Dangerous Game?

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President Obama is warning congressional Republicans against playing what he calls a “dangerous game” in respect of the economy. According to the dispatch of the Agence France Press he is referring to the coming vote on the debt ceiling. The president, according to AFP, vowed he “will not compromise” in insisting that Congress lift the debt ceiling. The way he put it was that “[i]f Congress refuses to give the United States the ability to pay its bills on time, the consequences for the entire global economy could be catastrophic. Our families and our businesses cannot afford that dangerous game again.”

Kind of takes one back, no? We remember the president of the German Bundesbank, Karl Otto Poehl, warning in the 1980s that talking down the dollar — not to mention running a loose monetary policy — was a “dangerous game.” In 1988, the New York Times issued an editorial headlined “Dangerous Game” about the political tactics the vice president at the time, George H.W. Bush, was using against Governor Dukakis. “It panders to the smouldering instincts of the mob, ready to explode when the next economic crisis bursts upon us,” the Times warned. It said that while “much of the electorate doesn’t want to believe it, ‘next time’ cannot be too far off.”

And who said this? “Look at reality. Trillion-dollar debt; multibillion-dollar deficit; gigantic trade imbalance; lack of both competitiveness and inventiveness on the part of American industry; heedless depletion of basic natural resources and criminal downgrading of the most basic resource of all, education; inadequate social services; growing poverty, a shaky banking system, a squeezed middle class; increasing disparity between rich and poor. Despite appearances, the American economy is running on empty.” Could that have been Glenn Beck? Or one of the gold standard nuts?

It turns out that’s from the same 1988 New York Times editorial, “Dangerous Game.” So let us just say, this idea that there is a dangerous game being played, well, two can play this dangerous-game-calling game. The fact is that the danger arises not from failing to lift the debt ceiling. The danger arises from racking up the kinds of debts we’ve been running in the first place. It’s a generation or more now that this has been going on, save for the burst of revenues that was ignited by the Reagan era tax cuts, which so powered growth that by the end of the century we were running a balanced budget.

Our own view is that it would be less dangerous for Congress to call a stop to this game than to keep it going with another round of debt ceiling hikes and easy money in the absent of reforms. This newspaper agrees with Mr. Obama that we need a grand bargain. But there’s nothing grand about a bargain that is restricted to taxes and spending and does nothing about monetary reform. The game that’s really dangerous is fiat money. Mr. Obama wants to lecture the country on the dangers of the debt ceiling showdown without addressing the problem that has made it all so explosive. That’s the danger.


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