In the 19th century, individual deadbeats could go to prison and countries that defaulted on their debt could be invaded. To choose only two examples of many, Britain invaded Egypt in 1882 and the U.S. invaded Haiti in 1915 because those countries were not meeting their obligations to international debt-holders.
Today we take a far more relaxed view about owing money. The law makes bankruptcy relatively easy and painless for individuals and corporations–at least less painful than the prospect of debtors’ prison. There is no ethic of living within your means; instead we are now encouraged to run up debt, whether via a home mortgage or a credit card bill, and spend, spend, spend. This isn’t necessarily a bad thing—we don’t need to return to the Puritanical, anti-debt attitude of the 19th century. There is nothing wrong with a responsible amount of debt, whether for a family or a country.
But we are carrying our easy-going modern-day ethos a little too far when we run the risk of defaulting on the debt of the United States. Odds are we will see an 11th-hour reprieve from this calamity; at least the markets seem to think so, judging by the run-up of stocks in recent days. But, even if we avert the worst today, it is grossly irresponsible and harmful for lawmakers—meaning principally Tea Party hardliners in the House—to have allowed the deadline to come so close.
Thankfully the U.S. armed forces are still strong enough—for the time being anyway—to prevent the Chinese military from showing up on our shores to collect the trillions we owe them. (But for how much longer? Given the increases in Chinese military spending and our own across-the-board cuts as a result of the mindless sequestration process, the trends are not favorable when it comes to the shifting balance of power in the Pacific.) But the U.S. cannot rely on military strength alone. Much of our economic strength is underpinned by the fact that the dollar is the favorite reserve currency in the world and by the fact that the U.S. is the favorite destination for foreign investment.
That strong financial position will not be sacrificed overnight. But it will gradually erode if we have too many more perils-of-Pauline flirtations with a sovereign debt default. Already China’s Xinhua news agency is using this occasion to call for the world to “de-Americanize.” Such calls are likely to fall on deaf ears—for now. But we cannot afford to make the world think there is any doubt about America’s ability and willingness to repay its debts. That is a fundamental obligation of government, which, if called into question, will erode our national standing and hence our national security. There is no excuse for the willingness of some lawmakers to drive us so close to the cliff’s edge.