Climate change comes slowly, at high price for consumers

 

Gordon L. Weil

The weak agreement at last week’s Glasgow climate change summit and double-digit rate increases for power and its delivery in the bills of Maine’s largest electric utilities have a lot in common.

They both showed that fighting climate change faces daunting obstacles, and it comes at great cost.

Facing entrenched economic interests, the U.N. summit struggled to agree on a new target for halting the steady increase in the world’s temperature.  It renewed hopes without much assurance they can be realized.  It recognized that goals set just a few years ago are being missed.

Some small island nations, facing the prospect of literally going under, issued desperate pleas. For example, the government of the Maldives, a group of islands in the Indian Ocean, claimed the country could soon be drowned out of existence.  Meanwhile, India, its big neighbor, refused to kick the coal habit.

Countries broadly agreed on the need to fight climate change. Who pays and how much could not be settled at a meeting of diplomats, where talk is cheap but change is not.  Tougher action might come next year.

Some countries have promised to fight climate change, but not kept their commitments.  The dangers remain. But, would American taxpayers back a seawall around the Maldives?  What about helping developing countries exposed to expensive energy standards that had not applied earlier to American and European industry?

The advanced economies grew partly thanks to the use of fuels, especially coal and oil, that are major contributors to rising temperatures.  Even today, U.S. taxpayers keep subsidizing oil producers, encouraging them to find more fossil fuels especially using high-cost fracking.

If Chinese, Indian or Australian coal production or the fate of far-away island countries seems beyond the reach of the daily lives of Americans, the issue of climate change and who pays to fight it comes home with every electric bill.

To get all electric production worldwide to come from renewable sources is estimated to cost between $8 trillion and $14 trillion.  After China, the U.S. is the second largest electricity consumer, so it faces a big bill to eliminate fossil fuel power.

When federal or state governments set out to reduce the huge American share of the total cost of reducing the effects of electric generation, they support few of their mandates with new taxes.  Openly advocating higher taxes for any purpose has become politically hazardous.

Paying the cost of moving to non-polluting power is left to electric customers. Politicians get to vote for laudable environmental goals without leaving fingerprints on the bill.  It encourages many of them to generously back new renewables and major power lines. 

All electric service is composed of two elements -- power generators and the wires for getting the power to the customer.

Power supply prices are supposed to be set by the market.  But governments can require that an increasing amount must come from renewable sources, displacing fossil fuels.  As these new resources develop, customers must pay the high start-up costs, and rates increase.

It will take many decades to phase out fossil fuels.  Meanwhile, their prices continue to be set without true competition. When state-market countries in the Middle East and Russia decide to manipulate prices, American oil companies, whose own costs have not increased, promptly follow the prices set by those countries.

When Mainers are told that their electric supply rates will increase because of higher fossil fuel costs, they have to accept bigger bills still mostly dictated by political decisions made elsewhere. Nearing self-sufficiency in fossil fuels means little to the U.S., if Americans pay Arabian prices. And it slows reductions in warming.

Economists delete fuel from what they call “core inflation.”  Inflation is supposed to show increases in production and distribution costs.  Fuel prices bounce around largely free from true cost changes while reflecting the price gouging practices of state-run economies.

The situation is even worse on the wires side of the electric business.  The federal government gives utility monopolies attractive profits to build lines connecting remote renewable sources to consumers.  The utilities like to build major transmission lines, paid for by end users, because that business produces good profits. 

In fact, the federal government gives utilities better profits for building high-voltage lines than the states give them for updating local delivery lines. 

The effort to reduce harmful emissions and halt climate change is widely supported.  If they try to accomplish more than merely making Glasgow-style promises, legislators tell regulators to shift the enormous bill onto consumers, boosting generator and utility profits along the way.

The increase in Central Maine Power and Versant bills will carry out government energy policies, both fighting climate change and boosting oil and utility industry profits.

