Playing Games with American Power
Posted by The Editors
This post by Nina Hachigian, who is a senior fellow at the Center for American Progress.
Yesterday, the House Republicans staged a vote--predetermined to fail-- on a measure to increase the U.S. debt ceiling. Nothing unusual here; this is standard political brinksmanship on Capitol Hill.
Unfortunately, this is not a standard political issue. American power and world economic stability are at stake.
The entire global financial system depends in large measure on faith that the U.S. government can and always will repay its debts. Any suggestion that it cannot can roil the markets. Realizing this, Republicans could have cancelled the vote. Instead, they attemped to reassure Wall Street executives that it was all just a piece of theatre, not a real indication of Congress's inability to solve this problem.
But it is not wise to toy with a significant source of American power. America enjoys the unique privilege of having its currency act as the world's reserve. Every political circus act on the debt gives ammunition to those (often from emerging powers like China and Brazil) who are calling for the world to become less reliant on the dollar, and eventually to replace it with another reserve currency. While there is, at present, no attractive alternative, and some economists think a switch to another currency would be a net positive for the U.S. as it would force us to live within our means, such a move would take away advantages Americans have long grown accustomed to, and the transition would likely be very, very painful. And, more immediately, some analysts predict that a failure to increase the debt ceiling could send the U.S. back into a recession.
Congressman Paul Ryan now says he is "serious" about not raising the debt ceiling unless the Republicans get exactly the untenable budget cuts they are demanding, though he earlier admitted that a government default was "unworkable."
Congress, the rest of the world can hear you. Please stop posturing and treat this issue with the gravity it deserves.