Earlier this week,
It may seem myopic to focus on what U.S. government default would mean for Maryland, but our state's members of Congress should think about it as they consider the willingness of some
Maryland's own debt has had a AAA bond rating for 50 years. Obviously, it has saved taxpayers' money by allowing us to pay lower interest rates on state borrowing. More importantly, it has been a lodestar for fiscal responsibility and a metaphor for the good fiscal management Maryland has had for decades.
Maryland is one of the most fiscally responsible states in the union. Members of Congress from Maryland like Sen.
It's always politically tough to cut spending or raise revenue. All of us want great schools, good roads and transit, safe neighborhoods, a clean environment — and low taxes. But there is no free lunch — despite
That's why the debt limit debate in Washington is important to our country, our world — and our state.
Our AAA bond rating is based on the credit rating agencies' belief that the risk of Maryland defaulting on our state debt is not much greater than the risk that the US government will not pay back its bondholders.
But international bond buyers — from Shanghai to Zurich — don't know
A totally rational market — what the right wing believes every market to be, despite evidence from the Dutch tulip bubble of the 17th Century to the Great Recession of the last few years — would reward Maryland for its fiscal responsibility by selling U.S. Treasuries and buying Maryland bonds, protecting our AAA rating.
But, as the great economist and investor John Maynard Keyes explained, financial markets aren't driven only by rationality, but by "animal spirits." A less diplomatic term would be irrationality.
I saw this in 1998 when I was U.S. Ambassador to
A U.S. default shouldn't raise Maryland bond interest rates — but it will. And it may well cost us our AAA bond rating — even if we pay our bills.
They call it credit for a reason — in Latin, it means trust. Lenders can trust that borrowers will repay their debts. Lenders to Maryland have been able for decades to trust we'll pay them back.
Shouldn't lenders to our federal government have that confidence too?