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…is lined with banana trees.
This is my response: http://www.youtube.com/watch?v=BYBw_o_2nG0
Raising the debt ceiling doesn’t increase the debt. Selling bonds raises the debt. We sell bonds because government spending is in excess of revenue. If you want to curb government debt, you need to do something about spending and revenue.
Sovereign debt isn’t like personal debt. If you default on personal debt, your creditor’s remedy is to sue you and take your assets. There’s no court which could have jurisdiction to take the United States’ assets against its will. There’s no sheriff with the power to seize America. If you default on sovereign debt, your creditor’s only remedy is not lending more to you, or of only lending to you at higher interest rates.
The effect of not raising the debt ceiling is the same as taking on more debt. If we don’t raise the debt ceiling, our ability to pay off the notes we’ve already issued will decrease, meaning the government will have to pay more for money. If we took on vastly more debt, (more than is at issue in the debt ceiling “debate”), we’d similarly diminish our ability to pay off the notes we’ve already issued, meaning the government will have to pay more for money.
There’s functionally no difference between not raising the debt ceiling and taking on nearly infinite debt. Refusing to raise the debt ceiling in order to control debt is like refusing to pay your credit card bill in order to keep your credit score healthy.
“There’s no court which could have jurisdiction to take the United States’ assets against its will. There’s no sheriff with the power to seize America. ”
True, but I wonder if I’m paranoid to expect that someday, a little sooner than anyone would guess, some American leader might find it politic to willingly submit to some world court, bankruptcy or otherwise.
You are paranoid to expect that.
1. There is no world bankruptcy court.
2. There is no “world court.,” with the caveat that most countries recognize universal jurisdiction for war crimes. Defaulting on a note isn’t a war crime.
3. We can submit to courts all day. We do routinely submit to courts, through the FTCA or various arbitration agreements, such as with the WTO. Submitting to courts doesn’t give someone the power to take US assets without our will. The US is a sovereign. No matter what courts we submit to, no one is taking our assets against our will, and if they try, they won’t be collecting on a debt. They’ll be starting a war.
My point was that there are only no such things yet.
Banana republics collapse or get squashed and we know it. We’ve been going around trying to “export democracy” in the Middle East partly because we put sovereignty somewhere below human rights (which is one thing) and political posturing (which is another). Who’s going to rescue us when we, in turn, need it? I don’t find it hard to imagine that few people, if or when that time comes, will first think “ourselves.”