That may look like a rate increase, but it will really be a tax increase that nobody sees.

“What’s the matter with America?” – people vote against themselves

 

Gordon L. Weil

“What’s the matter with Kansas?”

An 1896 editorial in a Kansas newspaper carried that headline.  It became a national mantra, revived in a 2004 book, a film – both with that title – plus a New York Times commentary last week.  They all concluded that average people often vote against their own best interests.

After this month’s elections, political pundits deployed in force.  Most explained to us Washington outsiders that the Democrats had suffered a bad loss, while Trump’s GOP won.  They urged the Dems to tap dance over to the right so they could keep alive their slim chances for the 2022 congressional elections.

If you ever wanted to know the definition of “conventional wisdom,” that was it.  In other words, the “experts” saw the Democratic Progressives having pulled the party and President Biden to the left, away from the political mainstream.  They paid the price at the ballot box.

In this view, the problem stemmed from the extreme policies unduly influencing a party clinging to a bare majority. Policies like paid sick leave, free community college and even tax increases on billionaires were too far ahead of what people would accept.  The country is “center-right” opined Democratic Sen. Joe Manchin (WV), not “center-left.”

Oddly, polling showed that a majority of Americans favor most “center-left” policies.  Maybe the pundits missed something that was bigger than issues.  Perhaps the view that people favored more moderate policies was not the cause of Democratic setbacks.

David Leonhardt in the Times took a different view from the pundits, one consistent with the Kansas book.  Democratic Party losses or narrow wins were not the result of its dalliance with the Progressive Left, but because it had lost its focus on the attitudes of average working people.

In its focus on appealing to suburban voters, traditionally backers of the GOP, it had assumed that generous federal spending would help it retain the support of middle income workers and their families.  It had failed to understand that many of these voters were driven more by their culture than their material interests, he wrote.

As often noted in this space, unhappy voters want change.  Government as usual has produced pointless wars, unresponsive officials, and troubled leadership. 

It’s not surprising that about one-fifth of Obama voters also backed Trump.  Obama embodied change and Trump, an aggressive businessman with no elective history, convincingly promised it.  In the end, Obama did not produce enough change and Trump abused his mandate.

Joe Biden offered calm and cooperation, but his pious hopes could produce neither.  In some respects, he embodied a return to the kind of government that people wanted changed.  The dangerously disorganized Afghanistan withdrawal and the endless haggling among congressional Democrats made him appear weak.

What had aided Trump’s appeal was his decisive style, even if it edged into being authoritarian.  His claim to have kept his promises had a ring of truth.  Even his critics would have to admit that he changed the way the federal government worked.

In effect, Trump’s presidency raised the question “What’s the matter with America?”  He wanted to slash medical insurance, reduce air quality and cut taxes for the wealthiest.  He let roads and bridges deteriorate. Yet he would gain the second largest popular vote of anybody who had ever run for president.

It’s possible that Trump has no deep-seated principles.  Instead, he recognized voter discontent with policies ranging from affirmative action to foreign wars and managed to make it look like he had led in shaping the opposition.  In reality, he exploited political and social discontent, and left what many saw as uncomfortable or fringe issues to the Democrats.

While this analysis may be pure speculation, conventional wisdom may itself be nothing more that that.  Cable “news” and social media spend little time reporting events and their background, while leaping into instant, poorly considered analyses.

For example, the GOP gain in the Virginia governor’s race is extensively interpreted as a nationally significant rejection of the Democrats in favor of Trumpism without Trump. Little attention is paid to the Democratic candidate’s well-intentioned, but breathtakingly inept gaffes.

Maybe something was the matter with Virginia, and it wasn’t about Trump.  But that’s too boring for the pundits.

Biden could benefit by asserting leadership of congressional Democrats to produce results, like the prompt post-election passage of the infrastructure bill.  It means taking bold, even risky action to get them to pass voting rights and popular parts of his economic and social programs.   

