Feature

Can America pay its debts?

Standard & Poor’s has shocked the world by announcing it was considering downgrading America because of the impasse between Republicans and Democrats over how to balance the budget.

A taboo has been broken, said Alfred Adamiec in Poland’s Gazeta Wyborcza. Until now, nobody dared question the creditworthiness of the U.S. There has always been an unwritten agreement that the U.S. gets to keep its AAA credit rating—“not because it is reliable, but because downgrading its debt could trigger another collapse of the global economy.” But now the rating agency Standard & Poor’s has shocked the globe by announcing it was considering downgrading America because of the impasse between Republicans and Democrats over how to balance the budget. If the two sides can’t reconcile within the next few weeks, the U.S. debt limit will be reached and the U.S. will effectively be declared bankrupt.

“Well, well, well, someone finally called a spade a spade,” said Sergei Shelin in Russia’s Gazeta.ru. A triple-A rating means that a country is guaranteed to pay back every last cent of the money lent to it, with all accruing interest. In the case of America, “that is an obvious lie.” In fact, the U.S. is actually worse off financially than Portugal. While Portugal’s debt is around 90 percent of GDP, America’s is about to top 100 percent. Plus, the U.S.’s annual budget deficit is consistently worse than Portugal’s. Why, then, is Portugal being pilloried and charged exorbitant interest rates while the U.S. still rolls in easy credit? The moment is surely coming “when it suddenly dawns on everyone at once that the dependability of the dollar is an illusion.”

Europeans can be forgiven for indulging in “a little schadenfreude,” said Marie de Vergès in France’s Le Monde. There is a sense that the U.S. “had it coming because of its exploding debt.” The U.K., France, and other countries have taken austerity measures to avoid massive debt, yet the U.S. continues to spend profligately. Still, our satisfaction will be fleeting. “Nobody benefits from seeing the world’s largest economy plunged into financial disgrace.” Certainly not Europe.

Europeans are aghast at America’s reckless spending and refusal to raise taxes, said Holger Zschäpitz in Germany’s Welt am Sonntag. Yet what we see as a moral failing is really the consequence of a very different historical experience. Europeans have bitter memories of the hyperinflation that followed both world wars, so we have made monetary stability the primary goal of our central bank. Americans, by contrast, were traumatized by the Great Depression, so to avoid unemployment they pursue “growth at any cost,” which means running up ever greater debts. Fortunately, the U.S. also has a strong tradition of “inventiveness and entrepreneurship.” So far, it has always been able to grow its way out of debt. Let’s hope it hasn’t lost that “spirit of innovation.”

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