If you’ve been living in the United States during the past three months and you’re not aware of this “debt crisis” everyone inside the Beltway is talking about, then you’re living under a rock.
The sad truth is, the rest of the world knows about it as well, they’re watching, and let’s just say they’re even more scared than we are on these shores. The reason? The U.S. dollar acts as the reserve currency for hosts of commodities traded every second of every day around the world. Further, the dollar also acts as the “pegged” currency from which many more goods and services are linked, most notably oil.
And for anyone waking up yesterday in London, they would have read this headline in the The (London) Sunday Times, “WASHINGTON PLAYS POKER WITH WORLD ECONOMY.” The editorial from which that headline came goes on to say, “It would be unthinkable now were it not for a dangerous stand-off between the White House and Congress over the country’s debt. … With this humiliating and destabilising threat hanging over them, one would expect politicians in Washington would be rushing to strike a deal. Far from it. They are engaged in a game of political brinkmanship. The US economy is in danger of looking alarmingly dysfunctional.”
Dysfunctional, ladies and gentlemen. And after the weekend’s events, I have to say I’m not sure what sort of poker game House Speaker John Boehner is trying to play, let alone win.
I’m on a roll with this “poker” analogy, so let’s keep it going. Both the White House and Congressional Republicans are holding measly hands, say… a Jack and 10 off-suit. The rest of their hand is full of meaningless low cards, and they’re essentially drawing dead. They’ve both gone all-in, and at best, they will split the pot.
Yet here we find ourselves barely 10 days from “Debt-ageddon” and it seems both sides are trying to out-bluff and out-maneuver the other. For what? What would it accomplish? Are these politicians so hell-bent on beating the other side that they have forgotten why they’re working round the clock – to save the financial health of the country?
Let’s be honest, both sides are to blame here, so they should stop jockeying for more political points, because it will do neither any good.
Of course, if the Speaker keeps up this “exit strategy” where he leaves seemingly every other day, then Americans may decide whose feet they would lay responsibility. Even a recent FOX News poll said Americans would blame congressional Republicans, not the President, if the U.S. were to default on its loan obligations. That’s a FOX poll, folks. That should scare Republicans, but more importantly, it should tell them that, even if they are right on the mission here (which they are), they’re doing a terrible job of sharing that with the American people.
Either way, this is a terrible gamble to make. I’d just as soon see both sides fold and start the talks fresh than risk going right up until the deadline with no deal. Every day they dawdle, the world’s financial markets squirm at such political brinksmanship.
The Congress now faces a choice. It must choose between the pain of discipline or the pain of regret. One or the other is certain. If House and Senate members take the easy way out of these debt talks, they and this nation will come to regret those actions. Regret defined here is an emotional and intelligent dislike for personal past behaviors. And that is clearly what they, and we, will face if we don’t turn this corner toward fiscal austerity.
The pain of regret will leave its scar for years. Even if we extend the debt ceiling in some artificial or short-term way, regret will still haunt us. For it will mean that policymakers weren’t prepared to make the difficult and lasting decisions to avoid such calamities in the future. That is why this debate embodies so many other policy discussions. Think about it – future negotiations over taxes, entitlements, new programs, old programs – they will all hinge on how this Congress emerges from these discussions. Will both sides agree that enough is enough, and put an end to the credit card mentality that has gripped this government?
The pain of discipline is equally unpleasant. I won’t mince words. It will not be easy or free of deep afflictions. We passed that threshold decades ago. Discipline means the tough decisions were made in the name of long-term dividends. We will surely benefit if Congress can get a grip on its spending habits. More importantly, our economy will breathe a little easier and run more smoothly without the crushing saddle of debt.