The GOP Default Enthusiasts
Late posted, but still relevant:
by Linda Beale
The New York Times has a story today about those in the GOP who don’t think the government of the USA defaulting on its debt for the first time in history is a big deal. Weisman, Many in G,O,P. Offer Theory: Default Wouldn’t be that Bad, New York Times (Oct. 8, 2013). One of them likens the government to his large-animal veterinary clinic, stating that he was able to talk to his creditors and work out some delayed payment and implying that the government can do the same. Id. (Ted Yoho, R-FLA).
What are these guys (mostly–but also some ridiculous women like Michele Bachmann) smoking?
First, they should read some history. Look at Spain in the late 1500s and early 1600s, where it went from the richest empire to poverty because of overcommitment to military enterprises at home and abroad that didn’t take into account the potential for decreased commodities coming from their American colonies. Look at the South American defaults, in which the richest country in the world (us) had to come to the aid of those country (remember “Brady bonds”?). There’s no richest country to come to our aid.
Second, they should walk the streets of this country outside the cocoon of their wealth and ease and privilege. Try to imagine what it feels like to be a dedicated government worker told to go home and do without any pay til Congress decides you’re worth paying again–and listening to the likes of Rand Paul, Richard Burr and the others who think the shutdown is doing no harm and should continue for months, with all tax revenues going to pay off debt.
“You’ve had the federal government out of work for close to two weeks; that’s about $24 billion a month. Every month, you have enough saved in salaries alone that you’re covering three-fifths, four-fifths of the total debt service, about $35 billion a month. That’s manageable for some time.” Id. (Richard Burr, shrugging off impact of default without any concern for the thousands of families and communities impacted or the long-term effects of government programs halted).
Third, they should look at the many spending obligations of this country that are the Law of the Land and apply their own purported views of fiscal responsibility to their own calls for defaulting on the debt. They do realize that Social Security recipients are among those who will be stiffed by the default? And military contractors, Head Start providers, NIH grant recipients, NSF grant recipients, the Centers for Disease Control and on down the list of federal agencies already hit hard by the shutdown and the people already living hand to mouth as they are forced into unemployment by well-heeled Republican congress people with such disdain for the very government that they are sworn to serve? The federal government cannot call a friendly lunch meeting with its creditors to work out a slo-pay schedule on its myriad obligations. (And most small businesses can’t either, for that matter.)
The default enthusiasts hereby reveal that no matter what they have mouthed on Fox News in the past, in fact they were never ever worried about the amount of the federal debt. They were never ever concerned about fiscal responsibility. And they never ever were concerned that the amount of debt was bad because they didn’t want the United States to be pushed into a situation where it would be required to default. They clearly don’t care about the debt since they are now saying they don’t think default is such a big deal.
Then what is this all about?
Krugman got it right.
Republicans don’t care about the debt and never did, they only pretended to as an excuse to slash social insurance programs. Paul Krugman, Default Deniers, New York Times (Oct. 8, 2013).
This is about the radical anarcho-libertarian Tea Party wing of the Republican party getting its way in spite of the fact that it represents a minority of the minority in this country. That group wants to force its view of the world on the rest of us, using extortionary demands to get the result it wants–less spending on social welfare programs that have been part of this country’s social makeup for more than half a century and more benefits going to the ultra rich and big corporations who will exercise more control through the likely tandem result on free-flowing money in elections from the GOP-dominated Supreme Court of Scalia, Alito, Roberts and Thomas, all backed by the Koch and Walton and similar well-heeled families.
And one of Krugman’s commenters also got it right:
I can’t figure out what the “dangerously high debt level” is [for those GOPers who refuse to increase the debt ceiling for that reason]. Is it the danger of default? So they want us to default to avoid the danger of default?
Sounds like their fix for Social Security. We have to cut SS now so we don’t have to cut SS in the future. Id (comments by Scott, Oct 9, 2013 at 11:02 am) , at http://krugman.blogs.nytimes.com/2013/10/08/default-deniers/?comments#permid=10203589).
cross posted with <a href=””http://ataxingmatter.blogs.com“>ataxingmatter</a>
Linda,
You have fallen victim to a misleading NYT headline.
