Worldview: U.S. debt zealots present a genuine danger

At a GOP news conference Tuesday were (from left) Sens. Rand Paul (R., Ky.) and Mike Lee (R., Utah), and Rep. Jim Jordan (R., Ohio).
At a GOP news conference Tuesday were (from left) Sens. Rand Paul (R., Ky.) and Mike Lee (R., Utah), and Rep. Jim Jordan (R., Ohio). (ALEX WONG / Getty Images)
Posted: July 28, 2011

At a time when the world seems off its axis, when a far-right Norwegian kills 68 kids in hopes of starting an anti-Muslim crusade, when the Taliban bombs civilians in hopes of restoring an eighth-century caliphate - one would hope for some sanity in the United States.

We're the stable country, right? The place that much of the world (even those who resent us) once admired for its economic and political smarts? I used to feel gratitude when I returned from trips to Afghanistan and Pakistan that I lived in a country free of radical zealots.

No more.

The impasse over raising the debt limit makes me wonder whether we've gone off our own axis. Some members of Congress appear eager to sacrifice our economy and reputation in the name of doctrine. Secure in their righteousness, these zealots disdain compromise with the passion of jihadis.

Mercifully, this kind of zealotry doesn't involve guns. But such doctrinaire behavior wounds the country deeply in other ways.

Unless the debt ceiling is raised, the United States will run out of money sometime around Aug. 2 to pay for expenses the government has already incurred.

In the past, raising the debt ceiling was a pro forma matter, no matter which party was in power. This year, Republicans insist the increase be linked to cutting the deficit, and they'd like that deficit reduction to come solely from cuts in spending.

In the interest of fairness and economic realism, Democrats say some of the savings must come from revenue increases.

Polls show that 60 percent of Americans believe a compromise is needed. Responsible legislators could have worked out a deal that involved a 2-1, or even 3-1 ratio of budget cuts to tax increases.

Indeed, President Obama offered such a compromise, including cuts in entitlements, which outraged his base, especially because it postponed any revenue increases. But Republicans rejected that forthcoming offer because they wanted only minimal revenue increases - or none at all.

Of course, deficits didn't used to bother Republicans. Ronald Reagan ran them up by cutting taxes. Bill Clinton disappeared them and created a huge surplus, while raising taxes. George W. Bush ran up much of our present deficit (despite Republican efforts to blame it all on Obama) via tax cuts, unfunded wars, a huge new Medicare drug benefit, and two bank bailouts.

This history has been relegated to the dust bin as some Republicans seek to wound Obama no matter the harm to our economy. ("We want to get the win now," Ohio Republican Rep. Jim Jordan told the National Review.)

But the ideologues in the tea party are the ones driving the stalemate. They dream of dismantling Medicare, Social Security, and indeed the whole federal government, and view the debt limit as a handy weapon. Tea-party leaders such as Rep. Michele Bachmann (R., Minn.) insist failure to raise the debt limit won't hurt us at all.

It's this doctrinaire disconnect from reality that should make Americans nervous. The mere prospect of a default has already hurt us, and the reality would hurt much, much more.

Assume there's no debt-ceiling increase by around Aug. 2. Even if the government manages to keep paying interest on its debts, the damage would still be enormous. The shortage of funds would have dramatic domestic effects, such as shutting down the government, or preventing Medicare checks from being mailed.

Moreover, the mere suggestion of default has already caused rating agencies to consider downgrading America's debt from Triple A; that would raise interest rates on mortgages and car loans and borrowing by small businesses, as well as on the government's future borrowing. That, in turn, would drive the deficit up, and the prospects for economic recovery down.

The markets dipped sharply Tuesday in recognition that the ideologues really may take us over the cliff. Things could get much, much worse.

If we default, it would shake a global economy already unsettled by the Greek debt crisis. It would undermine foreign investors' faith in Treasury bills, which have been the global gold standard, making it necessary to pay an interest premium to attract investors. China, our largest creditor, is already making nervous noises.

As for further effects, no one can fully predict them - one reason U.S. officials call it "unthinkable." We don't want to find out.

Indeed, this whole imbroglio has shaken global confidence that the American government knows what it's doing. As the financial writer Sebastian Mallaby told CNN: "Allies around the world would look at the United States and say, 'Their political system is so dysfunctional they can't even keep their government open, so what kind of a reliable ally can they be?' "

Leaders in Beijing, Tehran, Arab states, and other capitals of unpleasant autocracies are no doubt watching the debt-limit impasse with amazement and concluding that this country is a declining power. That conclusion will surely color how they react to American demands on any number of issues.

It's no accident that business executives and Wall Street types are beginning to get nervous. The business community understands the danger, even if many Republicans don't. "The damage will be real and long-lasting," says Mohammed El-Erian, CEO of PIMCO, one of the world's largest bond traders.

Our Tea Party Taliban doesn't use guns, but its dedication to doctrine is harming the country with the ferocity of bullets. Our prestige and influence is reeling from self-inflicted wounds.


E-mail columnist Trudy Rubin at trubin@phillynews.com.

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