< We Didn't Really Dodge a Bullet


Friday, October 18, 2013



KATE BOLDUAN:  To borrow a phrase from a past crisis, [LAUGHS] the long national nightmare is over.


BOB GARFIELD:  That was CNN’’s Kate Bolduan Thursday, with a powerful description of what happened this week. That’s how many media voices portrayed the end of the shutdown, in spite of that portrayal being utterly untrue. As long as congressional Republicans can use routine debt limit approval to sue for Democratic concessions, there’s every possibility we will be back in the nightmare in four months, as the next deadline approaches. As for the media's characterization of the economic fallout, that went mostly like this:

RACHEL MADDOW/MSNBC:  And congratulations, America. We have not defaulted on our national debt, by the skin of our teeth!

BOB GARFIELD:  Reuters’ financial blogger Felix Salmon says that the close call narrative that played out Thursday is an altogether misleading, if comforting, depiction of what really happened.

FELIX SALMON:  In a very real sense, the government is in default on its obligations. If we were to default on our Treasury bonds, it’s not like we're not going to pay you and you’re just going to have to take losses on your bonds. But what it means is we are not going to pay our obligations, as they come due, and that’s exactly what we’ve already started doing with the government salaries.

What people can’t do anymore is just implicitly trust that the obligations of the US government are what’s known as risk-free assets. This is this absolutely key concept in the financial markets. And it’s just impossible anymore, after what we’ve just seen, to believe that there is zero risk.

BOB GARFIELD:  Now that, once again, the final negotiations have been postponed on the debt ceiling, the operating cliché is we  have kicked the can down the road.

REP. STEVE ISRAEL:  We are kicking the can, but better to kick the can than to stomp on the can.

MAN:  At the same time, we can’t keep kicking the can down the road…

MAN:  Instead of kicking the can down the road…

MAN:  Kick the can down the road…

MAN:  And kick the can down the road…


FELIX SALMON:  The can-kicking metaphor is one which we’re very used to in the financial press. It invariably refers to countries which have very gnarly problems which can't be easily solved, and so what they do is implement legislation which causes those problems to just rise up again, down the road. That  is not the situation that we're facing right now. The entire problem could go away, as a stroke, if we just abolished the debt ceiling. That is not an insurmountable problem. There’s a piece of legislation, the McConnell Amendment, which would surmount it. And so, we’re taking a tractable problem and forcing it to come back, time and again, for no reason.

BOB GARFIELD:  As these things come up, how should the press be focusing its coverage? And how should we be doing it, in particular, this week?

FELIX SALMON:  Some of the better coverage that I saw was coming from abroad. You would get people going to Mexico, Brazil, India, China, South Africa and looking at the US through the eyes of foreigners, who are just absolutely shocked and appalled and can't believe what they’re seeing. And to just pull back a bit, get that kind of perspective, and to try and explain that this is not some kind of a game where so long as we managed to come up with a solution before some artificial deadline, that everything’s going to be okay.

BOB GARFIELD:  Well, I know somebody who agrees with you, there.

HOUSE SPEAKER JOHN BOEHNER:  And now, this morning I get the Wall Street Journal out, and it says, well, we don’t care how long this lasts, because we’re winning. Well, this isn’t some damn game!

BOB GARFIELD:  That was Speaker of the House John Boehner, about 10 days into the crisis. One of the ironies of this whole episode, it seems to me, is that the global financial stability that hangs in the balance and the devastation to the US economy was triggered by the tea party minority in the House of Representatives and one loud US Senator, all based on

Obamacare, which they claim is a dangerous, dangerous law because it's going to wreak havoc on our economy, and they say is wreaking havoc on us now, that it’s going to increase deficits, that it’s going to increase the national debt. Just  on the face of it, are those conditions even present or expected over the next, let's say, 10 years, according to neutral economists?

FELIX SALMON:  Well, there’s a whole arm of the government, called the Congressional Budget Office, which is tasked with exactly this question. And if you ask the CBO about Obamacare, they’ll say no, it really doesn't do what the Tea Party says it’s going to do. I'm going to go with the CBO on this one.

BOB GARFIELD:  So I guess my ultimate question is, should it not be a staple of coverage to remind readers and listeners and viewers, more or less every step along the way, that this whole ongoing catastrophe is premised on political rhetoric that is fundamentally untrue?

FELIX SALMON:  [SIGHS] Yeah, I wish. I, I would love that.


It wouldn’t change much, to be honest, because it's very difficult to argue someone out of an ideology using Congressional Budget Office speculation about what may or may not happen to debt-to-GDP ratios in the future.

BOB GARFIELD:  If the press understands institutionally that reporting the context properly and regularly is not going to have an effect on a major player in the debate, namely the Tea Party Republicans, does that absolve us of the responsibility to do our job?

FELIX SALMON:  Absolutely not, no. We should be out there,  explaining the facts as clearly as possible, as regularly as possible, and not just in the last crazy few days before the debt ceiling is reached. It’s incumbent upon the press to explain, no, this really is the politics of suicide, and it's insane for anyone to vote for it.

BOB GARFIELD:  Felix, as always, thank you very much.

FELIX SALMON:  Thank you.

BOB GARFIELD:  Felix Salmon covers international finance for Reuters.


Felix Salmon

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