If you’ve been confident the U.S. will not default on its debt on October 17th, you may want to reconsider. When the government shutdown began early last week, most Americans were sure the government would not allow the shutdown to cause a default. Even now, most of us still don’t see debt default as a real threat. We’re sure that despite political differences, Congress and President Obama will settle on a budget and will not allow the crippling economic effects that would come from a default to take place. However, our failure to see a default as a serious possibility could be precisely why it may happen.
A Bargaining Chip
At this point in the shutdown, it seems lawmakers are playing the game of who can hold out the longest in the face of looming financial crisis. House Speaker John Boehner has actually admitted he sees the risk of the U.S. defaulting on its debt as a bargaining chip in his budget negotiations with the president. With this attitude, it seems unlikely Congress will approve a budget before the 11th hour, and if it comes to that the budget may not be approved at all. After all, the government failed to reach a last minute agreement to avoid the shutdown in the first place, and it has made little progress in negotiations despite the toll the shutdown is taking on the country. Analysts, after all, estimate the shutdown costs the government about $80 million each day.
The Threat Has Not Taken Its Toll
When the shutdown first began, analysts expected there would be panic if the October 17th deadline was even approached. Interest rates were supposed to skyrocket, and traders were supposed to clam up. However, the economy still seems to be going strong despite the shutdown. Wall Street, at least for now, appears to be more or less unaffected. The fact that there has not been a panic may indicate the America people are not taking the threat of default seriously. Some analysts even believe the October 17th deadline is fake and was created by the government to ensure this shutdown did not go beyond the date.
The 11th Hour
One of the reasons the shutdown has lasted as long as it has is perhaps that people have too much faith in the government. We feel that even though negotiations have failed so far, lawmakers will not be idiotic enough to allow the U.S. to default when it is in their power to prevent such an event. Most of us still feel the government will reach an 11th hour resolution to avoid a default. Unfortunately, this may mean the American people are not putting as much pressure on the government to end the shutdown as they should.
What the Shutdown Means for the Future
Some are less concerned about the danger of default than they are about what lawmakers’ failure to negotiate during the shutdown means for the country’s future. If the Democrats and Republicans cannot work with each other to resolve the shutdown, how will they keep the country running in the future? Technical default would in many ways just be a symptom of a larger issue, similar to the changes in behavior a drug addict may exhibit. Just as the addict would need treatment such as holistic drug rehab to get better, the United States also needs to find a way to repair itself.