The house majority leader, Mitch Mcconnell, suggested that states should file for bankruptcy instead of seeking federal aid. It seems as though age old debates are never settled. States filing for bankruptcy is essentially the question of consolidating states debts into a national one. Nothing would be worse for American credit then letting the states file for bankruptcy. The interest rate on federal debt is low because people believe in the future of the American economy. What type of message is sent when the component parts of that government are allowed to fail? The United States is a nation of states. It adheres to the principal that one’s brothers are not left to fend for themselves. It is imperative that partisan politics are put aside to ensure financial stability for all Americans. To allow states to file for bankruptcy would be akin to flaying one’s brother on and idle hope.
All of the rhetoric is surely just posturing but even it’s discussion is damaging to the safety of American credit. There are competing global powers ready to seize on American weakness. Such divisiveness leaves an opening for America’s enemies and offers fodder for their claim to global leadership. It is imperative America projects a sense of unity to ensure a continued global order. There will be acute financial consequences if the dollar loses its preeminent position. The most severe consequence may be having American debt denominated in a foreign currency. Such a move would prevent the Federal Government from printing more money to pay its debt down. This is one of the principal reasons behind keeping the interest rate so low on American debt.
America needs to remember Alexander Hamilton’s message: consolidate state’s debts and give the union a financial diuretic. This can only happen if the political posturing ends and sensible discussion begins.