Looking at a looming default

Updated: Thursday, October 17, 2013
Looking at a looming default story image
KALAMAZOO, Mich. (NEWSCHANNEL 3) - We're 10 days along in the partial government shutdown, and if this goes on for another week, our Treasury Secretary Jacob Lew says we, as a country, will no longer be able to pay all of our bills.

What does that mean for our financial security?

Some in Congress say it really wouldn't amount to much. Most economists, on the other hand, say it could spark global economic chaos.

Tonight in Tom's Corner, Tom Van Howe says if he were a betting man, he'd put his money on those who deal in numbers every day.

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If I was going to have heart surgery, I’m fairly certain I’d want the guy holding the scalpel to be someone who does nothing but heart surgeries. A guy who could almost do it in his sleep.

And so it is with our government and our economy.

So if I hear Congressman Justin Amash of Grand Rapids—and only Mr. Amash—say, "there's no way we'll default on October 17. We have enough money to make interest payments. The real question is how do we restructure our government so we don't keep hitting the debt ceiling?"

He sounds pragmatic, confident, and unconcerned.

And there are others in congress who say "not to worry;" that if we have to start cherry picking for a while, to choose who we're going to pay and who we're not, so what?

Confident and reassuring.

Setting aside the fact Congress has a constitutional responsibility to pay who we owe—on time—there are whole bushel baskets full of economists who are saying loudly and repeatedly that the impact of default could be calamitous; not just for us, but for the world.

I know there's  a widely-held, cynical assumption that if you ask 20 economists the same question, you may get 20 different answers. And on some matters that may be true.

But this time around they're pretty much shouting with one voice. And they're telling Congress to get its act together.

Since cherry picking seems acceptable for the moment, let me cherry pick a few.

Gerald Epstein is an economist at the University of Massachusetts. "A default," he says, "will make the Lehman Brothers bankruptcy look like a cakewalk."

Everybody knows who Warren Buffett is. He may not be an economist but he gets a free pass because he understands money as few others do. "Default," he said, "would be like a nuclear bomb - too horrible to use."

And there's Tim Bitsberger, a former Treasury official under George W. Bush. "If we miss an interest payment, it would blow Lehman Brothers out of the water."

And this from Bloomberg news—it would be "an economic calamity like none the world has seen."

There is a FOX News economist, Peter Morici, who thinks default would be the best thing that could ever happen to the United States, but his evaluation gets neutered by the sheer weight of the other side.

At stake is the perception the world has of us. That perception has already been scarred a little by the government shutdown.

But U.S. Treasury Bonds are thought of as the world's primary risk-free asset.

That rock-solid confidence, despite our $17 trillion deficit, is what has made the dollar the world's most widely-used currency.

If we fail to make payments on those bonds, the perception of us as the world's richest and most stable country will take a dive, along with anyone willing to buy a little slice of America’s debt.

And its beyond my perception that the right wing of the Republican party would be willing to carry the specter of of default, with all of its dark possibilities, to the brink or beyond because it doesn't like Obamacare.

And if Justin Amash and his friends are so willing to reject the warnings of economists all over the country, maybe they'll listen to two organizations that have long supported conservative politics: the U.S. Chamber of Commerce and the National Association of Manufacturers.

In letters written a few days ago, both are urging Congress to rise above their differences and do what's right for the country.

Raise the debt limit. And do it now.

I couldn't say it any better myself.

In this corner...I'm Tom Van Howe.

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Last Update on August 31, 2015 17:08 GMT

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The move thrusts Google on to Apple's turf in an attempt to boost the lackluster sales of watches running on its Android Wear software. The program uniting the devices running on different operating systems is being released Monday in Apple's app store.

Until now, Android watches only worked with smartphones powered by Android software, just as the Apple Watch is designed to be tethered exclusively to the iPhone.

Google's new app, though, will enable the latest Android watches to link with the iPhone so people can quickly glance at their wrists for directions, fitness information and notifications about events, emails and Facebook updates.

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The Hulu-Epix deal starts Oct. 1 and will bring new releases from Lionsgate, MGM and Paramount to Hulu subscribers, the companies announced late Sunday.

Terms of the agreement were not disclosed. Hulu said it involves new titles, library films and Epix original programming.

Meanwhile, Netflix said in a Sunday blog post that that many of the movies it received through its Epix agreement also were widely available at the same time through other subscription platforms. Netflix said it intends to improve its customer offerings through original films and licensing deals with movie studios.

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BRENHAM, Texas (AP) -- Blue Bell ice cream is back.

Blue Bell Creameries has resumed selling its products in select locations Monday, four months after the Texas-based retailer halted sales due to listeria contamination.

Blue Bell ice cream is now available at stores in the Houston and Austin areas, including in the company's hometown of Brenham, plus parts of Alabama.

The company voluntarily recalled its products in April after they were linked to 10 listeria cases in four states, including three deaths in Kansas.

Production plants in Texas, Oklahoma and Alabama then underwent an extensive cleaning and decontamination, under the regulatory oversight of health officials.

Listeria bacteria can cause serious illness, especially in older adults, pregnant women and those with weakened immune systems.

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BERLIN (AP) -- German Chancellor Angela Merkel is making clear she expects Greece to continue complying with its obligations to creditors after upcoming elections, and says she doesn't see any possibility of reducing interest rates on its bailout loans.

Merkel said Monday, however, that while interest rates are already very low there is "a certain room for maneuver" on when Greece must pay back debts and the level of those payments. She says she's "relatively optimistic" of finding a solution that satisfies the International Monetary Fund's demand for debt relief.

Greece is holding elections Sept. 20 after Alexis Tsipras stepped down as prime minister, seeking a stronger mandate to implement austerity measures creditors demanded in return for a new bailout.

Merkel said in Berlin: "I assume that Greece will comply with its commitments."

EUROPE-ECONOMY

BRUSSELS (AP) -- Official figures show inflation in the 19-nation eurozone was stable in August at an annual rate of 0.2 percent.

The European Union's statistics agency, Eurostat, says Monday that a large drop in energy prices made up for increases in the costs of food, alcohol and tobacco, services and industrial goods.

The inflation figures remains far below the European Central Bank's aim for a 2 percent annual rate. The central bank is pumping 60 billion euros ($68 billion) a month of new money into the financial system of the eurozone to boost inflation.

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STOCKHOLM (AP) -- U.N. climate talks began anew Monday in Germany, three months before world governments are supposed to adopt a landmark deal to fight global warming.

The climate pact envisioned for Paris in December will be a crucial test for the diplomatic process, which failed to deliver a strong deal six years ago in Copenhagen.

U.N. officials note things look much brighter this time around because most major economies have already presented national plans to limit their emissions of climate-warming gases after 2020, when the new deal is meant to take effect.

Still, much work remains on how to ensure that countries live up to their pledges and how to divide the responsibilities of climate action among countries in different stages of development.

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CAIRO (AP) -- Experts say the discovery of a huge natural gas field off the Egyptian coast is a major boon for the country that will help alleviate energy shortages and boost the economy.

They say that the new "supergiant" offshore field revealed a day earlier by Italy's Eni SpA and billed as the "largest-ever" found in the Mediterranean Sea could alleviate the Arab world's most populous nation's need for gas imports.

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This summer, however, Cairo has been largely spared the power cuts.

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