When the big kids on the block decide to play chicken it is dangerous to all the little kids too. Every time I read or hear about the US debt situation it makes me cringe inside. I have constant pings in the back of my mind that tell me to get out of the stock market completely and take what I have and slam it into GICs or some other 100% guaranteed haven while the Democrats and Republicans have fun driving cars towards a cliff at breakneck speed. They know that both the US and the world economies will go into a tailspin if they fail to reach a deal and that the economic consequences of their choices are dire and yet they posture and shout and pretend like they could simply default and it wouldn't be that bad. The thing that makes me most crazy is you can see how the latest polls in the US answering the question "If the talks fail which party do you think is responsible for the ensuing chaos?" so massively influence policy. As those polls have shifted towards the Republicans their stance has become decidedly more conciliatory and their willingness to compromise has increased; not that the Democrats would do differently in their shoes, mind you.
If you hunt around you can find statements made by people in power that suggest that any increase in taxation to fix the US deficit is worse than defaulting - even if those increases are limited to removing loopholes and tax exemptions only for the super rich. Somehow the Tea Party extremists have fooled their constituents into thinking that it is better to be unable to pay Social Security benefits and have the US plunge deep into recession than to tax the top 1% of the nation to the same extent they tax the middle 1%. The mindless, all consuming fear of taxes that many people have utterly baffles me. It isn't just a desire for the stuff that could be bought with more money, but rather something primal like the natural disgust we have for feces, cannibalism or incest. Taxes have become something so dirty and awful that even when they are applied to those who would only have to give up their Sunday Porsche they are simply unconscionable.
It is clear that many of the governments of the world have fundamental issues with deficits. Canada is certainly in a better state than the US given its lower debt load and lack of a banking meltdown but nonetheless we in the north are still racking up huge debt and lacking any sort of plan to get rid of it all someday. The Republicans are trying to push through a plan that would make having a budget deficit simply illegal and I have heard that this is a pipe dream and is not really workable... and yet I find myself thinking that this is the only possible way to avoid this ridiculous situation. Politicians elected every 4 years who are allowed to spend beyond their means to buy votes will *always* do so. They won't spend 50% beyond their means because the public would go bonkers but people will continue to vote them in as long as they run just a few % more than they should. What we all need is to find a way to prevent politicians from ever running deficits. Sure, there is a theory that in good times they will pay it back but we all know that is about as likely as them paying it back by finding a leprechaun's gold.
We have to trust our leaders to declare wars, not to enact stupid laws and to shape our economy but we must not trust them to run a balanced budget. They have all proven time and again that they are just not up to the task.