Minnesota Isn’t America
The state-government shutdown holds few lessons for the national crisis.


By contrast, a panic over the federal debt could have far-reaching consequences.

Moody’s has put the U.S. government on review for a possible downgrade to the Aa range, which would have repercussions for over 7,000 ratings of credits that have direct links to the federal government, such as municipal and housing bonds. In addition, Moody’s is considering downgrading five states with AAA ratings — New Mexico, South Carolina, Tennessee, Maryland, and Virginia — because of their outsize dependence on the federal government for employment or revenue.


But there’s more.

“Even if Minnesota were to default — and it won’t — it would be just a very, very, very minor kick in the global financial situation,” adds Stinson. “Whereas if the U. S. Treasury were even to be rumored to miss a debt payment, that would have an interest-rate impact globally affecting all kinds of arbitrage deals, all kinds of holdings from various funds, and could easily trigger margin calls and real disruption in the financial markets.”

Finally, the crucial distinction between Minnesota’s government shutdown and a partial default on the federal debt is that the latter has never occurred before.

“No one knows for sure what will happen,” Marron says.

A less than comforting thought.

  Brian Bolduc is a William F. Buckley Fellow at the National Review Institute.


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