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U.S. Debt Default Could Threaten Israel Bonds

And Rep. Cantor is a crucial player in the negotiations

Marc Tracy
July 21, 2011
Rep. Eric Cantor Tuesday. Speaker John Boehner is in the background.(Mark Wilson/Getty Images)
Rep. Eric Cantor Tuesday. Speaker John Boehner is in the background.(Mark Wilson/Getty Images)

Should the U.S. government fail to increase the debt ceiling by the August 2 deadline, the consequences could include the downgrading not only of U.S. Treasury bonds but also of other bonds guaranteed by the United States, including those issued by Israel and Egypt. Moody’s, one of the three main credit raters, has announced that it may downgrade U.S. bonds from the current pristine AAA rating, and “[b]onds issued by the governments of Israel and Egypt that are guaranteed by the U.S. government were also placed on review for possible downgrade.” (Moody’s and the other credit raters famously rated investment instruments composed mainly of sub-prime mortgages as AAA, but our country is dysfunctional, so never mind.)

One aspect to this that may be especially interesting to Tablet Magazine readers is that Rep. Eric Cantor, Republican of Virginia, House Majority Leader, and the highest-ranking Jewish American legislator ever—and the subject of a superb profile by Allison Hoffman—has been playing a crucial role in the debt-ceiling talks. He emerged as the voice of the House Republican rank-and-file earlier this month, refusing even the possibility of tax increases as President Obama and Speaker Boehner negotiated a combination of spending cuts and revenue increases—the latter being a combination of tax hikes and the closing of tax loopholes—in an effort to decrease the debt and avoid a possible default. (For this, some have accused Cantor of being outrageously irresponsible and nihilistic, given how important raising the debt-ceiling is and the fact that Obama and Boehner had neared compromise, but Rabbi Shmuley Boteach explains that in fact Cantor is a “people person.”) A current compromise by the so-called “Gang of Six” senators would lower the debt by $3.7 trillion. Details are still hazy, but suffice to say that if whatever final deal is done has a proportion of spending cuts and revenue increases as low as three-to-one, then that would be a huge and unlikely win for the Democrats, because the Republicans are insane irresponsible zealots you should really read this essay and then run for your lives ours is an inherently conservative nation.

Marc Tracy is a staff writer at The New Republic, and was previously a staff writer at Tablet. He tweets @marcatracy.