Commentary on Political Economy

Monday 24 April 2023


Hillary Clinton: Republicans Are Playing Into the Hands of Putin and Xi

CreditCredit...Illustration by Sam Whitney/The New York Times

Mrs. Clinton was the U.S. secretary of state from 2009 to 2013

Speaker of the House Kevin McCarthy is making a ransom demand. His hostage is the economy and America’s credibility. Mr. McCarthy has threatened that House Republicans will refuse to raise the federal government’s debt ceiling, potentially triggering a global financial crisis, unless President Biden agrees to deep cuts to education, health care, food assistance for poor children and other services.

Mr. McCarthy repeatedly invoked the threat of Chinese competition as justification. The speaker is right that this debate has significant national security implications — just not the way he says.

With Russia’s brutal invasion of Ukraine grinding into a second year, tensions with China continuing to rise and global threats looming, from future pandemics to climate change, the world is looking to the United States for strong, steady leadership. Congressional brinkmanship on the debt ceiling sends the opposite message to our allies and our adversaries: that America is divided, distracted and can’t be counted on.

Let’s start by dispelling a myth. The debt ceiling debate is not about authorizing new spending. It’s about Congress paying debts it has already incurred. Refusing to pay would be like skipping out on your mortgage, except with global consequences. Because of the central role of the United States — and the dollar — in the international economy, defaulting on our debts could spark a worldwide financial meltdown.

Republicans in Congress have consistently voted to raise the debt ceiling with little drama when a fellow Republican is in the White House — including three times under President Donald Trump. But during Democratic administrations, they have weaponized the debt ceiling to extort concessions, despite the danger of default.

I was secretary of state during the debt ceiling crisis of 2011, so I saw firsthand how this partisan posturing damaged our nation’s credibility around the world.

I vividly remember walking into a Hong Kong ballroom that July for a conference organized by the local American Chamber of Commerce. Congressional Republicans were refusing to raise the debt ceiling, and the prospect of a default was getting closer by the day. I was swarmed by nervous businessmen from across Asia. They peppered me with questions about the fight back home over the debt ceiling and what it would mean for the international economy. The regional and global stability that America had guaranteed for decades was the foundation on which they had built companies and fortunes. But could they still trust the United States? Were we really going to spark another worldwide financial crisis? And the question that no one wanted to say out loud: If America faltered, would China swoop in to fill the vacuum?

I tried to reassure those businessmen the same way I did when I spoke with anxious foreign diplomats throughout that summer, confidently promising that Congress would eventually reach a deal. I repeated a quip sometimes apocryphally attributed to Winston Churchill: You can always count on Americans to do the right thing, after they’ve tried everything else. Privately, I crossed my fingers and hoped it was true.

Later that day, I headed to a villa in mainland China for a meeting with my counterpart, State Councilor Dai Bingguo. Over the years, I had heard monologues from Mr. Dai about America’s many supposed misdeeds, his criticisms at times bitingly sardonic but usually delivered with a smile. So I was not surprised when he, too, turned the conversation to the debt ceiling, barely containing his glee at our self-inflicted wound. I was not in the mood for lectures. “We could spend the next six hours talking about China’s domestic challenges,” I told Mr. Dai.

Fortunately, Congress and President Barack Obama finally reached an agreement to raise the debt ceiling before careening into the fiscal abyss. But the S & P still fell 17 percent, consumer and business confidence nose-dived, and the government’s credit rating was downgraded for the first time ever. After another crisis in 2013, the lesson was clear: Negotiating with hostage-takers will only embolden them to do it again.

Fast forward a dozen years, and Republicans are playing the same game. Except now, the risks are even higher.

Today the competition between democracies and autocracies has grown more intense. And by undermining America’s credibility and the pre-eminence of the dollar, the fight over the debt ceiling plays right into the hands of Xi Jinping of China and Vladimir Putin of Russia.

ImageA black and white photo of Hillary Clinton standing in a plaza dressed in a dark coat. A couple of people and tall buildings stand behind her.
Credit...Spencer Platt/Getty Images
A black and white photo of Hillary Clinton standing in a plaza dressed in a dark coat. A couple of people and tall buildings stand behind her.

America’s leadership around the world depends on our economic strength at home. Defaulting on our debts could cost the United States seven million jobs and throw our economy into a deep recession. Instead of the “arsenal of democracy” capable of outcompeting our rivals, dominating the industries of the future such as microchips and clean energy and modernizing our military, America would be hobbled.

Even setting aside this economic carnage, brinkmanship over the debt ceiling reinforces autocrats’ narrative that American democracy is in terminal decline and can’t be trusted.

Trust matters in international affairs. We frequently ask other nations to put their faith in the United States. Our military will be there to protect allies, our financial system is secure, and when we warn about compromised Chinese telecom equipment or an impending Russian invasion, we’re telling the truth. Threatening to break America’s promise to pay our debts calls all that into question.

When I was secretary of state, a big part of my job was rebuilding confidence in the United States after the George W. Bush administration. It wasn’t easy. Senior Chinese officials rarely missed an opportunity to argue that the United States was to blame for the 2008 global financial crisis, and they enjoyed highlighting our troubles in Iraq and Afghanistan. The more dysfunctional or untrustworthy America looked, the easier it was for Chinese propagandists to bad-mouth democracy and brag about their own authoritarian system.

Today America’s credibility will help determine whether nervous Europeans continue to stand with us and support Ukraine or seek an accommodation with an emboldened Russia. It could determine whether more Asian nations welcome American military bases and troops to deter Chinese aggression, as the Philippines recently did, or buckle to Beijing’s bullying.

There’s more. Playing games with the debt ceiling imperils the dollar’s pre-eminent position in the global economy and the power that gives the United States.

All over the world, people, companies and governments conduct international transactions in dollars, invest in U.S. Treasury bonds and rely on U.S. banks because they trust that America pays its debts, upholds the rule of law and guarantees stability. The centrality of the dollar gives the United States far-reaching influence. It allows us to impose crippling sanctions, like those I negotiated against Iran during the Obama administration and those the Biden administration has used to respond to Russia’s invasion of Ukraine. This is why Fareed Zakaria recently declared in a Washington Post op-ed that “the dollar is America’s superpower.”

It’s no surprise that Mr. Xi and Mr. Putin are eager to disrupt the dollar’s dominance and defang American sanctions. At their recent summit in Moscow, Mr. Putin suggested Russia may start selling oil around the world using Chinese yuan rather than dollars, which it is already doing for shipments to China. The two countries are also trying to build cross-border financial systems to allow them to bypass U.S. banks and are holding fewer reserves in dollars.

If Congress keeps flirting with default, calls for dethroning the dollar as the world’s reserve currency will grow much louder — and not just in Beijing and Moscow. Countries all over the world will start hedging their bets.

It’s a sad irony that Mr. McCarthy and many of the same congressional Republicans seemingly intent on sabotaging America’s global leadership by refusing to pay our debts are also positioning themselves as tougher-than-thou China hawks. They talk a good game about standing up to Beijing, yet they are handing a major win to the Chinese Communist Party.

Republicans should stop holding America’s credit hostage, shoulder their responsibilities as leaders and raise the debt ceiling.

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