Via AmericaBlog: Krugman: Failure to raise the debt limit could send "a terrible signal" — that "we’re a banana republic"
Paul Krugman considers various aspects of the decision not to raise the federal debt ceiling here.
But then he considers another negative consequence that's rarely discussed, the effect on our reliability in the eyes of other nations — on how well, in other words, we can be trusted by others to govern ourselves well. Hmm.
Mr. Krugman (my emphasis):
When you look at the US fiscal position in terms of what we’re capable of as a nation, it’s not a big problem. ... [M]odest tax increases and reasonable efforts to limit health care costs could bring our long-run finances into line. ... [But] What if it turns out that we’re a banana republic, with crazy extremists having so much blocking power that we can’t get our house in order?A "banana republic." You get language like that from the fringes; not so much from Nobel laureates at the New York Times.
And failing to raise the debt limit could be widely read as a signal that we are, in fact, a banana republic.
It will be interesting to see how this plays out, a real test of mettle on both sides. Krugman thinks that Obama should "not let himself be blackmailed" because "once he gives in the first time, the blackmail will never stop." Unfortunately, I think that ship has sailed, don't you?
But there's always a second time to get it right. Krugman concludes by offering advice, which suggests to me that he's not optimistic:
This is going to be very ugly. But I don’t think there’s any way to avoid taking it all the way to the edge, and possibly over it.These are my thoughts as well. If the crazies want to sink the country, let them, and make them own the disaster. But that's just me; I always like playing to win.
(I wonder what odds the U.K bookies are offering that Obama chooses this way out, now that the royal wedding bets are in the bank? Me, I'd bet with the house on this one.)
GP
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