Yesterday President Obama declared that no one is arguing for government default. But isn’t it amazing to see so many politicians work so hard to ensure that un-argued-for goal?
There are two parts to a default. The first is running up debt; the second is not paying it back. Like it or not, advocate it or not, sovereign debt repudiation comes closer as American politicians lumber on with the first part.
Of course, there are folks who think the American people should simply repudiate their government’s debt. Over at the Mises Institute, Justin Ptak provides citations from more than one economist advocating just that.
Gary North states that the day is fast approaching when the phrase “full faith and credit of the United States government” will “provoke universal laughter. . . .” He insists that “the credit rating of the United States government will be marked down from AAA to AA. It will then be marked down to A.” What’s more, he says this is a good thing: “For every notch down that it falls, the national day of deliverance draws closer.”
Paranoid? Fringe? Hopeful? No matter how you categorize such talk, it’s not crazy to think about, since the probability of default grows as the debt increases.
A default could have a beneficial effect on America’s politicians: They would be unable to finance further deficits. Reality’s cold, hard fist — that is, un-amused investors — would rein them in.
This is Common Sense. I’m Paul Jacob.