The Real Threat to the US Economy

In the majority of media coverage about the shutdown and debt ceiling, the press has bent over backward to imply that there is plenty of blame to go around. This is false equivalency of the highest order, and I’m here to correct the record.

The number one threat to the US and world economy is congressional Republicans and, by implication, the reactionary extremist voters who put them in power. They’re about to blow up the financial system in vengeance because they lost the presidential election — and this largely over a policy first implemented by their own presidential candidate.

Today, we learn that House Republicans are still clinging to proposals to scale back the ACA. For the umpteenth time: That was decided in November. Grow up and move on.

And don’t say, “What about the debt?” If they were serious about that, they’d try to keep interest rates low and GDP high. (They’d also take seriously the idea of more revenue…) If we default, though, interest rates will skyrocket and GDP will crater. (That’s not just my opinion, btw; follow the link to see the stark terms used by Mark Zandi of Moody’s Analytics.) Think “rates on my credit card” (instead of the near-zero rates we enjoy now) and “next Great Depression”. That’s a helluva debt trap (expenses way up, income way down) to try to claw our way back out of.

Even the credible threat to default has short term rates rising and people nervous to make long term investments. Would you buy US Treasury bonds right now? Would you open or expand a business right now (or even during the negotiations, assuming a bill passes)? (Zandi estimates the current standoff has already cut $20 billion off GDP.) If I had money to move, it’d be leaving the US economy post haste.

This isn’t “Let’s compromise because everyone has some valuable ideas” time. This is “Either you jerks come to your senses, or you’ll drive our government and economy off a cliff.” And I don’t have a lot of faith in the former.

I really hope Obama is willing to declare unilateral executive power to continue borrowing if it comes to that. The alternative starts to look like an even more extreme, self-inflicted version of the Greek collapse. But with way more guns. What could go wrong?