Tuesday, October 08, 2013

Articles Worth Reading

There have been some worthwhile articles about why we shouldn't be playing footsie with default:
Yale's Balkin explained on his Balkinization blog in June 2011: "Section 4 targets the worry that, once fully readmitted to the Union, senators and representatives from Southern states ... would deliberately refuse to repay debts incurred in suppressing the confederate rebellion." Still, he continued, the provision "was stated in broad terms in order to prevent future majorities in Congress from repudiating the federal debt to gain political advantage, to seek political revenge, or to try to disavow previous financial obligations because of changed policy priorities."
If you're particularly interested in the legislative history of this part of the 14th Amendment, the Balkin blog post Parloff links to will satisfy you.
[A] point worth making is that U.S. government debt is the only risk-free asset in the world. That debt undergirds the entire world financial system — precisely because the whole world has such faith in it. There is always demand for U.S. government debt. Almost every other asset you can think of is in some way measured against it. A default would destabilize the market for Treasuries. And that, in turn, would likely destabilize every other asset

The stock market would fall. Interest rates would rise — meaning, for instance, mortgages would become more expensive just as the housing market is starting to revive. Treasuries themselves would likely have to pay higher interest to investors, which would create a rather sad irony: a default would exacerbate the country’s long-term debt (the very problem the Republicans claim to care about).
 There are more points worth making, and Nocera's column touches on them.
  •  The New York Times offers an editorial, The International Fallout, that outlines the damage the GOP has already caused to American interests overseas. A snippet:
The biggest foreign policy casualty, so far, may be the cancellation last week of President Obama’s trip to Asia, which the president’s press secretary said was necessary so he could deal with the shutdown and the political stalemate in Congress. Even though he sent Secretary of State John Kerry in his place, this was the third time that Mr. Obama had canceled or postponed a trip to Asia, further hampering his efforts to make the region a centerpiece of his foreign policy.
In Mr. Obama’s absence, China was able to grab the spotlight. China’s leader, Xi Jinping, who became the first foreigner to address the Indonesian Parliament, offered billions of dollars in trade to that country. Mr. Xi then visited Malaysia (another stop President Obama had planned) and announced a “comprehensive strategic partnership,” including an upgrade in military ties. Mr. Obama should reschedule his trip as soon as he comfortably can.
The fiscal chaos has also given China, America’s largest creditor, an opportunity to scold the United States.
Think about that for a while: a President of the United States is unable to leave the country because the opposition party has the country in turmoil.


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