Sure, lots of people say a U.S. sovereign-debt default would be catastrophic and disastrous and the end of the world as we and the Chinese know it. But maybe it wouldn’t be? In that case, some G.O.P. bitter-enders say, “let’s find out.”
“It really is irresponsible of the president to try to scare the markets,” said Senator Rand Paul, Republican of Kentucky. “If you don’t raise your debt ceiling, all you’re saying is, ‘We’re going to be balancing our budget.’ So if you put it in those terms, all these scary terms of, ‘Oh my goodness, the world’s going to end’ — if we balance the budget, the world’s going to end? Why don’t we spend what comes in?…”
Mr. Paul acknowledged that some economists disagreed with him, but said others agreed. Peter Morici, a conservative economist and a frequent guest on Fox Business, dashed off a column on Tuesday in which he argued that “House Republicans, by refusing to raise the debt ceiling until they obtain budget reforms, may be the country’s last hope to avoid a financial ruin….”
Representative Ted Yoho, a freshman Florida Republican who had no experience in elective office before this year, said the largest economy on earth should learn from his large-animal veterinary practice.
“Everybody talks about how destabilizing doing this will be on the markets,” he said. “And you’ll see that initially, but heck, I’ve seen that in my business. When you go through that, and you address the problem and you address your creditors and say, ‘Listen, we’re going to pay you. We’re just not going to pay you today, but we’re going to pay you with interest, and we will pay everybody that’s due money’ — if you did that, the world would say America is finally addressing their problem.”
More moderate Republicans say sure, a default would be bad, but it’s not going to happen next week, anyway, even if they continue to do nothing about the debt ceiling. And they might be right, although other unpleasantness would follow, according to Goldman Sachs.
Economists at Goldman Sachs Group Inc., IHS Inc. and BNP Paribas SA said they expect the Treasury to husband the tax money it collects to make sure it can meet interest payments on the nation’s debt. Other obligations, from salaries of government workers to payments to defense contractors, would face the ax. The result: $175 billion less in government spending during November alone, said Goldman’s Alec Phillips in Washington.
“The cutting would be so huge it would put the U.S. back into recession,” said Jim O’Neill, former chairman of Goldman Sachs Asset Management who is now a Bloomberg View columnist.