its first default, fearful of the potential international economic ramifications—and astonished by the global superpower’s brush with self-sabotage.” (Letters from an American)

This is not a trivial matter. Failure to service the debt will destroy the U.S. as a world leader and potentially throw economies around the world into chaos. The crisis is already damaging the faith of borrowers around the world and could have very long reaching consequences which will affect every American in the future. 

The 14th Amendment to the Constitution is the trump card in this instance. A discussion in an NPR piece explains how this may be accomplished, but it is widely believed that the amendment gives the President the authority to protect the good faith and credit of the U.S. The article is at: Democrats urge Biden to use his constitutional right to raise the debt limit. 

From the referenced article:

TINA SMITH: Well, first, I think that if anyone can find a reasonable agreement to get us out of this mess, it's President Biden. And it's - the Republicans should take the threat of default off the table immediately. I think that what Secretary Yellen is saying is that the Biden administration and the president are negotiating in good faith to try to find a path forward. But if the choice we have is between default, which would be disastrous, and the president using the clause in the 14th Amendment, which says that the validity of public debt shall not be questioned, we believe strongly - I believe strongly - that he should use that 14th Amendment authority to avoid the disaster of default.

The downside of employing such a unilateral action would be the alienation of the Republicans. Oh wait, some of them are already alienated and working to dismantle our country. On the other hand, I cannot see any upside to default.

OK, raise the debt limit and let's move on. 

The fallout for such a unilateral action will occur at the end of September when a new budget will need to be passed. I'm feeling a prolonged government shutdown coming as a small group of anarchists continue to have a stranglehold on the Republican Party. 

-- Bob Doan, Odenton, MD

* Note: There is no historical evidence to support the assertion that Nero either started the fire or played his fiddle as Rome burned.

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