Republicans have been threatening to default on the national debt. Developments this week underscore how insane that idea is. Catherine Rempel writes:
Recent financial-market turmoil — in regional U.S. banks, as well as some of the larger European institutions — suggests there might be much more fragility in the financial system than previously understood. In a sane world, politicians might respond to this new information constructively.
They might, for instance, figure out what they could do to ensure that financial regulators detect vulnerabilities at significantly sized banks sooner.
Politicians might also take some modest actions to combat inflation themselves, so that less of the burden of dampening demand falls on the Federal Reserve’s interest-rate increases — which are part of the reason we’re seeing stresses in the financial system today.
Unfortunately, that sane world does not appear to be the one we live in.
Democrats blame the failures on Donald Trump's repeal of the Dodd-Frank bill. Republicans blame those failures on "wokeness:"
Some have instead blamed bank “wokeness,” a thoroughly incoherent (and yet very funny!) theory of the case. Hardcore Trumpers such as Peter Thiel patronized Silicon Valley Bank, so it’s hard to imagine the bank’s problems lay in too much emphasis on, say, critical race theory. We shouldn’t be surprised if Republicans start scapegoating drag queens soon, too.
After a scare like this, the next few months would normally be consumed with fights about what happened and how lawmakers should best address unexpected new weaknesses in the financial sector. But things have so devolved into petty demagoguing that the biggest new risk is that demagoguing about SVB’s problems will dovetail with the other crisis that has been looming for months.
Since at least last fall, Republican lawmakers have been threatening to not raise the debt ceiling, the statutory limit on how much the federal government can borrow to pay off bills that Congress has already committed to. They have laid out a mathematically impossible set of conditions they say must be met before they would consider raising the government’s borrowing authority.
There is never a good time to toy with the full faith and credit of the U.S. government, or otherwise question the validity of U.S. public debt. (Fun fact: According to the Constitution, it’s actually always forbidden.) But doing so right now seems especially unwise.
But, if there is one word that defines the Republican party, it is "unwise."
Image: ABC News