The gist of it is this: the right wing has been mucking about, promising doom and gloom if we don't reign in our deficits. Their concerns portend all sorts of disaster, from "bond vigilantes" (which as Krugman points out, appear to be invisible) to massive inflation/stagflation, to seemingly everything under the sun. Only tax cuts and spending reductions can save us from the fate of Ireland and Greece! We're not going to tell you how exactly reducing revenue helps, or how reducing spending can defeat a demand crisis, but just believe us because we are serious people!
But as Yglesias points out, and as I have been thinking for some time, there is a very crucial difference between the United States and many other states. Our debt is owed in the same currency that we directly control the value and availability of. We do not owe money in a foreign currency, nor is the value of our currency dictated by some outside agency, foreign nation, bond vigilantes, or the mysterious dollar fairy. As Yglesias states it:
The government of Ireland owes euros, but it lacks the legal authority to create Euros. Governments of small developing countries often owe dollars, but lack the legal authority to create dollars. Under a gold standard, a government might owe gold and lack the physical capacity to create it. But the United States is owed dollars, and can create dollars, so it’s absurd to think that we might not be able to pay our bills.It probably goes without saying that there can be a number of reasons why we wouldn't want to necessarily resort to this as a first measure. The point, however, stands: it is monumentally stupid to compare the United States to Ireland or Greece. The situations are not even remotely the same. This reduces the Republican Party's crusade against spending to what it is: an ideological belief dictating policy, and not something they are doing to save us from default. The only way the United States can default is if we actively decide to stop paying our debts. As long as we want to ensure the full faith and credit of the United States, and we take the necessary legislative and executive steps to continue doing so, we cannot default. This is why raising or eliminating the debt ceiling should be a no-brainer instead of the song and dance routine that it has turned into. (And most members of Congress can neither sing nor dance, so that's a problem.)
Thus, what really needs to happen in the economic debate should be to raise the debt ceiling and then get on to more important aspects of our economic policy, such as how to encourage jobs. The unemployment rate is still around 9% after all, which last I checked is only ideal if you run debtor's prisons and/or are a Charles Dickens villain. Too often, matters of economic policy get bogged down into "what is my party's vision for America," rather than "what produces the results that we want"? That of course shows no signs of changing anytime soon, but it would be nice. One thing is for sure in either case though: the only way the United States can default is if we decide we want to default.