Be Serious, Default Wouldn’t Be ‘Catastrophic,’ Nor Will It Happen
10th May 2023
Please keep this in mind amid all the hyper-ventilating over potential default. Janet Yellen, the walking, talking-est contrarian indicator on earth claims default would be “catastropic,” while the always and everywhere expert reverent Catherine Rampell tells readers “If you’re not afraid yet [about default], you should be.” Wise minds will be calm. This is such a non-story.
For one, As evidenced by the floating, occasionally very weak dollar over the decades, the U.S. has defaulted numerous times. And that’s not a partisan point. Left-of-center economists Carmen Reinhart and Kenneth Rogoff are clear in their book This Time Is Different that when FDR revalued the dollar from 1/20th of a gold ounce to 1/35th, the U.S. defaulted.
All of which brings us to the present. In contemplating the present, it’s useful to think about another book written by left-of-center reporters Peter Baker and Susan Glasser, The Man Who Ran Washington: The Life and Times of James A. Baker III. Baker and Glasser’s book was very fair, and among other things the authors noted about President Reagan was that much as he wanted a smaller, much more limited government, the act of achieving “it proved harder than Reagan’s team had imagined – every program they wanted to cut had a constituency, it seemed, often including fellow Republicans.” Translated, while some politicians want limited government, they all have at least one program that’s near and dear to them. Since they all do, government will always and everywhere grow as votes are traded back and forth so that everyone gets what they want.