Friday, May 20, 2011

Forgive us our debts?

If you borrowed government-guaranteed money for your college education and think you can just default on it and move on with your life as if nothing had happened, you will be sadly disappointed.

Defaults are treated seriously. They are reported to all national credit bureaus and this will affect your ability to buy a car or house, or to get a credit card.

But what about the money the government owes its bondholders?

When individuals, institutions or other countries lend money to the United States, they should be able to assume that their investment is secure. After all, it's backed by the full faith and credit of the United States—one of the richest nations in the world.

Incredibly, faced with the uniquely American requirement for a congressional vote to continue paying interest on U.S. Treasury notes held by millions of Americans as well as foreign investors, the Republican-controlled Congress is now continuing to consider simply defaulting on its obligations.

And who is pushing us toward default? Not China or even the Axis of Evil, but the tea party, a radical group that Republicans thought they could control and now find themselves being controlled by.

House Speaker John Boehner appears more concerned about these members of his own caucus than he is about the financial reputation of the United States. There's nothing new under the sun here.

Alexander Hamilton, the first secretary of the Treasury, faced stiff opposition to requiring the new American government to pay off its Revolutionary War bonds. Hamilton's opponents argued that the government should not pay off those bonds that had found their way into the hands of speculators. Hamilton knew that what was at stake, then and now, was the world's trust and America's acceptance into the family of nations.

Like Hamilton in 1780, every responsible businessperson and financial industry spokesman warns against playing games with the full faith and credit of the United States. Obviously, however, we are playing games—conflating the debt ceiling with the very real, but very different, issues of budgeting and deficits.

Boehner, Rep. Eric Cantor and Sen. Tom Coburn seem quite willing, even giddy, about taking the risk of defaulting on U.S. debt by not raising the debt ceiling. Their giddiness must give way to seriousness. At stake is the very standing of the United States as the world's most trustworthy and reliable nation.

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