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The arrival of the Deficit Clock presents an opportunity to lighten up on debt doom. Exaggerated warnings are wearing everybody out.
It's not easy to make fun of the deficit, but the City of Boulder almost pulled it off. Had the City Attorney's office not restrained its urges at the last minute, the nation would have been treated to nightly news footage of the Deficit Clock, its numbers scrolling ever higher while a Marv's wrecker dragged it to the City impound lot.
Or, consider the firm of DeRaismes, Greenfield & Fricke chained togehter to block the entrance to the Two Bitts parking lot. Instead, the Clock spent its day in Boulder across the street from its original destination, parked beside City Hall, blocking the City Attorney's view.
The Deficit Clock has replaced Slick, The Talking Pig as the most innocent victim of the sign code goons. From now on, to receive a beating from a Boulder bureaucrat is to be "debt clocked."
Fortunately, the Clock will have left Boulder by the time it hits $5,000,000,000,000.00 later this year. People may be sick of the subject, but they're still scared of all those 0's.
An otherwise reasonable gentleman asked for a meeting a couple of months ago, saying he was worried about the world's finances, and in particular wanting to know what would happen if the United States borrowed more money than it could pay back.
I grinned, and said "Well, then we'll default." My effort at reassurance was counterproductive, and he didn't seem to enjoy the rest of his lunch.
It is possible that someday we may be unable or unwilling to make the payments. If so, contrary to popular wisdom, the world would not come to an end.
If we can't pay the money back, then we won't. It happens to governments all the time.
On Monday, Standard & Poors officially pronounced Orange County, California to be in default on its debt. Orange is one of the richest counties in the US, and fully "able" to pay its debts; it just won't. Its citizens are annoyed that their treasurer misplaced $1.7 billion; they refuse to raise their taxes, and they ain't payin'.
Orange County was supposed to pay $800 million in cash to bondholders, and instead offered them more bonds. That's the standard way out of a cash flow problem: replace paper promises to pay cash with more paper. The bondholders fuss and moan, but still earn interest. The polite name for this strategy is "rescheduling." If a government is in a really deep hole, it merely modifies an old promise. "We'll pay you 95% of what we owe you."
Surely Orange County will suffer an economic disaster?
Hardly. It's business as usual. There are no repossessed garbage trucks or school buses, no garnished wages or tax receipts, and no foreclosure sales of schools, hospitals, or courthouse buildings. Orange County is already able to borrow: it's costing them a little extra interest, but people are happy to buy their new bonds.
Another leading defaulter, Mexico, became an upstanding, creditworthy borrower again this week. Demand was so hot for $500 million of new two-year notes that Mexico doubled the size of the issue, and still had excess bids. Sure, our bailout helped, but it was only a matter of time until Mexico found new lenders on its own.
An American default could happen this year. Congressional Republicans are delaying a final budget vote until two weeks before the government runs out of money in September. The Republicans will not release final details of their budget until then, which will give Mr. Clinton two whole weeks to negotiate agreement, or veto and shut down the budgetless government. Among other things, "shut down" means no money to pay interest: default.
In a grand game of barbecued chicken, around Labor Day, the Republicans and Mr. Clinton will begin to shout blame at each other. Wall Streeters will announce Armageddon. If nobody blinks, and there's a Gingrich-Clinton head-on, we should adopt the combination sign code and Orange County solution.
"Hello, Marv's? We've got a wreck for you to haul as far out of town as you can
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