So even reasonable and adult Americans have lately been making sounds about refusing to raise the debt ceiling. Not at least without some smidgen of compromise, which will no doubt involve putting poor people in ankle shackles and driving them through the streets.
Honestly, this is so monumentally stupid that we actually be surprised, if we weren't such a cynical and worldly fellow. Let us be utterly clear on this point. Refusing to raise the debt ceiling doesn't change a single thing about our prolifigate, irresponsible, and altogether ill-considered spending. It just means that we refuse to pay the bills.
To put it another way: If the United States of America was you, refusing to raise the debt ceiling would be like refusing to pay your mortgage. I wonder how that would turn out?
Why is it that nominally intelligent people can't grasp this? If you want to do something about spending, cut spending. If you want to raise more in taxes, raise taxes. What you should NOT do, under any circumstances, is willingly default on the national debt simply because you want Medicare benefits issued in chickens.
This is not a bloody game. In 2008, led by a serious mispricing of extant market risk, the mortgage securities market suffered a massive panic and commisserate flight to safety, which crushed security prices and drove down Treasury yields. The inability of the market to supply a co-equal supply of new safe assets led to a collapse in aggregate demand that, along with global deleverging, threw the economy into a massive recession.
That's what happens when investors doubt the safety of MBSs and CDOs. Imagine what happens when the United States regularly, and for no reason other than it's simple bloodymindedness, starts defaulting on it's debt.
