Commentary Magazine


Topic: U.S. economy

Can a Deadbeat America Stay on Top?

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.

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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.

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It’s Getting Late Early for Obama’s Economy

For some liberal political strategists, the focus on the monthly federal jobs report that will come out later this morning is much ado about not all that very much. The unemployment and job creation numbers are, they say, just statistics that don’t necessarily tell us all that much about the economy and perhaps even less about the sentiment of voters. To which the sensible observer can only respond: Like hell, they don’t.

The question about why we’re all so obsessed with economic statistics this summer was the conceit of a New York Times feature that served to preview the latest jobs report due out on the first Friday of every month. According to many of those quoted by the paper, the problem with the jobs numbers obsession is they aren’t a true measure of the worthiness of President Obama’s economic program. Their fear is that the latest report as well as those that preceded it and those that will follow in the coming months may merely reflect a caprice of fortune in which a few ill-timed economic statistics can ruin the chances of an otherwise praiseworthy president to gain re-election. The experts consulted seem divided between those who think the predictive power of these stats is overrated and those who think they do mean a lot but aren’t necessarily fair to the president.

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For some liberal political strategists, the focus on the monthly federal jobs report that will come out later this morning is much ado about not all that very much. The unemployment and job creation numbers are, they say, just statistics that don’t necessarily tell us all that much about the economy and perhaps even less about the sentiment of voters. To which the sensible observer can only respond: Like hell, they don’t.

The question about why we’re all so obsessed with economic statistics this summer was the conceit of a New York Times feature that served to preview the latest jobs report due out on the first Friday of every month. According to many of those quoted by the paper, the problem with the jobs numbers obsession is they aren’t a true measure of the worthiness of President Obama’s economic program. Their fear is that the latest report as well as those that preceded it and those that will follow in the coming months may merely reflect a caprice of fortune in which a few ill-timed economic statistics can ruin the chances of an otherwise praiseworthy president to gain re-election. The experts consulted seem divided between those who think the predictive power of these stats is overrated and those who think they do mean a lot but aren’t necessarily fair to the president.

But this analysis misses the obvious. The numbers matter because they are the tangible measure of the success or failure of any administration in proving the country is in better shape than it was when they took over the big fancy offices in Washington after the last presidential election. If voters take these numbers seriously, it’s because along with personal experiences, they help form the voters’ overall impression of the state of the economy. The key here is not so much the details of each report as it is the trajectory of the nation’s finances. Moreover, given the fact that we are just four months away from the November election, it’s that point in time when, in the immortal words of Yogi Berra, politicians begin to understand that “it gets late early out there.” Once the electorate accepts the verdict that the economy is either on the decline or on the rise, a possible change in the fall (with the exception perhaps of a collapse on Wall Street such as occurred in September 2008) is unlikely.

If, as some economists think and worried Democrats fear, the jobs reports will continue to spread gloom, attempts to spin the statistics as either arbitrary or misleading won’t work. Nor will President Obama’s claim the economy has been recovering for three years on his watch. If three straight summers of recovery leave the country in worse shape than the president found it in January 2009, then the only arguments to be made for his re-election will revolve around the historic nature of his presidency and attempts to smear Republican candidate Mitt Romney. Though it will, as Bill Kristol rightly noted yesterday, take more than a bad economy to elect Romney, a president who can’t run on his record in the midst of an ongoing economic crisis isn’t likely to be re-elected.

President Obama will have to hope the July numbers will be kind to him and pray the first Friday of August and September will not do him more damage. But whether they help or hurt him, it’s no good for Democrats to pretend the sinking employment figures aren’t a fair measure of the administration’s competence.

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