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Politics

The most dangerous man in Washington

Catherine Rampell on

In terms of both immensity and immediacy, the threat Mulvaney presents is far greater than any of the slow-motion train wrecks happening elsewhere in the administration. That's because he seems hell-bent on wreaking a global crisis within the next two months.

Not a century from now. Not a decade from now. In two months.

That's when the government will run out of money needed to pay bills Congress has already incurred, according to Treasury Secretary Steven Mnuchin, if Congress does not act to raise the debt limit.

What would follow? Just a constitutional, political and global financial crisis.

Arguably, the U.S. government would be in violation of the 14th Amendment ("The validity of the public debt of the United States . . . shall not be questioned"). The government's ability to continue paying Social Security checks, interest on the debt and other basic obligations would likewise be at risk.

Most important, this would irrevocably destroy the United States' sterling reputation as a borrower.

U.S. debt is considered the safest of safe assets, and as such, Treasury securities are the benchmark of the global financial system. Causing creditors to question whether they'll receive full and timely payments would trigger panic in markets throughout the world.

Technically, we already hit the debt ceiling in March. In the months since, Treasury has engaged in extraordinary accounting measures to avoid outright default. But come early fall, those measures will be exhausted. The United States will become a deadbeat.

The debt ceiling is a product of the misguided belief that limiting the official borrowing capacity of the government would force legislators into frugality. In reality, it has done nothing to curb financial profligacy. Its chief effect is to periodically offer some political faction -- sometimes the minority party, sometimes the nuttier fringe of the majority party -- the power to take a very valuable hostage.

Mnuchin has urged Congress to pass a debt-limit hike with no strings attached. The government would thereby dodge default with minimal drama and without spooking markets.

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