The World Next Week podcast is up. Bob McMahon is taking a well-deserved vacation this week. So I sat down with my colleague Stewart Patrick to discuss the continuing debt ceiling debate; Secretary Hillary Clinton’s trip to Asia; the inauguration of Peruvian President-elect Ollanta Humala; and the UN Security Council’s debates on Sudan and Libya.
The highlights: Read more »
At the tail end of a post last week I posed the question of what the consequences would be for American power around the world if Washington fails to raise the debt ceiling and the United States defaults. I promised to post my answer within a few days. Well, you can find it in the Outlook section of today’s Washington Post.
In a nutshell, a default would do significant damage to American power. It would create greater pressure to cut defense spending, make it harder to negotiate with foreign capitals, and erode American soft power. A default also could potentially end the long run that U.S. Treasury’s have had as a safe haven. That may not sound like much, but the fact that global capital sees the United States as a safe haven during crises has long given Washington considerable flexibility in foreign policy.
Worse yet, the costs of a default would be wholly unnecessary—an unforced error (if you like tennis metaphors), an own goal (if you prefer soccer, excuse me, football metaphors), a fumble (in American football), or a Merkle’s Boner (if you know your baseball history) of epic proportions.
Two points I wish I had made in the Post piece but didn’t. First, the higher interest rates that a default would trigger would derail an already weak American economy, and potentially the global economy as well. That means lower government revenues, higher unemployment, ballooning deficits, and even greater pressure to cut defense spending and retrench overseas.
Above the Fold. Speaker of the House John Boehner and Senate Minority Leader Mitch McConnell both say that the United States must avoid a debt default; Senator McConnell has gone so far as to propose a complex mechanism by which President Obama could raise the debt ceiling and Republicans could cast symbolic (and almost certainly meaningless) votes against it. But members of what National Public Radio has dubbed the “Hell No Caucus” in the House dismiss default as unlikely or no big deal. Their adamant opposition to raising the debt ceiling prompted House Majority Leader Eric Cantor to say this week that “nothing can get through the House right now.” Perhaps this is just run-of-the-mill posturing. Or perhaps a default is no big deal. But I decided long ago that there are several things I am not interested in learning. One is whether airbags work. Another is whether it is truly dangerous to stand under a tree during a lightning storm. A third is how Ohio State fans will react if you cheer for Michigan when the two teams play football in Ohio State’s stadium. To this list I would add discovering the consequences of defaulting on the U.S. public debt.
CFR Event of the Week. It has been another quiet week here at CFR, so we dip back into the archives. While the wrangling over the U.S. debt ceiling is stirring jitters in markets here at home, investors are also getting nervous over signs that the Eurozone’s debt problems continue to grow. Last month Olli Rehn, commissioner for economic and monetary affairs for the EU, sat down at CFR with Steven L. Rattner, lead auto adviser at the Department of Transportation, to discuss the Eurozone’s problem and future. You can listen to the audio or read the transcript.
Read of the Week. The U.S. General Accountability Office has created a website that will tell you everything you need to know about the U.S. national debt. With the exception of a brief moment in the 1830s, the U.S. government has run a debt since it first began operation. (At Alexander Hamilton’s insistence, the government formed by the Constitution assumed Revolutionary War debt.) If you master this website you will dominate all cocktail and barbeque party conversation this weekend.
The World Next Week podcast is up. Bob McMahon and I discussed the ongoing negotiations over raising the debt ceiling; NATO’s handover of power in the capital of Helmand province to Afghan forces; Secretary of State Hillary Clinton’s visit to India for the second round of the U.S.-India Strategic Dialogue; and the UN Security Council debate on the effect of climate change on international peace and security.
Above the Fold. They say that if you wait long enough everything comes back into fashion. Such seems to be the case with brinkmanship, the idea that leaders should go to the edge of disaster during a crisis to get their way. Brinksmanship was a hot concept back in the 1950s along with coonskin hats, and it is enjoying a renaissance in the current showdown over the national debt ceiling. Republican leaders know that failing to cut a deal would be economically and politically catastrophic. (The Economist and the National Journal both run through that nightmare scenario if you want to see what it looks like.) But they also know that “hanging tough,” to put a positive spin on the same idea, can be a devastatingly effective negotiating tactic—provided of course that the other side blinks first, which is what President Obama may be doing with his offer to rein in Social Security spending. But there is one small catch. Back when John Foster Dulles was championing brinksmanship, presidents could deliver on the deals they cut once they got to the brink. No one had the standing to undo their handiwork. President Obama and Speaker Boehner can’t be sure they command the same following. Rank-and-file House members on both sides of the aisle could revolt against any Obama-Boehner “grand bargain,” Democrats because they think Obama gave up too much and Republicans because they think Boehner got too little. Throw in the fact that the voters may blanch when they learn how any deal will affect their favorite programs—see the poll question of the week below—and you are guaranteed that the wrangling over the debt ceiling won’t be over until all the votes on Capitol Hill are counted.
CFR Event of the Week. We had a quiet time here at CFR this week. So for the event of the week we are going into the archives. Tomorrow the Republic of South Sudan will officially become independent. Susan Rice, the U.S. ambassador to the United Nations, and Colin Powell, head up the U.S. delegation that will be in Juba for the celebrations. In mid-February my good friend and colleague Irina Faskianos sat down with Katherine Almquist, former assistant administrator for Africa at the U.S. Agency for International Development, and Payton L. Knopf, International Affairs Fellow at CFR, to discuss the prospects for peace in a post-referendum Sudan. Check out the audio.
Read of the Week. Most Americans cheered as ordinary Tunisians, Egyptians, Libyans, and then Syrians took to the streets demanding political change. Richard Haass writes in the pages of the Financial Times, however, that “the promise of the Arab spring has given way to a long, hot summer in which the geopolitics of the Middle East are being reset for the worse.” Although the turmoil in the region will likely have ripple effects well beyond the Middle East, Washington has few levers with which to guide events in a favorable direction: “There is little in foreign policy more difficult than trying to steer the course of reform in another country.” If you think my boss is wrong, just think for a moment about how difficult it is to get American lawmakers to fix things here at home.
Blog Post of the Week. Josh Rogin offers up an early run down on who’s giving foreign policy advice to Mitt Romney, Tim Pawlenty, and Jon Huntsman. The most interesting aspect of Josh’s article may be the fact that “the vast majority of the Republican and conservative foreign-policy professionals and think-tankers in Washington have yet to pick a horse.”
The Water’s Edge examines the political forces shaping American foreign policy, the sustainability of American power, and the ability of the United States to navigate a rapidly changing world.