Rebels Without a Clue   
    By PAUL KRUGMAN   
    Published: September 29, 2013   
      
      
    This may be the way the world ends, not with a bang but with a   
    temper tantrum. Paul Krugman Blog: The Conscience of a Liberal   
      
    O.K., a temporary government shutdown, which became almost   
    inevitable after Sunday's House vote to provide government   
    funding only on unacceptable conditions, wouldn't be the end of   
    the world. But a U.S. government default, which will happen   
    unless Congress raises the debt ceiling soon, might cause   
    financial catastrophe. Unfortunately, many Republicans either   
    don't understand this or don't care.   
      
    Let's talk first about the economics.   
      
    After the government shutdowns of 1995 and 1996 many observers   
    concluded that such events, while clearly bad, aren't   
    catastrophes: essential services continue, and the result is a   
    major nuisance but no lasting harm. That's still partly true,   
    but it's important to note that the Clinton-era shutdowns took   
    place against the background of a booming economy. Today we   
    have a weak economy, with falling government spending one main   
    cause of that weakness. A shutdown would amount to a further   
    economic hit, which could become a big deal if the shutdown   
    went on for a long time.   
      
    Still, a government shutdown looks benign compared with the   
    possibility that Congress might refuse to raise the debt   
    ceiling.   
      
    First of all, hitting the ceiling would force a huge, immediate   
    spending cut, almost surely pushing America back into recession.   
    Beyond that, failure to raise the ceiling would mean missed   
    payments on existing U.S. government debt. And that might have   
    terrifying consequences.   
      
    Why? Financial markets have long treated U.S. bonds as the   
    ultimate safe asset; the assumption that America will always   
    honor its debts is the bedrock on which the world financial   
    system rests. In particular, Treasury bills, short-term U.S.   
    bonds, are what investors demand when they want absolutely   
    solid collateral against loans. Treasury bills are so essential   
    for this role that in times of severe stress they sometimes pay   
    slightly negative interest rates, that is, they're treated as   
    being better than cash.   
      
    Now suppose it became clear that U.S. bonds weren't safe, that   
    America couldn't be counted on to honor its debts after all.   
    Suddenly, the whole system would be disrupted. Maybe, if we were   
    lucky, financial institutions would quickly cobble together   
    alternative arrangements. But it looks quite possible that   
    default would create a huge financial crisis, dwarfing the   
    crisis set off by the failure of Lehman Brothers five years ago.   
      
    No sane political system would run this kind of risk. But we   
    don't have a sane political system; we have a system in which a   
    substantial number of Republicans believe that they can force   
    President Obama to cancel health reform by threatening a   
    government shutdown, a debt default, or both, and in which   
    Republican leaders who know better are afraid to level with the   
    party's delusional wing. For they are delusional, about both the   
    economics and the politics.   
      
    On the economics: Republican radicals generally reject the   
    scientific consensus on climate change; many of them reject the   
    theory of evolution, too. So why expect them to believe expert   
    warnings about the dangers of default? Sure enough, they don't:   
    the G.O.P. caucus contains a significant number of "default   
    deniers," who simply dismiss warnings about the dangers of   
    failing to honor our debts.   
      
    Meanwhile, on the politics, reasonable people know that Mr.   
    Obama can't and won't let himself be blackmailed in this way,   
    and not just because health reform is his key policy legacy.   
    After all, once he starts making concessions to people who   
    threaten to low up the world economy unless they get what they   
    want, he might as well tear up the Constitution. But Republican   
    radicals, and even some leaders, still insist that Mr. Obama   
    will cave in to their demands.   
      
    So how does this end? The votes to fund the government and raise   
    the debt ceiling are there, and always have been: every Democrat   
    in the House would vote for the necessary measures, and so would   
    enough Republicans. The problem is that G.O.P. leaders, fearing   
    the wrath of the radicals, haven't been willing to allow such   
    votes. What would change their minds?   
      
    Ironically, considering who got us into our economic mess, the   
    most plausible answer is that Wall Street will come to the   
    rescue, that the big money will tell Republican leaders that   
    they have to put an end to the nonsense.   
      
    But what if even the plutocrats lack the power to rein in the   
    radicals? In that case, Mr. Obama will either let default happen   
    or find some way of defying the blackmailers, trading a   
    financial crisis for a constitutional crisis.   
      
    This all sounds crazy, because it is. But the craziness,   
    ultimately, resides not in the situation but in the minds of   
    our politicians and the people who vote for them. Default is   
    not in our stars, but in ourselves.   
      
      
   BOB KLAHN bob.klahn@sev.org   http://home.toltbbs.com/bobklahn   
      
   ... Freedom's just another word for nothing left to eat.->Republican Version.   
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