One Piece of Good News About the Debt Ceiling

A blog about business and economics.
Oct. 8 2013 9:59 AM

One Piece of Good News About the Debt Ceiling

93008035
Don't Panic rides to victory.

Photo by Julian Herbert/Getty Images

David Keohane at FT Alphaville delivers the first bit of reassuring news about the debt ceiling that I've seen—American government debt does not include what are called "cross default" clauses. The idea of cross default is that if I owe you a bunch of money through several different loans and then one loan comes due on Monday and I don't pay you, I'm considered to have defaulted on all my obligations to you. That's a kind of basic borrower protection, ensuring that nonpayment of your debts will be a disaster for you.

In the case of the looming debt ceiling crisis, however, disaster is what we want to avoid. And so what this means is that if Republicans force us to default on payments that come due on Nov. 1, that doesn't put the U.S. government in the legal position of having defaulted on all its debts. In principle, you could have a minor disaster on the 1st followed by a hasty congressional recognition of the error of its ways and then the problem is addressed on Nov. 2 before the whole world burns.

Now, again, I don't want to put people's minds too much at ease. The sequestration experience has been, to me, sobering. The fact that the damage to the economy is "only" things like thousands of kids losing their place in preschool programs and a gutting of America's long-term scientific research has been widely interpreted as showing that actually it's totally fine. That seems to me to be too low a bar for non-disaster. The situation Keohane is describing still strikes me as pretty epically disastrous—just a little less cataclysmic than I'd thought previously.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Sports Nut

Grandmaster Clash

One of the most amazing feats in chess history just happened, and no one noticed.

The Extraordinary Amicus Brief That Attempts to Explain the Wu-Tang Clan to the Supreme Court Justices

Amazon Is Officially a Gadget Company. Here Are Its Six New Devices.

Uh-Oh. The World’s Oceans Have Broken Their All-Time Heat Record.

The NFL Explains How It Sees “the Role of the Female”

Future Tense

How to Keep Apple From Sharing Your iPhone Data With the Police

Food

How to Order Chinese Food

First, stop thinking of it as “Chinese food.”

A Simple Way to Keep Apple From Sharing Your iPhone Data With the Police

The Country Where Women Aren’t Allowed to Work Once They’re 36 Weeks’ Pregnant

The XX Factor
Sept. 18 2014 11:40 AM The Country Where Women Aren’t Allowed to Work Once They’re 36 Weeks’ Pregnant
  News & Politics
Weigel
Sept. 18 2014 8:20 PM A Clever Attempt at Explaining Away a Vote Against the Farm Bill
  Business
Moneybox
Sept. 18 2014 6:02 PM A Chinese Company Just Announced the Biggest IPO in U.S. History
  Life
The Slate Quiz
Sept. 18 2014 11:44 PM Play the Slate News Quiz With Jeopardy! superchampion Ken Jennings.
  Double X
Doublex
Sept. 18 2014 8:07 PM Crying Rape False rape accusations exist, and they are a serious problem.
  Slate Plus
Behind the Scenes
Sept. 18 2014 1:23 PM “It’s Not Every Day That You Can Beat the World Champion” An exclusive interview with chess grandmaster Fabiano Caruana.
  Arts
Brow Beat
Sept. 18 2014 4:33 PM The Top 5 Dadsplaining Moments From The Cosby Show
  Technology
Future Tense
Sept. 18 2014 6:48 PM By 2100 the World's Population Could Be 11 Billion
  Health & Science
Science
Sept. 18 2014 3:35 PM Do People Still Die of Rabies? And how do you know if an animal is rabid?
  Sports
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.