Wednesday, September 16, 2009

Matt Yglesias on why the U.S. will probably default on its debt (implicitly if not formally)

In re. why the Chinese are getting nervous about their holdings of U.S. debt, he notes:

"It strikes me that any rational person looking at how the health care debate has unfolded is going to grow substantially more skeptical about the ability of the United States to pass major legislation in general. What’s more, if you contrast the health care situation with the relative ease with which it was possible to enact debt-financed tax cuts (in 2001 and 2003) and a debt-financed increase in Medicare spending (in 2003) you’re not going to get super-optimistic about the prospects of deficit reducing legislation passing in the future."

This overlaps with but is also partly distinct from (and a complement rather than an alternative to) Bruce Bartlett's explanation, noted by me here, of why the U.S. is likely to default.

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