In this country, our word is our bond. The respect and admiration that the United States and its institutions inspire around the world are based on the certainty that when our nation makes a promise, we keep it.
Unfortunately, Congress seems poised to undermine U.S. credibility at home and abroad by taking the extraordinary step of reneging on bills that our nation has racked up. Ordinary Americans will bear the brunt of the damage if our leaders don't prevent the United States from defaulting on its debt for the first time in history.
Sadly, we've been here before. The debt ceiling standoff in 2011 is costing taxpayers nearly $20 billion as nervous investors demanded higher interest on U.S. Treasury bonds to defray the risk of government default. That manufactured political crisis caused economic uncertainty to spike, consumer confidence to plummet and stock prices to spiral downward — all because of the perceived risk of the United States defaulting on its domestic and international obligations.
If our nation defaults on its nearly $17 trillion in debt, the harm is likely to be measured in hundreds of billions of dollars.
Beyond the enormous cost to taxpayers, even the slightest uptick in Treasury interest rates would cascade through the economy. Default would be a blow to retirement funds, leaving fewer resources available for retirees. It would raise the borrowing costs for companies, meaning job losses and price increases. For banks, which hold $3 trillion in Treasury, agency and mortgage-backed securities, the sharp decline in value would translate into fewer resources available for mortgages or business, auto, credit card and student loans.
Default would put the United States in the category of reckless debtor nations that have broken their word in the markets, including Argentina, Venezuela and Cameroon. Defaults left those countries financial pariahs and debilitated their economies.
No one takes our national debt more seriously than I do. As a Republican governor, I balanced my state's budget eight years running and worked with colleagues from both sides of the aisle to ensure that Oklahoma honored its debts and expanded its economy.
Later, I joined the Bipartisan Policy Center's Debt Reduction Task Force (also known as the Domenici-Rivlin commission), which endorsed painful but necessary measures to put the country's fiscal house in order.
Using the debt ceiling as leverage in the deficit debate is unwise and dangerous. Citizens nationwide are frustrated with the political stalemate in Washington. But our nation's financial integrity should not be used as a bargaining chip.
Honoring U.S. fiscal obligations isn't a Republican or Democratic issue — it's the American thing to do. As George Washington said, "No pecuniary consideration is more urgent than the regular redemption and discharge of the public debt; on none can delay be more injurious, or an economy of the time more valuable."
Since May, the Treasury has used extraordinary measures to keep us from hitting the debt limit. We've been lucky to avoid it thus far, but time is up. With the U.S. economy and our nation's honor on the brink, our leaders must — in the spirit of patriotic compromise — do what it takes to make a deal.
Congressional Republicans must avoid scorched-earth tactics in pursuing their agenda on health care and deficit reduction. Democrats in Congress must begin to engage their constituencies in responsible discussions about the long-term outlook of government programs popular with their base.
In short, Republicans need to be more willing to say yes and Democrats must be more willing to say no. Disagreement and debate strengthen our democratic institutions. But we cannot allow honest differences of opinion, however diametric, to jeopardize the trustworthiness of our nation's credit.
If confidence is lost in our country's willingness to pay its bills on time, we will have lost something that may be impossible to regain — the world's trust.
Frank Keating is president and chief executive of the American Bankers Association. He was governor of Oklahoma from 1995 to 2003 and was a member of the Bipartisan Policy Center's Debt Reduction Task Force.
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