Although, most media sources, politicians and economists are telling us that a default by the US government would be the worst-case, world-ending scenario, I’m a bit disappointed to see that hardly anyone is discussing what will happen if they just continue to raise the debt ceiling.
First of all, let’s face the facts. As many have been quick to point out, even if the debt ceiling is not raised, it is highly unlikely that the government would not pay its creditors (which means no default). They would still get paid and, instead, internal cuts would be made- things like Social Security, Medicare, Medicaid, etc. Many of the articles I’ve read quote a man named Jay Powell, who served as a Treasury undersecretary in George H.W. Bush’s administration, and Jay says that it’s anybody’s guess how the cuts will be prioritized, but if the Treasury were to pay for Social Security, Medicare, Medicaid, unemployment and defense contractors, it would be out of money. That would leave out veterans’ programs, student loans and many others. But why, exactly, would the multi-billionaire defense contractors get paid before the veterans programs (remember? the people who risked their lives?)?
Values and Priorities
Powell’s statement begs many questions, actually. Mostly about the values and priorities of this nation.
Firstly, many media sources and economists keep saying that one of the worst things that could happen in the case of a default is that interest rates will go up and people won’t be able to borrow as much. Well, isn’t that a big part of the reason we’re in this position in the first place? People were borrowing more money than they could pay back, in most cases to buy stuff they didn’t need. So, do we really want to keep interest rates low, encouraging people to become even more indebted? Hmmm....
Another question is, why should we have student loans to begin with? Shouldn’t access to higher education be considered a universal right in such a modern, democratic country?
Yet another question is, how can the Federal Government be expected to provide health care or any other basic services for over 300,000,000 people? I am all for universal health care; just like universal access to education, I think it should be seen as a basic human right. However, it must be implemented in a practical and functional way. That means on a local level. The Federal Government’s role in the nation’s politics and economics should be minimal. How many billions of dollars does it lose every year? Money just gone... unaccounted for. The system is monstrous in size. Even in abstract terms, what kind of centralized democratic government can truly provide these kinds of services for so many millions of people? Let’s localize our politics and our economics a bit.
In this spirit, I say that people are greatly overlooking the opportunities that voluntarily defaulting would give the US. Defaulting would give us a very important chance to start fixing the fundamentally flawed aspects of our system. We Americans would have to finally start facing the issues and the reasons why things happen the way they do in this country. For instance, why do the tax-payers have to pay for the bad decisions of the corporations? In recent years, gigantic corporations and banks got nearly $600,000,000,000 (that’s six hundred billion dollars) in tax-payer funded bail-outs. And, now, as the entire nation faces a debt crisis, the tax-payers will absorb the cost of this, too, through the cutting of programs and such, while the billionaire CEOs and banksters will be just fine. In a default scenario, the gap between the elites and the rest of us will grow exponentially overnight. And I see this as a good thing, because it will no longer be able to go ignored. Corporatism could finally come crashing down. A default would force America to face the reality of its situation in a way that it is able to avoid right now, cushioned by a false sense of debt-fuelled security. Many illusions would be shattered (well, they will be shattered at some point, no matter what).
Illusions and Delusions
One major illusion is that of wealth. There is no such thing as debt-funded wealth (which is what we have under the fractional-reserve banking system). It’s just debt, no wealth about it. And, at some point, somebody has to pay. We can either just keep pushing this time further and further into the future, while the debt grows exponentially faster than the economy, or we can face reality and start the creation of a new modus operandi now.
Along with the shattering of the illusion of wealth will come the opportunity to question what we want in our quest for “prosperity”. What does it mean to be prosperous? At what point do the costs of trying to accumulate wealth outweigh the benefits, resulting in a loss of prosperity?
Another illusion is that of independence. The idea that individuals are completely independent and that nations are completely independent is so obviously false, yet this assertion is deeply ingrained and heavily influences society. A default would show just how important our connections and interdependence are. In the midst of no more cheap credit, we would have to rely more on each other and cooperate. Something that I think is very healthy, considering that we only had independence funded through debt (therefore, a false sense of independence). Families, neighborhoods and communities will all start pulling together more.
Who knows? Maybe a default would even break the illusion that having more stuff brings us happiness, an idea that’s been proven wrong through surveys dating back to post-WWII. The surveys show that Americans’ self-rated feelings of happiness and life satisfaction peaked in 1956 and have slowly, but steadily, been dropping ever since, despite rises in income and having vast amounts of more and more stuff.
American Realizations
Another reason America should default is that it would not be alone. It could reign in the new paradigm that’s coming, whether we like it or not. Greece, Spain, Portugal, Italy, Ireland and the UK, just to name a few, are also in the midst of huge debt crises, a fact that proves two things. 1) The US is far from being alone in this problem. 2) The modern, Western approach to development has failed. (This approach mainly being “party now, pay later”.)
This situation gives us the chance to truly build the foundation for realizing the vision of America that was described in our Constitution; a vision that has, to this day, never been realized. I use the word “realize” twice because it is extremely important. “Realize” has many meanings, all of which are needed in the renewal of our country and, indeed, our world.
Realize:
1) to understand
2) to become conscious
3) to make real
Let’s finally heed the message that the era of debt-fuelled growth and excess is over and use this as an opportunity to change our values and priorities and realize a truly prosperous society.
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