Just two weeks after Congress negotiated a last-minute deal to avert going over the fiscal cliff, economists say political roadblocks by Republicans, who have gotten hammered lately, are again throwing tantrums over the nation’s borrowing limit and could once again threaten to cause grave harm the nation’s sluggish recovery and 99 percent of Americans’ well being.
Republicans have spent so much time on the ropes lately that John Boehner’s, orange, spray-tanned face is beginning to look like he stuck it in a fan…
“It’s probably the biggest headwind right now,” said Paul Ashworth, chief North America economist with Capital Economics.
So, what do we do about it? As usual, there seems to be two widely divergent opinions on this. The scientific, mathematic, econometric camp….and the Republicans…
There are Low-Information Republicans and, Well, Everybody Else
The first group of course says,”My gosh, of course it should be raised — why are we even talking about this? The thought of willingly defaulting on the national debt is insane and shows a deep lack of understanding about how economies work!” This is not a self-imposed deadline like the fiscal cliff. This is real-world, and it has serious consequences for every American. They[the GOP] are playing Russian Roulette with Americans’ livelihoods.
The other group says, “Whoa, whoa, whoa! No one is talking about defaulting on the debt. Not raising the debt ceiling just forces the government to spend within its means. Payments could be prioritized so that vital spending commitments — notably, interest on the national debt — are paid first and default is sidestepped.”
To illustrate the level of understanding the second group maintains, Congresswoman Michele Bachmann noted during the debt ceiling debate in 2011:
“This is a misnomer that I believe that the president and the Treasury Secretary have been trying to pass off on the American people, and it is this — that if Congress fails to raise the debt ceiling, that somehow the United States will go into default and we will lose the full faith and credit of the United States. That is simply not true. … It is important to recognize that revenues continue to come in to the United States Treasury. It is merely the president’s obligation, and the Congress’, to make sure that the interest is paid on the debt. We are grateful that revenues are sufficient to be able to pay the interest on the debt.”
This might seem logical to your average, run-of-the-mill community college drop-out, and it’s mostly right. But it’s just flawed enough to be absolutely, disastrously, and tragically wrong.
First of all, the government certainly does take in enough tax revenue to cover interest payments on the national debt — by at least a factor of 10. In fact, despite the hand-wringing, and downright lying by that second group above, interest payments as a percentage of GDP are actually near the lowest level in 40 years.
But again, teabaggers, ne’er-do-wells, nay-sayers, listen up…the government is NOT like a household that receives a fixed amount of pay every other Friday and pays a static mortgage payment on the first of the month. Tax revenue and expenses are uneven, irregular, and coming and going in sporadic fits and starts.
That’s an incredibly important distinction. Why? Because although it’s accurate that on an annual basis the government takes in enough to cover interest payments, it’s categorically not true on a day-by-day, week-by-week, month-by-month, basis.
Using daily and monthly cash-flow statements, the Bipartisan Policy Center put together a projection of the Treasury’s revenue and expenses come Feb. 15:
So, on its first day with no spare cash on hand, the Treasury is projected to receive $9 billion in tax receipts and owe a $30 billion interest payment.
Let’s look at that.
Suppose you are a parent with a child that desperately needs to have his appendix removed or he’ll probably die, or at least become gravely ill, but you just don’t have the money in the bank to pay for it that day. Are you, a parent, going to mull over whether or not you should go borrow the money to have your child’s soon-to-rupture appendix removed or just hope that it will hold off just long enough for you to get paid or worse, won’t actually be that bad? I guess if you don’t understand or don’t care about the consequences, the kid is toast. Welcome to the GOP mentality. “As long as it doesn’t affect me? @%#$ it.
Even if we shut down all the Federal courts, send the FBI home, lay off all Federal workers, suspend all Social Security payments, and stop paying soldiers, the Treasury still wouldn’t have enough money to make its Feb. 15 interest payment on that day. (But I bet the Congress won’t miss a payment, a healthcare insurance claim-for LIFE , or a pension deposit-for LIFE !).
That is what’s known as a debt default.
It’s not a fiscal cliff/slope/whatever. It’s serious hurt for 99 percent of Americans and the economy as a whole.
The Treasury is expected to bring in $40 billion of tax revenue from Feb. 19 to Feb. 21, and it could easily make its interest payment then, at that time, but only after being in default for four business days. That’s why, until this current flock of nutjob Republicans, the debt-celing increase has always been a ten-minute parliamentary procedure, not a dangerous game of Russian Roulette with House GOP using the American people as human shields. The average American doesn’t even know it’s happening, but what would happen to financial markets during those four days as the full faith and credit of the United States goes up in smoke?
I don’t want to find out…and anybody with a brain or a conscience shouldn’t either. It’s absolutely insane that we have Republicans who are so out-of-touch with how the government (that they hate so much, yet will campaign to remain a part of at virtually any cost) works, that they are AGAIN considering using it as some sort of hostage-taking. It really is tantamount to domestic terrorism.
The risk of defaulting by not raising the debt ceiling is so irresponsible, so treasonous, that the Republicans considering it should be prosecuted for domestic terrorism and shipped off to Gitmo.
According to Politico, a right-wing online “news” organization, Congressman Jason Chaffetz warns that “lawmakers are prepared to shut things down or even default if Obama doesn’t bend on spending.” What do they season these teabaggers’ food with, LSD?
Republicans Sure Do Love Their Soap Opera
Yes, we’ve been down this rabbit hole before. Last summer’s debt ceiling debate and in the more recent fiscal-cliff negotiations, the Republicans basically threatened to hold their breath til they turned blue like petulant children. Both parties try to intimidate each other and draw lines in the sand, the Dow falls about a thousand points as investors panic that these fools won’t come to their senses, congresspersons suddenly realize they need to get serious, and a deal comes at the last possible moment. But the magnitudes of even getting close to, or threatening to default are so serious and would shellac so many, that I can’t believe Congress would actually allow it.
But with this bunch of clowns, that only work 126 days a year for life-long pensions, healthcare and ever-increasing staffs? Sure. They could do it and never feel the pain themselves. And really, therein lies the rub.
As Warren Buffett put it, “The rest of the world may think we’re idiotic at times, but they don’t think we’re going to commit suicide.”
I don’t have Warren Buffet’s or a Congressperson’s money to pad my fall if they do. Do you?
For pete’s sake Red States. Quit sending these idiots to Congress!!