Thursday, June 30, 2011

Another Viewpoint on the National Debt

I first encountered Fareed Zakaria on ABC's Sunday news show, This Week With George Stephanopoulos. I was struck by both his clarity in thinking and in articulating his thoughts. Frankly, when he left the show, I missed him more than I did George Stephanopoulos, who turned the hosting job for This Week over to Christiane Amanpour last August.

Zakaria was born in India, but came to the U.S. to attend Yale, where he earned his B.A. degree. He later went on to earn a PhD from Harvard. He was formerly the editor for Newsweek International and is currently the editor-at-large for Time as well as the host of the CNN show Fareed Zakaria GPS.

Foreign Policy magazine has begun doing an annual list--one in 2009 and another in 2010--on the Top 100 Global Thinkers. Zakaria was included on both lists.

I say all this as a lead-in to an interview Terry Gross did with Zakaria on Fresh Air this morning. The title of the show was "What Does a 'Post-American World' Look Like?"

Terry asked Zakaria, "... if the U.S. does not raise its debt ceiling, if we end up defaulting on debts, what impact do you think that would have on the U.S. and the global economy?"

Zakaria responded:

"I tend to think it would be catastrophic. And I think that, more importantly, there is a high enough risk here that this is surely a game we don't want to play. What have we learned over the last three years--whether you look at Lehman Brothers and the effect that that collapse had on the world economy? It's that there are these kinds of things that economists call low-probability, high-impact events that you don't want to test. You don't want to see whether this is one of those things that is an unlikely situation, but once it happens could have a huge seismic global effect, because then the cost of dealing with that--the after-effects--is just cataclysmic.

"I think it would be huge. The United States has never defaulted on its debt. It is the leading country in the world. It has the reserve currency of the world, and I think it is madness for us to be doing this when Congress is, in effect, already mandated that we borrow more money. This is what I don't understand. By choosing to spend money at a certain level and setting tax revenues at another level, a lower level, what Congress has implied is we're going to have to borrow the difference, right? So raising the debt ceiling is the logical consequence of Congress's decision to spend a certain amount of money and to tax at a lower level.

"How can you have second thoughts about this when you, Congress, was the one that set these levels in the first place? And besides which, it's unconstitutional. The 14th Amendment very clearly says the validity of America's credit and its debts cannot be questioned. I don't have the exact phrase, but it's about as clear as you can get. And so for people who believe in the Constitution, it is to me, beyond bizarre that they're doing this. And I think that President Obama should if he is forced to assert that what Congress is doing is unconstitutional and simply use his a executive authority to do what he needs to, to make sure that the United States makes good on its debts."

To listen to the entire interview, go here.

5 comments:

Anonymous said...

Well, I won’t say that I agree or disagree with Zakaria, but someone should say that most of the narrative on this subject is thoroughly disingenuous.

No one disputes that wealthy speculators caused the current economic situation, but the consensus is, they must be sheltered from the logical consequences of their own speculation. I find that surprising, because I have done a lot of speculating in my day, and nobody came around offering to indemnify me from the losses I sustained when I made a bad call. That was years ago. The new logic is that the wealthy must not take any sort of hit, no matter how irresponsible they are, and the powerless must bear the burden for their mistakes. That is the sort of logic that prevailed when Reagan was around, and that led to the Savings and Loan debacle. That was also the logic that prevailed when Herbert Hoover took office and led the country into The Great Depression. Wealthy capitalists and bankers were indemnified by the Hoover Administration from losses, however stupidly incurred. It is the logic that drives the Republican Party.

The public is told Republicans will not stand for any tax increases, but leading Republicans have made it clear they have no problem with tax increases, so long as the poor are the ones paying higher taxes. Their problem is that Obama does not want to jack up taxes on the poor while granting a complete abatement to the rich. They have also made it clear they have no problem with deficit increases so long as the rich are the beneficiaries, as they were during the deficit laden Bush Administration.

No one can speak the truth publicly without being shouted down as a “class warrior,” but the truth is, as Warren Buffett said, there is a class war going on, and his class is both waging it and winning it. One of their weapons of warfare is disinformation. That the disinformers are categorized as among the hundred leading thinkers in the world testifies to the parlous state of American education. That the cooks and bottle washers of the world are rabid Tea Party Republicans testifies to the parlous state of mental health in this country. In a rational world people would not cheer for those who are working against their own legitimate self-interest.

I won’t bother to point out the dishonest arguments used by Zakaria. I will say, however, that I got a real sense of perspective on all this slogging through Cannadine’s excellent book, The Decline and Fall of the British Aristocracy. Everything the American aristocracy is doing is inspired by the experience of their British counterparts, and their principal fear is that they will fall, as their British cousins did, over the period from 1880-1980. Their fear is well justified. The way they see it, without their money they will be no better than you are.

Sandra Ferguson said...

Big business, check that. Businesses with global spans are believed to run the economy. Where then are the individuals? The little guy and gal who pay their taxes, save a bit, invest (maybe) a bit, and spend a bit. What continually rolled around in my brain after the great banking bail-out was the # break-down if those funds had been distributed to the individual. It folks get a 1k bonus, what do they do with it? Pay off a bill? Perhaps. Plug it into savings? Perhaps. That doesn't exactly jump-start the economy. However, give the folks 20K or 50K, and you can darn well bet your Sam's card, money will be spent.

I don't know about everyone else, but when I don't make as much money in any given month, I don't spend as much. If I know I'm working fewer hours for the next 6 months, I adjust my spending habits before I've spent beyond my means. Maybe the government could try that approach. Just a thought.

Jeff Rivera said...

A debt would always remain a debt. No speculations would change it. I would totally agree on how Fareed Zakaria answered those questions.

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