House conservatives have devised a “new and improved” threat to the world economy if their demands are not met. Once again, they vow to vote against raising the cap on U.S. debt if desired cuts in government spending are not made.
Once again, they insist their plan would not crash the world financial markets, because it would guarantee payments to holders of U.S. debt. Only Americans expecting to be provided certain government goods and services would get stiffed.
(That the U.S. debt is tantamount to a balance already on the national credit card does not seem to have gotten through to them.)
This move is not political genius, according to Senate Budget Committee Chair Sheldon Whitehouse. “As a Democrat, I actually look forward to them voting to put foreign investors ahead of American families for payment,” he told Politico. “I’m not sure that’s the message they want to take to the public in 2024, but God bless them if they do.”
House Speaker Kevin McCarthy hasn’t scheduled a vote on the House Bill but had promised to do so during his desperate effort in January to obtain the leadership post. He wanted it that bad.
Republicans seem to have not learned their lesson back in 2011, when Democrat Barack Obama was president. They came up with a scheme envisioning only a “technical default” that, they imagined, would not shove the economy over the cliff. Under that plan, the government would continue to pay interest on the debt while putting off payment of other bills — for instance, Social Security benefits.
The financial markets were not amused. Just the fear that the United States would go into default caused the S&P 500 index to sink 7% in one day. Standard & Poor’s then took away America’s triple-A rating for the first time in history, costing U.S. taxpayers at least $19 billion in higher interest costs.
The voting public was also not amused. The next year, Obama was reelected. Democrats gained two seats in the Senate and eight in the House.
This time is different, so they say. Republicans would give President Joe Biden the authority to continue paying Social Security and Medicare benefits by borrowing beyond the debt limit. That would remove some sticks of political dynamite.
Nevertheless, Treasury Secretary Janet Yellen would still have to figure out how to pay for such things as national defense and veterans’ benefits. She’d have to find a magical way to pay government contractors, federal workers, state and local governments, and other beneficiaries of government programs.
China, meanwhile, would not have to worry at all about the U.S. making good on the $1 trillion it holds of U.S. debt. This bill is about defunding America, not China.
Meeting debt obligations to China while making American farmers sweat does not sound like a political winner. But politics aside, these threats against the full faith and credit of the United States are a form of economic terrorism.
Why haven’t these Republicans come up with a comprehensive list of cuts to make? Because the game is the thing. When Donald Trump was president and the national debt rose by nearly $8 trillion, they turned into obedient sheep voting multiple times to raise the debt ceiling.
The creepy part is their insistence that playing this latest game of chicken is a harmless way to encourage a level of fiscal courage that they’ve never shown.
As Whitehouse put it: “They are composing an imaginary world in which the debt limit has been breached and there is not catastrophe. This bill normalizes that.”
The U.S. defaulting on any part of its debt would have disastrous consequences. That’s in the real world.
