I just read some extremely sobering words from the Financial Times' Martin Wolf, that in fact there are some Conservatives who are actually advocating behind closed doors, America defaulting on its loans. Fed up with spending, they would use a default (and an ensuing global economic catastrophe) to permanently break the system of social welfare spending and the whole free market system, to that before FDR. Don't think Conservatives are that mean-spirited and foolish? Think again!
But I believe the circumstances that would allow Republicans to force the US to default are nearly here.
The expiration of Bush's tax cuts will become an instrumental argument for Republicans this Fall's mid-term elections. They have already taken to the airwaves to promulgate the fallacy that their tax cuts have had a positive inducement on the economy, when as I have shown before, they are in fact lowering federal receipts while massively adding onto the federal debt. Even if you believed that tax cuts did help push the economy forward, you cannot ignore the fact that Bush's tax cuts (and for that matter neither Reagan's) cut the federal debt. But they will be using the 2010 mid-cycle elections to push the illusory promise of tax cuts to solve the economic malaise and spending cuts that will magically co-exist with tax cuts, to reduce the federal debt.
So there you have it: We are headed for default because Conservatives (either out of a lack of honest intellect or out of zeal for pushing against social spending) are planning to respond to the weak economy and the growing federal debt with tax and spending cuts just as soon as they win back Congress and in 2012, 1600 Pennsylvania Avenue.
But of course, a default won't deliver the Republican's hopes for a death knell to social spending. What it will do, is create chaos of the violent sort.
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