gracchusdixit

Dick Cheney notoriously once said:  “Deficits don’t matter.”  He was pilloried at the time, not because he was wrong but because he was right.  And what he said about the deficit could just as easily be said about the national debt.   The current manufactured crisis over raising the “ceiling” on our national debt is a thus charade, and both sides of the argument know it.

The truth of the matter is that raising the debt ceiling is largely a psychological gesture, which says to the world:  for the time being, we’ll continue to send you interest payments, and you can continue to pretend you’ll get your money back some day.  Such symbolism is not unimportant, but it shouldn’t be confused with reality.  Debt is, and always has been, a game of musical chairs in which someone is eventually left without a place to sit or a penny to spend.  The only thing that matters, to debtor and creditor alike, is to keep the music going as long as possible.

Republicans constantly prattle on that the country should be run like a sensible household or, better yet, an “efficient” corporation, with a tidy “balance sheet”.  These homely metaphors would be merely silly if they weren’t being used to advance the loony idea that the financial catastrophe of trying to “balance the books” might somehow be good for us.  A nation isn’t a household, and it certainly isn’t a corporation.  This is particularly true of the United States of America.

We have the largest economy in the world, and our public debt is the de facto currency on which the rest of the global economy runs.   We are constantly being threatened with the possibility that our Asian creditors may someday pull the plug and demand their money back.   That’s ridiculous.  Where else are the thrifty Chinese or Japanese going to park their savings?  They need American debt just as much as we do—perhaps more so—and if they pulled the plug, they know full well that they’d be left sitting on a mountain of suddenly worthless paper higher than the Himalayas.  A nation’s debt has value only as long as nobody asks for the money back.

More crudely, we also have the largest military establishment in the world.  No one on the planet is capable of forcing us to pay off our debts until we actually choose to do so.   There will undoubtedly come a day when this is no longer the case.  Military muscle doesn’t last forever, either for us or for the innumerable “empires” that came before us.  But for the time being, our creditors have no interest in turning us over to some global collection agency, because they know that no such agency exists.  You might even say that our debt isn’t debt at all but, rather, a form of implicit taxation:  buy our bonds or we blow you to smithereens; buy our bonds or we’ll let someone else blow you to smithereens.

Finally, unlike households or corporations, governments are perfectly capable of printing all the money they want to pay their bills, and our money just happens to be the world’s principal medium of exchange.  Don’t get me wrong.  Printing money has undesirable consequences, inflation being the main one.  A surge of inflation would be painful for everyone, most especially for ordinary working Americans, but it would, within nanoseconds, turn our national debt into chicken feed.

History, not the debt ceiling, is the only reality that counts.  As long as we remain the foremost economic and military power in the world, the game of musical chairs we’ve bee playing for 75 years will continue.  When our turn at the piano finally ends, somebody else will be playing the tune, and the rest of the world will once again be singing merrily along.