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Neel Kashkari on Whether a Debt Downgrade Will Be Worse Than Lehman. "Many are asking whether a downgrade could itself lead to a financial crisis," observes Neel Kashkari. "With the example of 2008 still fresh in many minds, the question has become: Would it be as bad as the Lehman Bros. bankruptcy?" He points out that although it is not possible "to accurately predict the consequences of an economic shock," recent examples "offer guidance." In 2008, "a number of once-cherished beliefs were turned upside down" (e.g., that home prices would never fail, that AAA-rated subprime securities are sound) and "when the beliefs were revealed to be false, massive shocks were inflicted on the economy." To judge whether or not this is possible with the debt, consider the following factors: "How strongly is the belief held?"; "How big an asset class does the belief support?"; "How wrong was the belief?"; and "What is the economic context in which the shock is taking place?". He runs the belief that Treasury bonds are risk-free through this metric, and comes to this grim conclusion: "These factors suggest that a U.S. downgrade has the potential to be as bad or perhaps worse than the Lehman shock... We may not be certain what will happen if U.S. credit is downgraded, but there is no upside to finding out."

Aluf Benn on Netanyahu's Overreaching Diplomacy.  "[D]iplomatic successes, like battlefield victories, can inspire overreach," writes Aluf Benn of Netanyahu's foreign policy.  "When he visited America in May, Mr. Netanyahu picked a fight with Mr. Obama over a formula for peace proposals. That raised his popularity at home and pleased Republicans in America. But in the long run, it could cost Israel dearly." At this point, in Benn's estimation, "America needs Israel, but Israel needs America much more" -- and the "Palestinian problem will not go away." Following the Arab Spring, Netanyahu should have established "a new understanding" with Obama regarding the American-Israel friendship, rather than picking a fight: "He should have worked out an agreement on how to reignite the peace process, rather than antagonize the American president." But it's not too late for Netanyahu to change course in light of the Arab Spring. The "Arab storm" has not yet reached the shores for Israel. Until it does, Netanyahu should take more "political risks at home," or else his "timidity and cynicism will prove costly for Israel."

Paul Begala on How Republicans Squandered the Surplus. "There it sits, lonely and forlorn on my shelf. A leather-bound copy of the 1999 Budget of the United States of America. A gift from President Clinton to the folks on his team, it was the first balanced budget in decades," begins Paul Begala. But it was not to last. According to Begala, "There was no unforeseen earthquake, no tsunami, no hurricane that wiped out our surplus. It was instead a Republican House, a Republican Senate, and a Republican president who squandered the surplus." But this depressing recap aside, Begala insists we should focus on where the GOP wants the country to go: "we should treat the GOP proposal as a serious governing document." This is what, in his estimation, it contains: "Deep cuts in every domestic priority—from education for disabled children to food safety to homeland security to clean air and water. Followed by painful cuts in Social Security, Medicare, and Medicaid. But not a dollar in new revenue." He concludes: "Seems to me the GOP seeks a banana republic: a toxic blend of right-wing populism, anti-intellectualism, debt defaults, and an end to the ladder of economic opportunity." And, "if they don't get their way they will cripple the Treasury's ability to pay the debt—the debt, I hasten to add, that their policies created."

Charles M. Blow on Racial Revisionism in Hollywood. Charles M. Blow, like a great many people, watched Captain America in theaters recently. "But as I watched the scenes of a fictitious integrated American Army fighting in Europe at the end of World War II, I became unsettled," he describes. "Yes, I know that racial revisionism has become so common in film that it’s almost customary, so much so that moviegoers rarely balk or even blink. And even I try not to think too deeply about shallow fare... But this time I was forced to bend it back. It was personal." Blow notes that "the only black fighting force on the ground in Europe during World War II was the 92nd Infantry Division: the now famous, segregated 'Buffalo Soldiers.' My grandfather, Fred D. Rhodes, was one of those soldiers." And in truth, "the soldiers were placed under the command of a known racist," and "his and others’ efforts were not fully recognized." Blow describes the service of his grandfather and how he learned of his contribution and suffering. "That is why the racial history of this country is not a thing to be toyed with by Hollywood. There are too many bodies at the bottom of that swamp to skim across it with such indifference. Attention must be shown. Respect must be paid."

The Washington Post Editors on Sanity in the Senate. This is the third out of five columns devoted to the debt deal today. We apologize. We acknowledge that other things are happening in the world, and we risk boring you, but we can't stop ourselves from trying to provide a sane perspective. The Washington Post editors give a noble attempt in an editorial laying out the state of the matter in the Senate. "Democrats, representatives and senators, is this really what you went to Washington for? Surely you did not seek elective office believing that, once in power, you would be able to achieve everything you wanted, entirely on your own terms." After dwelling on this sad plea, they note that "sanity will start, if it does, in the Senate." Of course, the Senate has to deal with the "straitjacket of its cumbersome procedures that eat up precious time." But as the attention turns to Reid: "Can the leader craft a compromise, two-step measure that would bring enough Republicans on board to get past the 60-vote hurdle?" And a few practical observations: "The Gang of Six sympathizers ought to be amenable to the notion of a supercommittee to come up with additional savings"; "There is no rational basis for insisting on a dollar of savings for every dollar increase in the debt ceiling"; and "In short, an effective trigger must involve shared pain that would be unpleasant but not unendurable." As for now, "the more immediate trigger is the gun to the head of the nation’s economy."

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