Paul Krugman: GOP Threats to Shut Down Government Have 'Terrifying Consequences' for Global Economy
New York Times columnist and Nobel laureate Paul Krugman at a lunchtime discussion with AFL-CIO staff in the organization's Washington, D.C., headquarters, March 5, 2013.
Photo Credit: A.M. Stan
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New York Times columnist Paul Krugman ripped Republicans in a column over their machinations regarding government spending and the debt ceiling.
While Krugman cautioned that a government shutdown would not be the end of the world, it could harm an American economy still reeling from recession. But even more significant are Republican threats to allow the country to go into default because of a refusal to raise the debt ceiling.
For weeks now, Washington has been convulsed by a debate starring Republicans who want to shut down the government or have the U.S. not pay its bills because of the Affordable Care Act. Krugman focused his ire on the threats to refuse to raise the debt ceiling, which would mean the U.S. can’t pay existing debt.
“Hitting the ceiling would force a huge, immediate spending cut, almost surely pushing America back into recession. Beyond that, failure to raise the ceiling would mean missed payments on existing U.S. government debt. And that might have terrifying consequences,” the columnist wrote. “Why? Financial markets have long treated U.S. bonds as the ultimate safe asset...Now suppose it became clear that U.S. bonds weren’t safe, that America couldn’t be counted on to honor its debts after all. Suddenly, the whole system would be disrupted.”
Krugman lays the blame at the feet of a dysfunctional political system where Republicans can threaten to force a government shutdown over insane demands.
He also ironically says perhaps Wall Street could convince the GOP to not wreak havoc on the economy because of Obamacare. “But what if even the plutocrats lack the power to rein in the radicals?”