HuffPo - "What Happened The Last Time A Major Western Country Defaulted" - Familiar?
As Republican debt ceiling deniers actively flirt with default, it is worthwhile to consider the consequences and similarities of the last default.
http://www.huffingtonpost.com/2013/10/14/what-happened-the-last-ti_n_4098078.html?utm_hp_ref=business
Germany unilaterally ceased payments on long-term borrowings on May 6, 1933, three months after Adolf Hitler was installed as Chancellor. The default helped cement Hitler’s power base following years of political instability as the Weimar Republic struggled with its crushing debts.
“These are generally catastrophic economic events,” said Professor Eugene N. White, an economics historian at Rutgers University in New Brunswick, New Jersey. “There is no happy ending.”
The debt reparations piled onto Germany, which in 1913 was the world’s third-biggest economy, sparked the hyperinflation, borrowings and political deadlock that brought the Nazis to power, and the default. It shows how excessive debt has capricious results, such as the civil war and despotism that ravaged Florence after England’s Edward III refused to pay his obligations from the city-state’s banks in 1339, and the Revolution of 1789 that followed the French Crown’s defaults in 1770 and 1788.
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Faced with little option, the German government under chancellor Heinrich Brüning decided to divert all economic output into exports in order eliminate the huge trade imbalance which made reparations payments so difficult. Between the two, too much wealth was leaving the country. Spending cuts and tax hikes, put into effect by emergency decree, had the result of increasing unemployment in Germany by 2.1 million. Subsequently, in the September 1930 elections, the Nazi party polled 6.5 million votes, or 18.3% of the vote. Nazi party representation in the Reichstag, Germany's parliament, expanded from 12 seats to 107, making them the second largest party. Although more wealth fled the country as a result, the government's deflation strategy did have the intended effect. The 2.9 billion Gold Marks trade deficit of 1929 was turned into a trade surplus of 2.8 billion Gold Marks by 1931.
Heinrich Brüning
German Chancellor Heinrich Brüning
"Harmony In Europe, 1932, the Detroit News
"Harmony In Europe", 1932, the Detroit News Artist unknown
This was not due to increased German exports, however. Those were falling. But they fell more slowly than did German demand for foreign goods.
At this point, the German government might have eased itself out of the crisis, if it would have accepted a foreign loan from France. However, Chancellor Brüning resisted any economic collaboration with France, their mortal enemy, and instead further agitated the strained relationship. As a result, he was forced into a second round of deflation. Then Brüning issued an aggressive demand for an end to reparations. This threw the international markets into fits. U.S. President Herbert Hoover temporarily suspended reparations, causing the Allies to default on their own loan payments to the U.S. By 1932, all war debt/reparation payments had effectively ceased, but instability wreaked havoc on the international currency exchange rates. Germany decreed yet another painful round of deflation.
By this time, the German economy was a disaster. Unemployment was up to 6 million, German banks were put under government control, and there was an epidemic of German bankruptcies. Finally, on June 1, 1932, Chancellor Brüning was ousted, and replaced by Franz von Papen. The cabinet which Papen formed had virtually no support. To gain the Nazis as allies, he repealed his predecessor's ban on the SA (the "brownshirts"
. During Hitler's rise to power, the SA had functioned as his private militia, which he used to intimidate rivals and disrupt the meetings of competing political parties, especially those of the Social Democrats and the Communists. The SA were notorious for their street battles with the Communists. With the ban against them lifted, riots between the SA and Communists quickly erupted on the streets of Berlin in June 1932, resulting in more than 400 street battles and 82 deaths.
Lots more here:
http://www.authentichistory.com/1930-1939/4-roadtowar/1-germany/
Economists debate the theories about why Germany's economy fell into such a horrible state and why Germans reacted with so much hate against a few minorities as a result, but the lesson is clear: The cost of default to your own economy is horrible.
We need to tax imports. It doesn't have to be a large tax.
Germany owed war reparations for the damages incurred by other countries especially France in WWI. We owe China simply because we import too much junk from that country and others. We don't need to abolish imports. We just need to make them more expensive. With the money we can regain our budget balance.
Our government is not just some entity that lords it over us individual citizens. Our government tracks the health and life of the American people by collecting statistics and data on our cancer rates, the progress of our students in school, the quality of the life in the oceans that surround us. Our government developed the basic technology that put man into space, that is exploring the planets, the universe, that accumulates information on the tests of new materials and chemicals that could pose great dangers to humans and many other things -- the weather, epidemics, the financial well being or misery of ordinary Americans. We need a well funded government. But we can't adequately fund our government with a tax system that taxes work (making it more attractive to export work and the profits from it) and rewards laziness and living off your grandparents work (no inheritance taxes and no import taxes).
Republicans talk about tax reform, but they want to reform it so that labor is more costly than it is and inherited wealth and income from overseas investments more profitable than ever. We need to do precisely the opposite. We need to reward wealth from labor (and encourage some sensible money management at the personal level if not plain old frugality) and penalize wealth with derived from the labor of others. Nothing wrong with wealth accumulated by employing others. That's a good thing to do. But when you employ people in China or Japan (paying very low taxes to the US government on the profit you earn from the labor of people outside the US) while people in your own country (who pay the taxes that keep your highways paved, your schools running, your scientists learning, your food safe, etc.) have no jobs and low if any incomes, then you are harming yourself and your country. Don't pretend to be a patriot if you export jobs while Americans earn low wages or no wages and your government does not have the money needed in the 21st century.
Republicans hate science. They hate progress. They are ignorant. This shut-down proves it.
What do the Republicans have? 
They always said 9/11 would "change" everything.