He should stop talking about his tough Scranton background and start acting like it. 

Biden is less than one year into his presidency and already he is being written off.  That’s too quick a judgment.  The challenge for him in the next year is less about policy and more about leadership. 

Covid 19 changed the economy; we won’t go back

 

Gordon L. Weil

To many people, “inflation” is a dirty word.

It means higher prices at the store and higher interest rates at the bank or auto dealer. The basic rule of inflation is that prices rise when too much money chases too few goods.

Yet the Federal Reserve, which can control the nation’s money supply, likes two percent inflation. That rate shows a growing economy in which business is trying to keep up with demand.  Along the way, that effort can create more jobs and, as a result, more demand.

The neat trick is to keep inflation from getting out of hand. If prices and interest rates increase too rapidly, the economy can slow down.   The mismatch between supply and demand becomes too great until the slowdown helps restore a more manageable balance.

For several years, the inflation rate has been at or below the Fed’s target.  But it has climbed in recent months and some market experts believe it will stay high.  They watch to see what moves the Fed will make to raise interest rates and when.  It will act sooner than planned.

Why is inflation increasing?  Its climb is yet another symptom of the Covid 19 pandemic.

When the coronavirus hit, the U.S. and much of the rest of the world hunkered down.  Some businesses closed, travel almost collapsed and many people began living on reduced incomes.  Less money was chasing fewer goods at the store – notably in the strange case of the run on toilet paper.  The federal government moved aggressively to prop up household incomes.

As the economy recovered from the depths of the pandemic, prices began to rise. That created inflation well above the target two percent, though the Fed concluded that the level is both natural, given the low 2020 base, and temporary.  The effect of the inflation surge can be seen in the big boost to Social Security payments for 2022.

While the Fed has been expected to allow small increases in interest rates as the economy returns to something like the 2019 level, what looked like temporary inflation now may extend as a changed economy begins to emerge.   The virus won’t go away and neither will its effect.

One of the biggest changes has come in labor.  Government policy assumed that almost all workers would want to come back to their own jobs just as soon as they could. Trucking companies, offices and restaurants were poised to open.  But something funny has happened on the way to recovery.

During the slowdown, workers had the time to learn something about their place in the market economy.  Employers have traditionally paid them at levels linked to the cost built into the prices they charge.

The Covid 19 quarantines allowed workers to better understand that their value to their employers was more than they were being paid.  Places of business closed for lack of workers.  If you withheld your labor, you might get paid more.  It began to feel like a giant national labor union.

Only a few months ago, debate raged over a $15 minimum wage.  Companies claimed that prices would have to increase, cutting sales and causing unemployment.  When workers did not return as expected, major employers boosted wages in an attempt to lure them back.  The minimum wage is now being set by the market and it could end up higher than $15.

Higher pay can translate into either higher prices, cuts to executive pay, or a reduction in booming investment gains.  Right now, it’s higher prices. That yields higher inflation than originally expected.

The prospect of better pay should bring more workers back to the job.  But what has been called the “Great Resignation” is also taking place.  The Covid break led some people to decide on a more simple, family-oriented life, even if that means less income.  When people start thinking “money isn’t everything,” the economy can change.

The impact of Covid 19 has been big enough to raise questions about the American economy itself.  The free enterprise system is alive and well, but the supply chain from some sources, especially China, has been disrupted.  Add to that the changed relationship of workers to their jobs and employers.

President Biden believes the historic opportunity now exists for increased government efforts to develop new economic and environmental rules and social policies.  The next 12 months should reveal if he is right.  If so, sooner or later, somebody’s taxes will have to increase.

Economic change is occurring.   Operating private enterprises is becoming more costly, possibly promoting labor-saving efficiency. In any case, people are likely to pay more and probably buy less.

That could look like inflation.  But it may turn out to be paying something closer to the real cost of what we need or want.