No where does any GOP member say “default is no big deal.” What they are saying is “We always have enough money to pay our debt service,” said Mr. Burr
Net interest is only 6% of the total budget. http://en.wikipedia.org/wiki/File:U.S._Federal_Spending_-_FY_2011.png
“It really is irresponsible of the president to try to scare the markets,” said Senator Rand Paul,
They are mainly permanent shut down enthusiasts. They dont like DC. For those of us familiar with American history, the idea of shutting down DC is a common theme. Would the result be bad? Out west we would rely on Texas to make the new currency, as no one would trust California. But we would survive, maybe even thrive out west with new currency and a free pass on paying for the 4 trillion we owe. Not much different than Dean Bakers idea of destroying the 1.6 trillion of bonds on the Fed sheet.
Debt limit breach no big deal, some GOP lawmakers say
http://www.usatoday.com/story/news/politics/2013/10/07/debt-limit-denial/2937087/
“I would dispel the rumor that is going around that you hear on every newscast, that if we don’t raise the debt ceiling, we will default on our debt,” said Sen. Tom Coburn, R-Okla., Monday on CBS This Morning. “We won’t. We’ll continue to pay our interest.”
Coburn and other Republicans argue that the Treasury Department could prioritize interest payments while delaying others. The House has passed a bill requiring the Treasury to do just that.”
Sammy pull the other finger. First of all no reasonable person can read what Coburn “and other Republicans” are saying and not read “default is not big deal”.
Now if one was totally ignorant of the way world finance works one could read Coburn and others saying “the U.S. unilaterlally abrogating the terms of thousands of otherwise enforceable contracts with vendors and citizens by not raising the debt limit is technically not default because we can still meet our obligations to the Chinese Central Bank” and say “You know? That’s right!”
But Sammy do you really want to be that person? Because the idea that the Federal Government can operate like its entire financing system is equivalent to an interest only or neg-am loan is lunacy.
Exactly where does it say that “Full Faith and Credit of the United States” REALLY only applies to debt service? Ya think that people will really continue to buy Treasuries at current negative real yields with that attitude?
The time value of money is written into every financial contract whether or not that is formally expressed as a specific interest charge.
Now there are no doubt a lot of people who believe that when a mattress or car salesman sells you product “with no interest and no payments for a full year!” that they are making you some free gift. “Look I got a free TV! For a whole year!” “Man oh man they threw in a second set of steak knives just for the cost of shipping and handling!” “Hey it says here that this motorized scooter is ‘Free to Me’!”
Sammy oh Sammy try listening to your libertarian brothers when they tell you TANSTAAFL. Because There really Ain’t No Such Thing As A Free Lunch. Not in buying steak knives and not in federal contracting,. Just because they don’t label it ‘interest’ doesn’t mean that your credit doesn’t rely on timely payments. Or that the accoutant at the other end isn’t figuring in the time value of money when advising on the price point.
Bruce,
The US government breaking a deal with its citizens and vendors is not that big of a deal compared to defaulting on it’s debt.
Breaking a deal with, let’s just say, Social Security recipients, results just in some disappointed citizens. These type of pacts are modified ALL THE TIME and it’s not considered a “default.”
However, defaulting on interest or principal payments, now that has worldwide consequences such as collapse of all banking and inability for the US to borrow any further.
Try paying only the interest on your home mortgage and see what happens. Then tell me it is no big deal when you are out on the street.
Jerry,
Trying to pay interest only on your mortgage is a “default.” The US can just pay the interest and roll over the bonds = no default.
“The US government breaking a deal with its citizens and vendors is not that big of a deal compared to defaulting on it’s debt.”
Sure. As long as the Chinese Central Bank is convinced that the U.S. government will continute to prioritize its interest payments to them while stopping payments to those veterans that actually were fighting the ChiComs in Korea.
Who knew that the successors to Chairman Mao were so beloved by the American government that they would stiff not only the Greatest Generation but their nephews who fought in Korea?
Of course prioritizing interest payments is not JUST about honoring our obligations to the ChiComs. We also owe big bucks to the former Axis Powers the Japanese and Germans.
Sammy are you sure you want to demagogue this particular line of argument? Did we fight all those wars just to guarantee payments to our former adversaries? While cutting Food Stamps for American kids?
