Why China is Laughing All the Way to the Bank
A Commentary By Joe Conason
The global impact of the American debt crisis -- and the likelihood of permanent damage to American interests -- are already visible to Sen. John Kerry, D-Mass., from his perch as chairman of the Senate Foreign Relations Committee. Indeed, he is not only seeing but hearing those effects.
"The Chinese are laughing all the way to the bank," said the former Democratic presidential nominee, because a downgrading of U.S. Treasury securities will mean enormous and completely unnecessary increases in our interest payments to the nation's largest creditor -- and our most important competitor in the international arena.
"If we suffer a downgrade of our (U.S. Treasury) debt simply because of the brief time before we have to go through this exercise again," said Kerry, referring to the House Republican insistence on a debt-limit increase that will expire before next Christmas, "it would mean billions of additional dollars that would have to be paid to the Chinese."
Those costs would come on top of the extra interest expense that all Americans would see on their home loans, car loans, student loans and credit cards, further weakening the slow recovery from the recession. Moreover, that loss would cut into government's capacity to pay for important functions, sending many billions of additional dollars abroad instead of rebuilding our infrastructure, bolstering Social Security and Medicare, educating our children and maintaining national security.
The ill wind of an American default and downgrade will blow far beyond any temporary financial setback, according to Kerry, when allies and adversaries assess this country's future influence. Chairing the Foreign Relations Committee, he speaks frequently with diplomats, ministers, business executives, elected officials and social leaders from every continent -- and he is disturbed by what they're telling him now.
"People in other parts of the world are incredulous," he said, as they observe the current spectacle in Washington. "Some of them are gloating. ... I know personally of major (U.S.) government officials who have been needled about what is happening here, in the course of their conversations abroad. I've had personal conversations with leaders who are praying that the United States doesn't flounder here, because their economies depend on it."
European leaders are particularly worried, said Kerry, because of the possibility that an American default will worsen the debt crisis across the Atlantic. "I met with the Greek foreign minister and deputy prime minister a few days ago," he noted, to discuss the U.S. commitment to the International Monetary Fund, which is essential to Greece's eventual economic recovery. He has heard expressions of deep anxiety from leaders in Spain and Italy, as well.
More broadly, Kerry is hearing rumors of the decline of a nation that once led the world. "There's a general sense that the United States has already been questioned about our steadfastness and willpower, the consistency of our pledges. ... One of the great things we've always had going for us was the sense of our strength, our unity of purpose, our ability as a democracy to come together and display our intent, and right now that is fraying -- with the potential of serious consequences, not automatic, but certainly real."
Why would a group of conservative Republicans in Congress -- who rarely stop braying about their great patriotism -- create such a grave risk to American power and prosperity?
"Some of them don't get it, some don't care, and for some it is a combination of both," Kerry lamented. "I have had Republican leaders of the Senate -- I'm not going to tell you who -- tell me that they've tried to talk to some of these (House members), and they just don't understand the implications of their actions."
By the time our congressional clowns realize what their intransigence has inflicted on this country, if ever, the harm will be done -- and very hard to undo.
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