Yes, "default." And I thought I was hard-nosed.
Welcome Martin Wolf, economics writer for the UK Financial Times, to the screamer side of the table. (Hat tip Paul Krugman, whose headline for this find is "Martin Wolf is Shrill.")
There's more good stuff in this Financial Times article than I can quote honorably, so I urge you to click through. It's highly readable. Wolf's bottom line is the same as mine — the crisis is the plan for Movement Conservatives, whom he quaintly calls "radicals."
The political genius of supply-side economicsWho's Martin Wolf? This guy. Looks pretty mainstream to me.
My reading of contemporary Republican thinking is that there is no chance of any attempt to arrest adverse long-term fiscal trends should they return to power. Moreover, since the Republicans have no interest in doing anything sensible, the Democrats will gain nothing from trying to do much either. That is the lesson Democrats have to draw from the Clinton era’s successful frugality, which merely gave George W. Bush the opportunity to make massive (irresponsible and unsustainable) tax cuts. In practice, then, nothing will be done.
Indeed, nothing may be done even if a genuine fiscal crisis were to emerge. According to my friend, Bruce Bartlett, a highly informed, if jaundiced, observer, some “conservatives” (in truth, extreme radicals) think a federal default would be an effective way to bring public spending they detest under control. It should be noted, in passing, that a federal default would surely create the biggest financial crisis in world economic history. . . .
[W]ith one party indifferent to deficits, provided they are brought about by tax cuts, and the other party relatively fiscally responsible (well, everything is relative, after all), but opposed to spending cuts on core programmes, US fiscal policy is paralysed. . . .
This is extraordinarily dangerous. . . . Those radical conservatives (a small minority, I hope) who want to destroy the credit of the US federal government may succeed. If so, that would be the end of the US era of global dominance. The destruction of fiscal credibility could be the outcome of the policies of the party that considers itself the most patriotic. [my emphasis]
Like I said, a slow-motion suicide.
GP
