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The United States has lived beyond its means, but defaulting on the nation’s obligations would harm the economy.
Wednesday, October 9, 2013
No rational person would express remorse and self-loathing for excessive credit card debts by skipping a mortgage payment.
But rationality has vacated the U.S. Capitol, where some members of Congress are prepared to inflict an equivalent damage to the nation’s economy by defaulting on their collective obligations.
In effect, they would deny the existence of expenses they have already approved by refusing to pay their bills.
It’s almost inconceivable that the country’s attention would shift away from the still-lingering cloud of the federal government shutdown, and yet a more foreboding emergency awaits with next week’s deadline for adjusting the federal debt ceiling. Americans numbed to the culture of crisis in Washington, D.C., must shake off naïve assumptions that their leaders will act to prevent a calamity without prompting from the homefront.
The country lies at a crucial crossroad, and voters must be clear that they want their leaders to act responsibly, not indulge in political pranks.
There is no doubt that the United States has spent beyond its means.
Fiscal discipline remains lacking because too few elected officials are willing to engage in the give-and-take negotiations necessary to come up with a compromise that includes both new revenues and spending reductions.
But demolition and dismemberment should not be confused with a cure. For some hard-liners, even that would not be enough.
They are intent on trashing the full faith and credit of the United States. In saner times, honor alone would be an adequate argument against such recklessness. There are, however, more tangible financial consequences.
Businesses that provided products and services to the federal government would not be paid.
Social Security payments to retirees could be cut off.
A default would disquiet international markets, threatening to dissolve the fragile global economic rally.
Interest rates on U.S. bonds would mount, pushing up mortgage rates and inflicting misery on the housing market and banking systems.
And the higher cost of credit would ultimately feed the national debt that inspired the debate in the first place.
The United States has never defaulted on its debts.
Those willing to bet that the consequences will be less disorderly than economists warn are free to flirt with such dangerous odds in their personal finances. But as elected members of Congress, they have a fiduciary duty to be more careful with the future of their country and the well-being of their constituents.
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