I care deeply about the US default because I bet Tyler Brown a six-pack of beer and Tyler has expensive taste in beer. My side of the bet is that we won't default, so I'm pro-anyone winning at this point, as long as they win soon enough that we don't default. I'm going to ramble a bit- I don't have a point to make and I'm not a credible source about anything but I've really been enjoying watching this play out so I'm going to discuss my personal highlights of the debt crisis.
One of my favorite things about everything that has been going on is that the rhetoric and logical twisting from both sides have gone through the roof, and nothing pleases me more than a subtly misleading statement. Something that both parties like to bring up is a metaphor comparing the U.S. debt to the credit card debt of the average American family. This is a bad metaphor. I know from having made many bad metaphors in my time and from the fact that governmental debt works in almost no way like consumer debt. But hey, if they keep dumbing down the issue for whatever constituents they're trying to convince and it leads to one side winning... then great, I don't owe Tyler beer.
Brilliant political maneuvering from the right: I listened intently as a republican representative, when discussing what it meant to have a "balanced approach" to resolving the debt ceiling crisis, said something like "well we are being balanced. We are agreeing to raise the debt limit- that's a huge concession from us- and we're just expecting a balance of spending cuts in return." This is like if two farmers had a squabble over who owned a piece of land and during the talks about how to best divide it one of the farmers pulled a gun on the other and said "not shooting you is a huge concession and all I'm asking for is this land, which I think is a balanced and fair trade." (That's not a great metaphor, but it's better than the 'government debt is just like family debt' metaphor.) Anyway, the whole "we've already made a concession" line is pretty great.
Brilliant political maneuvering from the left (even if they aren't selling it well): Reid's bill which seemingly does exactly what the Republicans asked for in cutting spending and adding no new taxes. The catch? Its calculations assume not just the winding down of wars (which is deceptive accounting on its own) but also the expiration of the Bush tax cuts in 2012, so if the Republicans vote for it now then they are implicitly signaling that they will not fight against the tax cuts expiring in the future. Of course, they WILL fight against the tax cuts, but then the Democrats will have an amazing PR opportunity to destroy them for their hypocrisy. Will they use it? Probably not seeing as Democrats are terrible at getting their point across, but hey- if it passes then I don't owe Tyler beer.
Something I don't see people talking about: in the event of a "downgrade," where are institutional investors with money that needs to be as safe as possible going to park their money? Treasury auctions today suggest nowhere, as enthusiasm for our debt does not seem to be slipping in spite of being near the brink of "default." European debt is no safer than ours (thanks, Euro!) and nongovernmental debt is way too risky for the kind of money that is used to purchase our bonds. A debt spiral with rising interest rates is, unless I'm missing something big here, probably less of an issue than it has been made out to be. There's also a good chance I'm missing something big here, because I'm a very casual observer of all these trends.
Another fascinating issue that has been brought up: the 14th amendment (the validity of the US debt shall not be questioned) vs. only congress being the only body that can authorize spending. Personally I don't think that the 14th can be invoked by the president to raise the debt ceiling, but I think it CAN be invoked to make sure that interest on any public bonds is paid off with whatever revenues we have before we can use those revenues for any other purposes. Will that stop a downgrade? No. But speaking of downgrades, I think it's hilarious that we are being so reverential of the same ratings agencies that had no clue what they were doing when they rated subprime mortgage packages. They have no meaningful data for how modern governmental defaults occur- they're just guessing. Which is what they did with subprime mortgages because that was something else they had no historical data for. Anyway, back to just paying off the bond interest. This would not necessarily be a good thing but if being a strict constitutional constructionist is the cool thing to be nowadays it would be the most constitutional solution to not defaulting on debt (though we would default on all internal discretionary spending obligations and so I would still owe Tyler beer, so that doesn't fix things for me).
For some reason a passage from Utopia, by Sir Thomas More, comes to mind (even though it has nothing to do, really, with the current debt crisis- I think of this a lot in terms of how our government currently operates).
"If all else failed, they would take refuge in some remark like this: 'The way we're doing it is the way we've always done it, this custom was good enough for our fathers, and I only hope we're as wise as they were.' And with this deep thought they would take their seats".... "as though it would be a very dangerous matter if a man were found to be wiser in any point than his forefathers were. As a matter of fact, we quietly neglect the best examples they have left us; but if something better is proposed, we seize the excuse of reverence for times past and cling to it desperately."
Sir Thomas More then adds (paraphrased): this has even happened in England, but just this one time a long time before our current awesome king, Henry VIII, gained the throne. He's so awesome. And manly. And makes great decisions all the time. Please don't cut off my head.
Love the Utopia quote, but then, you knew I would.
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