CFR Daily News Brief 10/8 China Urges U.S. to Avoid Default

Daily News Brief October 8, 2013

Top of the Agenda: China Urges U.S. to Avoid Default

A senior Chinese official said the Obama administration should avoid a default that will hurt China's interests and the global economy (BBC). Top U.S. bankers warned that prioritizing interest payments over other obligations such as Social Security would create uncertainty and pose severe risks to financial markets and the economy (Reuters). Senate Democrats are planning a test vote this week on a measure that would give President Obama the authority to raise the $16.7 trillion debt limit for a year unless two-thirds of both chambers of Congress disapprove (Bloomberg).

Analysis

"The appeal of the American economic model took a major hit from the events of 2008; now we are doing the same to our political model. No one should be surprised when official entreaties to Egyptians go ignored, or when elites in China and other authoritarian societies conclude that their approach, for all its flaws, is still preferable to ours," CFR President Richard Haass writes in Politico.

"A 1,000 point drop in the Dow can solve most problems in Washington. In September 2008 a slightly smaller decline was enough to shake legislators from their refusal to approve the troubled asset relief program. But it would be better for Mr. Boehner not to find out," the Financial Times writes in an editorial.

"During the 2011 debt-ceiling crisis, consumer confidence dropped by 22 percent. When consumer confidence falls, people are less willing to spend and businesses are less willing to hire. That's how recessions—or depressions—begin, and that may be the most important consequence of all," Joe Nocera writes the New York Times in an editorial.