We’re facing another showdown over the national debt ceiling, thanks to the intransigent Tea Party morons in Congress who won’t compromise over anything. The first debt ceiling showdown happened in 2011, and was moderately successful in getting spending cuts. However, it resulted in the budget sequester that’s holding defense spending down, which Republicans are now whining about. The 2013 government shutdown resulted in a lot of people being angry at Republicans. Now, they’re trying the same old gambit…but with a new twist. We’ll default on our debt, but it won’t really be a default, so Republicans won’t really be to blame.
An article in Slate pointed out this new little twist on a very tired game, which is called the Default Prevention Act. Representative Tom McClintock (R-CA) introduced this bill to Congress, and it would allow the Treasury to continue borrowing to make payments on Treasury bonds, and send Social Security checks.
This will, to their way of thinking, prevent us from causing worldwide, economic catastrophe by being unable to pay on our debt obligations. One question comes to mind: How is this not adding to the national debt? In doing this, these Republicans tacitly admit that we need to raise the debt ceiling, routinely, in order to keep paying on our obligations.
It’s also a tacit admission that they know they can’t screw with the whole world in order to get what they want, and not pay a price. The U.S. economy suffered billions in losses during the 2013 shutdown, while government employees and employees of federal contractors were stuck in a kind of limbo of not knowing whether they’d be able to pay their bills anytime soon. Federal workers who were furloughed were put in another kind of limbo, too, as Congress debated whether they deserved to be paid.
Hitting the debt ceiling doesn’t necessarily mean an automatic default on our debts, but it does mean that the Treasury loses its ability to borrow money to pay on our obligations. In 2013, we were only bringing in enough tax revenue to pay 68 percent of our bills. Since we had some ability to pay, that’s why Congressional Republicans kept saying, “Hitting the debt ceiling won’t be that bad. The Treasury can just prioritize payments to avoid default.”
However, some bills would inevitably go unpaid. Contractors, for instance, or hospitals, might end up getting stiffed. The Washington Post said, two years ago, that the Treasury’s system may just keep sending out payments until checks start bouncing, and the ones whose checks bounce first are the ones who get stiffed first. They said it was hard to predict just how the system would handle an inability to borrow money.
Treasury bonds are among the biggest ways we borrow money. The U.S. doesn’t go to the bank and apply for loans, or swipe credit cards, or call other governments and say, “Hey, I can’t pay my bills. Can you spare a little change?” Investors buy these bonds, and we get more money. But it means that we owe money on these bonds; investors wouldn’t buy them if they weren’t going to get something out of them. Should we default on this debt, global markets could potentially crash, and global rates could skyrocket, according to the BBC. While it’s true that nobody knows exactly what would happen, this is the likeliest scenario.
Since we all remember what happened the last time the global markets crashed, Republicans are loathe to be responsible for it happening again. So, they’ll try to put in place a little insurance policy to insulate us, and them, from potential fallout.
They’re playing the same old game and trying to come out smelling like roses if they can. They think something like this will make them look like true debt crusaders, just trying to do right by the country. Holding the debt ceiling hostage has only ever partly worked once, and it won’t work now, because some key people aren’t playing this game again. Perhaps these obstructionist members of the Tea Party ought to figure out exactly what it is this country wants before they once again try playing these games.