Flirting With Default

As the August 2 deadline approaches, Congress continues to fight over whether and under what conditions to raise the federal debt ceiling. Both Standard and Poor’s and Moody’s have warned that they might reduce the nation’s credit rating—with potentially catastrophic effects—unless progress is made. Nearly all the major political players agree that not raising the ceiling—making the government unable to meet all its financial obligations—would be, as Treasury Secretary Geithner says, “unthinkably damaging to the economy.”


So why even flirt with disaster? Ostensibly, it’s because if we don’t act to cut spending now our growing national debt will become unmanageable. That’s nonsense. As large as our debt is, we are not broke. In fact, as I wrote last week, our supposedly unmanageable deficits would mostly disappear if we simply let the Bush tax cuts expire. The country could begin to pay off its debts if we let tax rates return to something like the level they were under the Clinton administration, rates which would still be a moderate level compared to other advanced economies. The fact is that we have a budget crisis only because we refuse to pay more in taxes. In other words, it’s not that we can’t afford to pay for things like Medicare, public education, or the national defense. It’s that we don’t really want to pay for them.

In fact, Republicans are using the idea that we are facing an imminent debt crisis to win political concessions in Congress and position themselves for the 2012 election. Their latest tactic is to push a balanced budget amendment—which would make negotiations like this harder in the future—designed to fail but to embarrass Democrats in the process. And, as Paul Krugman points out, while Republicans insist that the growing debt is a national crisis, they nevertheless refuse to consider raising taxes to solve that crisis—even though federal tax rates in the U.S. are about as low as they have been since the 1940s. In fact, with the economy still slow, it wouldn’t be a good time either to raise taxes or cut spending—a fiscal contraction is the last thing the economy needs. But the point is that for all their overheated talk about a national crisis Republicans don’t care much about the deficit. As Krugman says, “It has always been nothing but a club with which to beat down opposition to an ideological goal, namely the dissolution of the welfare state.”

Photo credit: Pete Souza

LinkedIn meets Tinder in this mindful networking app

Swipe right to make the connections that could change your career.

Getty Images
Sponsored
Swipe right. Match. Meet over coffee or set up a call.

No, we aren't talking about Tinder. Introducing Shapr, a free app that helps people with synergistic professional goals and skill sets easily meet and collaborate.

Keep reading Show less

What’s behind our appetite for self-destruction?

Is it "perverseness," the "death drive," or something else?

Photo by Brad Neathery on Unsplash
Mind & Brain

Each new year, people vow to put an end to self-destructive habits like smoking, overeating or overspending.

Keep reading Show less

Can the keto diet help treat depression? Here’s what the science says so far

A growing body of research shows promising signs that the keto diet might be able to improve mental health.

Photo: Public Domain
Mind & Brain
  • The keto diet is known to be an effective tool for weight loss, however its effects on mental health remain largely unclear.
  • Recent studies suggests that the keto diet might be an effective tool for treating depression, and clearing up so-called "brain fog," though scientists caution more research is necessary before it can be recommended as a treatment.
  • Any experiments with the keto diet are best done in conjunction with a doctor, considering some people face problems when transitioning to the low-carb diet.
Keep reading Show less

Douglas Rushkoff – It’s not the technology’s fault

It's up to us humans to re-humanize our world. An economy that prioritizes growth and profits over humanity has led to digital platforms that "strip the topsoil" of human behavior, whole industries, and the planet, giving less and less back. And only we can save us.

Think Again Podcasts
  • It's an all-hands-on-deck moment in the arc of civilization.
  • Everyone has a choice: Do you want to try to earn enough money to insulate yourself from the world you're creating— or do you want to make the world a place you don't have to insulate yourself from?
Keep reading Show less