Good luck with THAT messaging. Because liberals can fight dirty too when it comes to it. Beck and Limbaugh don’t have a patent on that.
Bruce,
I am simply pointing out that we are not on track to default on our debts, if we don’t want to. There is plenty of tax revenue to cover this.
Defaulting on our debt is much worse than defaulting on food stamps for some shiftless bums. Do you disagree?
Plus Sammy the following is not at all clear in current law.
“Trying to pay interest only on your mortgage is a “default.” The US can just pay the interest and roll over the bonds = no defaul”
You got any controlling legal authority that would allow for that roll-over? Is there REALLY some label on new Public Debt that shows that it is just redemption of old Public Debt? Are their REALLY Treasury bonds stamped ‘re-fi’? If not you are talking through your hat.
It is one thing to argue that Treasury can just pay debt service out of existing revenues and another to say they can just redeem Treasuries by issuing new Treasuries. Maybe so, but it would help to have you cite the sections of U.S. Code that authorize the latter.
What is the exact mechanism that allows Treasury to issue ANY new instruments once the Debt Limit is hit? Because I don’t think back end accounting is going to justify the ‘no harm, no foul’ principal you are relying on.
“Defaulting on our debt is much worse than defaulting on food stamps for some shiftless bums. Do you disagree?”
Eff you Sammy. I was living off of food stamps right through the end of July of this year and am only making it now because I am eligible for VA education benefits that also have been potentially cut off come Nov. 1.
Maybe I am just a shiftless bum. But don’t expect me to agree with you on any of that. Hey the Cayman Islands are still issuing permanent resident visas, don’t let the U.S. door hit your sociopathic ass on the way out.
Bruce,
Good point.
We would be able to roll over our debt only to the extent that it doesn’t exceed the debt ceiling. So then it becomes a game of prioritization. Remember Obama’s golf course remains OPEN.
Eff you????
I’ve been paying a lot of taxes to support your food stamp habit and this is the thanks I get?
Bruce,
Feed me. Please. I am able bodied, intelligent but please, give me food stamps.
You should be ashamed, but you feel it is your right to have other people feed you. Sorry but this is pathetic.
Hey Sammy,
You’re paying a lot more taxes on welfare for US business than on individual people. You need to read this: http://angrybearblog.strategydemo.com/2012/02/welfare-im-not-hurting-from-it-and.html
And at least welfare for people moves through the economy from the bottom up. Thus, everyone gets some action from every one of those dollars unlike welfare for business.
Stop showing your selfishness. You really have hit your lowest point here.
I believe that defaulting on mostly richer people (ack including me!) who thought we would pay them back the money they loaned us with interest in a timely manner is less problematic than defaulting on a worker who worked for the money we owe them, or failing to provide food for a poor infant.
But US policy choices for quite a while have favored bankers over babies, so it’s not really a surprise to see this going that way.
The consequences to us (discounting the hungry babies) of not paying the bankers and rich people, at least in the short run, might be worse given that we have given them such immense power.
76% of households that get SNAP (aka foodstamps) have a child, and elderly person, or a disabled person in them. Those households receive 83% of the total benefits. The US stopped providing food to able bodied potential workers, except as a consequence of feeding others, long ago.
“Defaulting on our debt is much worse than defaulting on food stamps for some shiftless bums.”
Sammy, I agree with you. Unfortunately, the vast, vast, VAST majority of people on food stamps are not shiftless bums.
Bruce,
I am sorry for my comment to you. It is way out of line. I shouldn’t comment in anger.
As the primary lender to the US government I would think that the Social Security Trust Fund would be entitled to priority status if we’re switching over to an interest only payment scheme. The entire concept of paying debt interest before paying employees and other lenders is absurd and could only have been suggested in the theater of the absurd that the Republican Party has become.
Once you enter the world of absurdity then any suggestion is satisfactory. Frankly I prefer an approach that is more concretely grounded in reality. For that we can turn to the folks at the International Monetary Fund, never a group to be accused of being too liberal in its pronouncements. As run75441 points out:
“IMF Says Tax the Rich to Make Up the Deficits and Fight Income Inequity” Could bankers with a global perspective be wrong? Not likely.
Good article, Dan! Would like more.