The Repudiationist Strikes Again


Jeffrey Rogers Hummel is back, and this time we're all doomed. The Independent Institute fellow and San Jose State University professor of economics has been making the case for the inevitability of a federal government default since 1993. Matt Welch caught up with Hummel around this time last year.

The question is whether that default would be a good or bad thing. Although his argument that default is gonna happen goes back to Bill Clinton's first year, Hummel has been arguing that default is wot we all oughta do since Ronald Reagan was the presidink.

Lately, however, Hummel admits to some doubts about the desirability of what he calls "repudiation" of the debt:

I've accompanied the article with a caveat that includes the following: "If I were writing it today, the article would be a little less strident, and my discussion of the economic consequences of repudiation would be more sophisticated. I would tone down some minor hyperbole in the article's opening section. In particular, the 2007-08 financial crisis has convinced me that I was much too blase about the short-run consequences of a U.S. repudiation. But I still think my long-run economic analysis is correct, that my moral case for repudiation is justified, and that my historical examples (which could be expanded and extended to other cases) is telling."

I'm not getting how 2007-2008 underscored the unique short-term dangers of Treasury default. As Treasury Secretary Tim Geithner points out—accurately for once—during that period capital flooded into Treasuries. Maybe the argument is that had the rest of the world made what must already be looking like the smart move and run away from Treasuries, the GoverFed would have been unable to keep interest rates low and spur the summer of recovery?

I'm objecting to the term repudiation—a Marxist/Leninist/postcolonial trinket that has no bearing on our situation. We cannot reject the debt as having no authority or binding force, nor can we reject it with disapproval or condemnation (except disapproval of ourselves and our ancestors). The American people collectively ran up this debt, and if we default on it we're not repudiating anything. We're deadbeating.

And deadbeating may be a damn good idea. But we need to keep our categories straight.