Democracy could commit suicide if elected leaders block voting

Gordon L. Weil

The wrong Maine senator gave the right U.S. Senate speech.

Sen. Angus King, the independent who aligns with the Democrats, recently argued strongly for a bill that would protect voting rights from efforts in many states to discourage voting or discard valid votes.

He showed that state laws supposedly to protect against election tampering were really attempts to suppress voting.  He said that such laws were aimed at fixing election defects that do not exist.

States passing these laws are under Republican control, but the GOP fears losing its dominance.  It wants to prevent Democrats from winning elections by reducing their valid votes.  King saw their recent moves as endangering democracy itself.

As he noted, the American political system is an “experiment.”  It tests whether government under the people, expressing their will through voting, works and can survive in a world where authoritarian rule has seemed to be the natural form of government.

Over the course of history, people have most often been under the control of either a single man or an elite group.  They have lacked the weapons to overthrow authoritarian rule.  In creating the American republic, the founders gave the people the necessary tool – the vote.

Popular control of government has spread around the world.  The U.S. did not invent democracy, but it has played the leading role in its adoption.

Yet democracy contains the seeds of its own potential destruction.  Voters may choose a government that then uses its legitimate power to curtail or eliminate democracy. In effect, the democratic system can commit suicide.

The simple reason why elected officials would endanger or destroy democracy is their desire to cling to power for their own ends.  Their drive to make their control permanent, even if it means undermining democracy, proves the truth of the famous assertion by a long-ago British leader: “All power tends to corrupt; absolute power corrupts absolutely.”

Sometimes they seek power for its own sake.  Or they may use the power of government to enrich an elite group.

That threat is why the system of government under the U.S. Constitution is considered an experiment.  It was endangered when a destructive mob of a few thousand people tried to seize the Capitol on January 6 to reverse the results of an election decided by tens of millions of people.

Attempts to prevent majority rule, the central element of democracy, have gone on as long as the U.S. has existed.  Yet the Constitution has been repeatedly amended to extend democracy by guaranteeing voting to all 18 and older, regardless of race or sex. It provided for popular election of senators and abolished the poll tax used by some states to screen out black voters.

Increasingly, GOP-run states limit access to the polls, and some give Republican legislatures the right to overrule election results.  They echo Trump’s self-serving charge, made with no proof, that massive cheating deprived him of victory in 2020.

Not one Republican senator voted in favor of a bill to prevent states from suppressing voting or overriding the popular vote.

King did not gain as much national recognition as Maine Sen. Margaret Chase Smith received for her “Declaration of Conscience” speech in 1950.  Backed by a few other Republican senators, she condemned Wisconsin GOP Sen. Joseph McCarthy for his phony anti-Communist campaign, smearing hapless victims.

Smith gained fame because she took on a member of her own party.  For her, principle did not conflict with her party.  She said the GOP could defeat the Democrats without resorting to McCarthy’s tactics.

The difference between Smith and King was that he was defending democracy by opposing the other party, the Republicans, while she defended it by taking on her own party. His warning was laudable.  Her declaration was both laudable and courageous.

Sen. Susan Collins, a Republican, says that Smith is her political model.  Having shown the courage to vote against the political impeachment of Bill Clinton and for the impeachment of Donald Trump because of his support of the January 6 insurrection, she might have been expected to speak out against the GOP assault on democracy.

Collins would have been the right senator to express the sentiments in King’s speech.

When a thoughtful senator like Collins falls in line with the anti-democratic actions of her fellow Republicans, it reveals the depth of political division.  The GOP’s policy boils down to crushing the Democrats, even if they represent a popular majority in a state or the country.

Compromise is now impossible, because there is no common ground.  Unless the Democrats can find ways to win elections despite GOP voter suppression, fair elections could be lost.    The real loser would not be either party, but the people.

Correction: Last week, I erroneously labeled the Ninth Amendment to the Constitution as the Eighth. 

