The AFR has lifted a fascinating article from the New York Times from Bruce Bartlett who held senior policy roles in the Reagan and George H.W. Bush administrations about a US default:
The Obama administration and those on Wall Street have long thought that such a prospect was so horrifying that it would necessarily lead to resolution of the current budget impasse. What I don’t think they understand is that there has been a movement under way for some years among right-wing economists and activists not merely to default on the debt, but even to repudiate it.
Those making this argument are largely unknown to professional economists and journalists, but their research permeates the obscure web sites where Tea Party members get their ideas. And not all are obscure. The late Nobel Prize-winning economist James Buchanan supported debt default, as has the Harvard historian Niall Ferguson.
I have previously noted that defeated Southerners were very hostile to being taxed to repay the Union debt after the Civil War, while the Confederate debt was repudiated and not permitted to be repaid by the states. This is the reason that Section 4 of the 14th Amendment, guaranteeing the validity of the national debt, was included in that amendment.
…There are still many in the South, where the Republican Party is now based, whose hostility to the national debt traces back to those days.
…In 1995, the Foundation for Economic Education, the oldest free market organisation in the country, published a study advocating cancellation of the debt on the grounds that the budget would forever be balanced afterwards.
Any number of Republicans in Congress have said they will never vote to increase the debt ceiling, no matter what. Others believe the threat of default is the only way to force President Obama to accept their demands, whether it’s an immediate balanced budget or repeal of the Affordable Care Act.
Default advocates are a small minority…
Hopefully small enough. Fascinating and scary.
