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I will, on reflection, quibble with this one passage from Keith Hennessey:
But it’s irresponsible for the government not to fulfill in a timely fashion legal commitments it has already made. This is about the sanctity of contracts and the U.S. government’s credibility as a party to an agreement. If the U.S. government legally commits to paying someone a benefit, or agrees to pay a firm for a good or a service, the U.S. government should fulfill that agreement in a timely fashion. To do otherwise is taking the first step to becoming a banana republic.
This all sounds superficially convincing. But there is a front-loaded, lopsided, failure-to-see-the-bigger-picture aspect to it. Consider:
Why wasn’t it “irresponsible” for the government to make a bunch of ‘legal commitments’ in the first place, ‘commitments’ to spend more than it either has or can (sustainably) raise?
Why wasn’t it then – when the irresponsible spending was approved – that the ‘U.S. government’s ‘credibility as a party to an agreement’ was, could have been, or should have been called into question?
Why wasn’t the ‘first step to becoming a banana republic’ the moment they approved a bunch of pie-in-the-sky spending (and not the later, inevitable moment that they struggle to scrounge up that spending)?
If I rack up a giant credit-card bill buying lap-dances, and then later can’t pay it, does it make sense to chastise me for the ‘not-pay’ part but let me totally slide on the ‘lap-dance’ part? Because that’s what everyone is effectively doing.
Surely a neutral observer not clouded by this bias towards spending everyone seems to have would at least have a hard time sussing out how/where to assign blame between (1) the moment spending is approved and (2) a later moment when borrowing is not-approved, hence spending cut off.
But if you follow the Hennessey analysis to the letter, you never end up assigning blame to moment #1. Congress can seemingly dial up any number from 0 to Infinity with the help a random-number-generator, write it down, and then ‘approve’ spending that number: THAT’S FINE. But if they decline to borrow enough money to cover it later: THAT’S A BANANA REPUBLIC.
No. We already were a banana republic. That ship has sailed. The task before us, should we decide to accept it, is to be the best banana republic that we can be – and to try to limit further descent into banana-hood. I just don’t see not-borrowing-to-pay-wacky-spending-numbers as a meaningful slide down that slide; it was the wacky-numbers that got us down here. And this analytical approach under which Congress gets no blame whatsoever for ‘approving’ spending $X, for all possible values of X – just for not-borrowing-to-cover-it-later – isn’t helping.
Actually, it’s part of the problem. Isn’t it?
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