Sunday marks the end of summer, and with it the closing of another Deep Thinking Season. In delightful venues from Aspen to Sun Valley to Chautauqua, the sophisticated class once again gathered to contemplate the great issues of the day. Lectures were delivered, slideshows unlimbered and chins rubbed sagely over topics like the downward spiral of world order, the promise and peril of AI, semiconductors and national security, etc. And of course climate, climate, climate.
‘The Day the Dollar Died’ is coming. What’s the plan?
America is racing toward a fiscal apocalypse, unprepared for the serious social upheaval that could result.
September 19, 2024
Here’s a proposal for next summer’s program organizers: a conference devoted to preparing a plan for the collapse of the U.S. public debt market and the dollar’s world reserve status — and the economic and social consequences of such an event. With debts already about to surpass the nation’s entire GDP, and adding close to $2 trillion more this year, only a dwindling number of denialists doubt that a cataclysmic reckoning, including double-digit damage to Americans’ income growth, lies ahead. It’s past time to prepare.
An eye-catching, attendance-building title for the conference would come easily: “Preparing for Armageddon”; “Climbing Out of the Ashes”; “The Day the Dollar Died.”
Once one proposes the topic, the agenda writes itself. The meeting would need panels on which government safety-net promises to renege on immediately, which previously sacred discretionary spending to eliminate, how to protect the nation with a shrunken defense budget and which new taxes to impose.
Given the dead end into which our leaders have already steered us, though, these measures won’t come close to meeting the moment.
A highly stimulating session could be committed to asset sales. A basic tool in any bankruptcy is to look through the balance sheet for marketable property. The federal government owns a ton of it, ranging from its vast land holdings to electromagnetic spectrum to student debt. Deciding which assets to monetize, in what order, would make for a fascinating afternoon discussion.
We’ll need a plan for dealing with creditors. What size haircut or renegotiated duration might bondholders be willing to stomach? Surely we could do better than, say, the Argentines, but how much better? What demands might foreign sovereign bondholders try to place on the United States, and how could those demands be countered?
The economic issues might well be the simplest to anticipate. Maybe the most likely of many possible triggering events is the day when — not if — tens of millions of Americans are told that the trust funds are not trustworthy, and that the safety-net benefits they have been receiving are about to be reduced, perhaps drastically.
One panel at this conference could be charged with drafting messages attempting to explain to an enraged public the necessities of that unfortunate situation. (But at that point, no words, however artful, will suffice.)
The sense of social betrayal that the debt crisis will stir might require actions the nation has rarely contemplated. An accompanying economic collapse could unleash violent reactions in a country that has become grimly familiar or even inured to such conduct.
Which of the president’s more than 100 unilateral emergency powers might be needed? Martial law has been invoked at least 68 times, but no act of Congress defines it. Should it be included as a possible response to widespread civil unrest? If so, under what limits?
What is and is not permitted by the language of the Insurrection Act, authorizing the use of the military not just to “suppress the rebellion” but also to suppress an “unlawful combination or conspiracy” that “hinders the execution of the laws”?
It shouldn’t fall to the summer conference community to fashion such a plan. Any well-run business or institution engages in disaster scenario planning as standard practice. Collapses of creditor confidence tend to happen suddenly; that would be no time to start the thought process.
In every executive assignment I’ve been given, I’ve commissioned tabletop exercises to think through conceivable major threats, ranging from natural disasters to a sudden product failure, and to draw up specific action plans ready for swift implementation if the worst should happen. The bottom left-hand drawer of whatever desk I was occupying at the time always held several of these “redbook” plans, most of them for contingencies far less likely than the debt cataclysm that more and more observers are now calling probable or even unavoidable.
One would like to believe that a redbook plan for a national debt emergency rests, ready for implementation, in somebody’s White House desk. But given that an effective response would require action across so many agencies — a “whole of government” approach, as the current administration likes to label its extralegal impositions — if such a plan had been assembled, odds are we’d know about it. Besides, the crowd in charge now has spent 3½ years exacerbating the debt problem, in denial that there is one.
A British maxim says (there are various renderings), “Now that the money has run out, we shall have to begin to think.” When it’s already clear that the money will run out, it’s unconscionable to wait that long. Since our national leaders, from both parties, have made the reckoning so probable, the least they can do is to start thinking about how to meet the fiscal judgment day when it arrives.