The ITT List
Tuesday Apr 26, 2011 10:56 am
Weekly Audit: Hostage-Taking Over Debt Ceiling
The latest contrived showdown between Congressional Republicans and the White House is over what concessions the GOP will demand in order to increase the federal debt ceiling.
George Zornick of The Nation explains how
Congress now needs to approve any borrowing past the $14.3 trillion debt ceiling, which the United States will reach “no later” than May 16, according to Treasury Secretary Timothy Geithner. If Congress doesn’t raise the debt ceiling, the government would have to stop spending—including stopping interest payments on those Treasury bonds, meaning that the United States would effectively default on its debt.
The debt ceiling has to be raised and everyone knows it. Surely the Republicans knew it when they voted for tax cuts for the rich with borrowed money. If the debt ceiling is not raised, the United States will default on some of its obligations. Just like what happens after you miss a credit card payment, the country's creditors will demand higher interest in order to lend to us in the future.
Playing chicken with the debt ceiling is a recipe for increasing the national debt. Paul Waldman argues in The American Prospect that the Republicans hate government so much that they are willing to
The reason we're now seeing an unprecedented amount of attention paid to a vote that ordinarily passes with little notice is that the Republican Party's agenda is being set by a group of ideological radicals who seem quite willing to cripple the American economy if that's what it takes to strike a blow against the government they hate so much.
At AlterNet, Joshua Holland explains why failure to raise the debt ceiling would be an economic catastrophe that could jeopardize the economic recovery. "Peak Crazy," he calls it.
However, Holland notes that a showdown over the debt ceiling does not risk an immediate government shutdown, like the one we faced over the budget battle. Borrowing isn't the only way that government agencies are funded. The government could still spend the $150 billion or so it takes in every month in tax revenue, for example.
Yet, Senate Minority Leader Mitch McConnell (R-Ky.) has announced that all 47 GOP senators oppose raising the debt ceiling unless "credible attempts" are made to cut federal spending. Meanwhile the Tea Party is launching an all-out lobbying effort to urge House Republicans not to raise the debt ceiling without major spending cuts.
The Tea Party's wish list includes some total pipe dreams like a balanced budget amendment to the constitution and a law to require a two-thirds majority for all future tax increases. Former senator and current U.S. presidential hopeful Rick Santorum cheerfully announced that he would let the United States default on its debt if health care reform is not repealed. Rep. Michele Bachmann (R-Minn.) helpfully suggests paying the interest on Treasury Bills using money that would otherwise go to Social Security.
Shoot the hostage
Cenk Uygur of the Young Turks argues that Democrats are panicking needlessly and, once again, offering
The truth, Uygur notes, is that Wall Street has already told the Republicans in no uncertain terms that the debt ceiling will be raised. The economic consequences of doing anything else would be unthinkable. The Tea Party can yell and scream, but the adults have already made the decision. Knowing this, Democrats should not be trying to placate the Republicans so as to induce them to do something they will ultimately end up doing.
Digby on Social Security
Democrats are wavering in their decades-long commitment to defend Social Security, Heather Digby Parton (a.k.a., "Digby") writes in In These Times:
In a quixotic attempt to fix the problems in the current economy without confronting the plutocrats, the Democrats are using the illogical argument that since Social Security is projected to have a shortfall in 35 years, we must cut benefits now. And they seek to prove to “the market” that the government is fiscally responsible by showing it’s willing to inflict pain on its citizens—in the future.
Even if we do nothing, Social Security can pay out full benefits for the next 35 years. There is no crisis. A small increase on the payroll cap on Social Security could shore up the program for generations to come. Republicans oppose Social Security because they are ideologically opposed to social welfare programs, not because Social Security is broken.
This post features links to the best independent, progressive reporting about the economy by