Trump's Twitter lawsuit and upcoming Maine vote: constitutional rights claims used to mislead

Gordon L. Weil

Do these two issues have anything in common?

Donald Trump wants a court to order Twitter to lift its ban on his tweeting.

Maine voters will decide next month on Question 3, a constitutional amendment on food independence.

Both issues focus on individual rights, the basis of Americans’ freedoms.  And they both get it wrong.

As president, Trump used Twitter, a private social media site, to announce public policy.  He tried to block his critics from responding to his tweets. A federal court overruled him, saying that he used the site for public purposes so the people must have free access to comment on it.

Now, he flips the argument. After his backing of the January 6 insurrection, Twitter dropped him. He has gone to court claiming the site is violating his free speech rights. He seems sure to lose.

Meanwhile, the advocates of Maine’s Question 3 say they want to add to the state constitution a confirmation of the “natural” right of people to grow their own food.  Such a confirmation is no more necessary that the right to brush your teeth, so it raises the question whether stating the obvious may have a less obvious purpose.

These two cases illustrate three common misconceptions about individual rights. 

First, the Bill of Rights applies only to both the federal government and, in most cases, to the states and deals with the relationship between government and people not to conflicts between people.  Freedom of speech does not apply between Trump and Twitter.

Second, individual rights are not limited to those listed in federal or state constitutions.  All people have natural rights.  The Declaration of Independence states that all people “are endowed by their Creator with certain unalienable Rights.”

In other words, individual rights are part of the human package.  Not all are mentioned in the Bill of Rights, only those clearly protected from the government. The Eighth Amendment says: “The enumeration of rights in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.” No need to add “right to food.”

Third, no right is absolute. The rights of each person go only so far as they do not harm the rights of others.  The famous rule is that freedom of speech does not extend to yelling “Fire!” in a crowded theater.

This third misconception is being tested now. The government cannot prevent new religions from forming.  Suppose a person creates one for the purpose of asserting that their religion does not allow the Covid 19 vaccination.  Can that right be limited if a non-vaccinated person can spread the illness to others, who may fall ill or die?

Perhaps the most difficult role of the courts is to determine if a limit on an individual right is acceptable because that condition protects the rights of others.

In its decision on guns, the Supreme Court said that the Second Amendment assured people’s right to keep and use firearms for their own purposes, but government could impose some limits. Yet some gun control opponents maintain the right is absolute and cannot be subject to conditions.

Government may pass laws on rights beyond those listed.  It may impose safety and purity standards on food to prevent disease.  For many issues, private parties need to work out among themselves the degree to which they will respect rights that the Constitution makes the government respect.

And, as Trump is discovering, rights must be the same for everybody. Nobody is more equal than everybody else.

What’s wrong with enshrining the natural right to food in the Maine Constitution?  Won’t it amount to nothing more than possibly reducing the sales of canned peas?

Maybe, but the food independence movement may hide a broader agenda behind this proposal, which it seeks to have adopted worldwide. If it is considered absolute, it could reduce government regulation of food safety.  Cutting food regulation is similar to opposing gun regulation.

“We carry concealed weapons because we don’t trust others with our protection, and believe our security is primarily our responsibility,” writes one advocate. “Why do we not apply the same principles though to one of the most important aspects of our life – food?”

In other words, behind what seems to be harmlessly obvious may be an entering wedge to reduce government efforts to protect society.  It is likely a sign of the growing emphasis on stressing individual freedom above the community interest.

Like much of the discussion of freedom, the cornerstone of the American democratic system, much of what is said about Trump’s right to free speech, fighting the coronavirus or even the right to use a firearm or grow your own food is intentionally misleading.

Protecting personal freedom may require reading the fine print.

Dems, GOP splinter, leaving seven political parties scrambling for power

 

Gordon L. Weil

You can’t tell the players without a scorecard.

That’s not about the World Series. It’s about American politics today.

Conventional wisdom identifies two major political parties and a few minor ones.  But the current struggles over Biden’s Bring Back Better reveal that the Democrats and Republicans have morphed into seven distinct parties, each with its own agenda. 

The rise of parties results from the deep and bitter divisions between the two major parties  and their nearly equal split.  That means a party spinoff may be able to determine the ultimate decisions. Each spinoff  becomes its own party.  Here’s the political scorecard.

The Biden Administration and Trump in Exile are the two presidential parties.  Biden wants to stay in power and reverse Trumpism.  Trump seeks a comeback to restore his policies and reverse Biden’s big government efforts before they take root.

As president, Trump rejected the domestic and foreign policies that had evolved, often with the support of members of both parties, since World War II.  Trumpism is based on a radical reduction in government involvement in the economy and environment plus “America First” in foreign policy. 

Trump showed little interest in protecting minorities and upholding the American political tradition.  While he could exercise strong leadership, it was chaotic and destructive. His election appeal yielded him control of the Republican Party.  Trump’s fans: 30 states, mostly small  plus Texas and Florida.

Biden has chosen the exact opposite approach.  Less forceful than Trump but equally determined and better informed, he has proposed major federal spending on programs to quickly produce tangible benefits.

His obvious goal is to influence the 2022 congressional elections, strengthening the Democrats’ ability to block a Trump revival. Biden’s fans:  20 large coastal states with a popular majority.

Despite the growth of presidential power, Biden and Trump each need backing from enough members of Congress to promote and protect their policies.  Biden’s program depends on unified congressional Democrats, which he does not have. Trump’s future depends on a unified GOP, which he does not have.

Biden’s proposals, priced originally at about $6 trillion, provide the setting for the five congressional parties to test their strength.  Two are Republican and three are Democratic. They range from right to left across the political spectrum.

Trump Republicans are on the extreme right.  In both houses of Congress, they are usually the majority of the Republicans.  As the GOP, they want less government and, as Trumpers, they are unquestioningly loyal to their leader, thanks to his surefire vote-getting appeal.

Because the Republicans have signed on with Trump, their leaders in Congress – Sen. Mitch McConnell and Rep. Kevin McCarthy – head this party. Its policy is simply to block Biden, which it often can, so long as the filibuster survives.  Their fans: Trump’s states.

Traditional Republicans come next.  They are politically conservative but not aligned with Trump. They are a small group in the House of Representatives and a sometimes invisible group in the Senate.  They control little, but seek to keep alive the causes of political conservatism and compromise.

This party’s leader is Rep. Liz Cheney, the Wyoming Republican who defies McCarthy’s demands for Trump loyalty.  Cheney boldly resists, while Maine Sen. Susan Collins, an occasional member, desists in the face of Trumpism.  Their fans: so far, only a handful of House districts.

Moderate Democrats come next on the right-left spectrum.  They are led by Sen. Joe Manchin and include Maine Rep. Jared Golden.  They believe they can bring GOP voters aboard in 2022.  If they won’t give some ground, they could fatally undermine Biden’s hopes. Chances are they won’t block a deal. Their fans: GOP leaning states and districts.

Traditional Democrats are headed by House Speaker Nancy Pelosi, who maneuvers to gain help from other Democrats to control the House.  In the Senate, with Vice President Kamela Harris’ tiebreaker and the Moderates, Senate Leader Chuck Schumer has a majority but can’t overcome a GOP filibuster. They back Biden. Their fans: Urban, coastal states.

Democratic Socialists, led by Sen. Bernie Sanders, are on the extreme left.  They support broad reforms and have some Biden support. They can block a House Democratic majority.  Their opponent is really the Moderates.   They want Biden to accept them as essential to their party’s future success. Their fans: Some urban areas.

Despite this scorecard, this is not a game. To avoid complete political paralysis, there must be a compromise. While the GOP may be involved in an historic internal war, the Democrats are likely to reach an agreement among themselves.  Biden will settle for what he can get.

Ultimately, these parties are all about Trump.  The Democratic parties seek ways to achieve a big win over Trump, while the GOP mostly continue to rally around his blue banner.

Debt ceiling crisis is pure politics, undermining U.S. world leadership

Gordon L. Weil

You want to borrow some money.  The bank will make the loan, because you have an excellent credit history and valuable property to back up your ability to repay.

Later, you tell the bank you won’t be making any more loan payments.  The bank says that your credit is so good, you can even borrow some more. But you decide you have too much debt and prefer to stop paying on your existing loans.

The bank is dumbfounded.  It warns that you would destroy your top-flight credit rating and won’t be trusted the next time you seek a loan.  Even if the bank lends you money in the future, it will charge a much higher interest rate, maybe even placing a lien on your property.  

You are torn between ending debt payments until you can slash your personal spending or avoiding destroying, possibly forever, the good credit rating you have built over the years.

Now substitute the U.S. for yourself in this story and you have the great debt ceiling crisis of 2021.

Congressional Republicans want the Democrats to take the responsibility for the national debt having climbed, though that has taken place over decades under both parties. 

They want to stymie President Joe Biden’s economic plans, though he says it would depend less on debt than on tax increases on the wealthiest people.   The Democrats have helped the GOP by wrangling among themselves about how much of the Biden proposals they will support.

So the GOP has blocked an increase in the debt ceiling. They will only agree to a short-term patch, but keep the crisis going.

The debt ceiling is pure politics.

Congress and the president enact spending bills that commit the U.S. to pay for government programs. The Treasury pays the cost using tax money and, if necessary, it borrows the rest.  The repayment of the amounts borrowed plus interest become part of the federal budget.

When passing spending laws, if Congress does not either cut some other spending or raise taxes, it inevitably requires more borrowing.  It may unrealistically assume that the growing economy will send Washington more tax revenues, but it accepts the likelihood of more debt to pay the bill.

Congress also adopts a debt ceiling, meant to impose a limit on total borrowing. When the amount of outstanding debt bumps up against the ceiling, it is increased.  The debt ceiling serves as an easily ignored notice that Congress may be spending too much without necessary taxes.

The Republicans controlled the federal government when Donald Trump was president. In those years, Democrats joined the GOP in raising the debt limit.  The bills had to be paid.

The debt ceiling war is dangerous.  If the ceiling is taken seriously and not increased, two major options loom.  The government would shut down spending on its normal operations, and use tax revenues to make debt payments.  Or it could stop making debt payments and default on its debt.

The shutdown would lead to a blame game.  That could hurt either party or both.  But default is worse.

The U.S. dollar is the world currency. Some currencies are not backed and their value can tumble, but not the dollar. It is used in most international transactions. Countries believe that the U.S. will back the value of the dollar and that its powerful national economy will always protect it. Some countries even use the U.S. dollar as their national currency.

The role of the U.S. as the dominant world power probably results less from its military might than on the dollar, accepted even by America’s adversaries. The world has opted to depend on the American economy and the certainty that the U.S. will back the dollar by paying its debts.

If the U.S. defaults on its debt, it also defaults on its role as the world’s leading power.  That’s a lot to risk in playing partisan politics in Congress.  GOP leader Mitch McConnell has too narrow of view of the game he is playing.  Even his current debt ceiling threats undercut American power.

The 14^th Amendment to the Constitution says: “The validity of the public debt of the United States, authorized by law, ...shall not be questioned.”  President Biden could ignore the debt ceiling and make debt payments as “authorized by law.”  Ultimately, the Supreme Court could either uphold the Constitution or keep out of this obviously political game.

In the future, each spending bill should include the sentence: “The debt ceiling is hereby adjusted to the extent required by this appropriation of funds.”  That would end the dangerous political games.

At the end of this year’s war, the dollar, now damaged, is likely to survive as the standard, at least for a while longer.