Once again, there is blackmail afoot.
Once again, the GOP is hellbent on playing chicken with the lives of ordinary citizens, and with the solvency of the government.
For most of us, it’s boring to even think about the federal debt ceiling. Yet for the umpteenth time, the GOP intends to weaponize it. Which could bore us, quite literally, to death.
We’ve seen this movie before. In 2011, they refused to raise the debt limit, which had the effect of reducing the credit rating of the U.S. Treasury for the first time ever.
Ultimately they backed down, and they took a huge political hit that cost them dearly in the 2012 election. But in the process, they extorted Obama into spending cuts that were, in the context of such short-sighted bad faith, totally outrageous.
To Republicans, that was a victory. Debt ceiling blackmail had been shown to work.
Most economists — the reputable ones, anyway — agree that there shouldn’t be any ceiling at all on the national debt. It’s natural for a fiscally responsible government to borrow money when its tax revenues fall below its debt obligations. There is no rational reason to place a numerical limit on the amount it can borrow.
But Republicans don’t do rational, and they figured out long ago that they could use that debt limit to coerce concessions. They could walk right up to the brink of catastrophic default, and get Democrats to pay them to stop. It was the old give-me-what-I want-or-I’ll-blow-my-brains-out trick, and responsible adults — Democrats — were left to pick up the pieces.
Now they’re at it again. Senator John Thune — an almost responsible adult Republican — just said it out loud. They want deep cuts in Social Security and Medicare, and they’ll hold the economy hostage till they get it.
But before we start thinking through strategies for dealing with blackmailers — especially when they’ll be running one branch of Congress — let’s take a moment to consider what’s at stake. Because I think the consequences have not been fully thought out, least of all by the blackmailers themselves.
Without getting into the arithmetic, if the debt ceiling is not raised, the United States of America, for the first time, will not be able to meet its financial obligations in a timely manner. We will default on money we owe. How much money and how quickly we default is up in the air.
Most likely, the first thing people would notice is that Social Security checks will be late, or less than the amount due, or delayed indefinitely. That would affect roughly 50 million people, 12 million of whom rely on those checks as their sole source of support. Lives would surely be lost.
The same would be true of Medicare, affecting 60 million people. And Medicaid, affecting 75 million. CHIP only affects 7 million, but they’re all children.
And by “affecting,” I mean that their claims could be delayed or de-funded, leaving them on the hook for their medical bills. The ripple effects could disrupt the entire healthcare system, as people and companies— doctors, hospitals, labs, and ancillary organizations of all kinds— go unpaid. This could lead to shutdowns, bankruptcies, and an epidemic of bad health outcomes. Did I mention that 9 million veterans would have the same problem?
Few doubt that a federal default will make a serious dent in around 50 million household budgets. Enough of a dent to force some tough decisions about food on the table and pills in the medicine cabinet.
And that’s just the beginning. There’s plenty of speculation about how far this goes, and how fast, but the truth is nobody knows — we’ve never stiffed our creditors before. But if you look at the pie chart of government spending, the three biggest slices, by far, are healthcare (Medicare, Medicaid, CHIP), Social Security, and defense. All of these will take a major hit in a major default.
Meanwhile, a full-blown global financial crisis would almost certainly ensue, complete with the sort of credit market freeze that was such fun in the Great Recession of 2009. Combine that with our financial support of the Ukraine war — also a GOP target — and we’d be likely to see a stock market crash, another global recession, and the disappearance of a few trillion dollars in asset value. To Republicans, this is not worth thinking about.
It’s no accident that the world puts its money in dollars. Despite our erratic behavior in the last few decades, other nations continue to look to our treasury as a “global benchmark safe asset,” a place where they can invest their money with the confidence that its value will be preserved.
Which is why, whenever there’s a hiccup in global markets, we see banks, private equity funds, pension funds, and all manner of financial service companies fleeing for the safety of U.S. Treasury instruments.
All that changes when we stop paying our debts. Trust will be eroded, perhaps irrevocably. The world will no longer assume the preeminence of the dollar, and investors will look to other currencies for safety.
But wait, it gets worse. Not only would a Treasury default trigger multiple crises at once, but it would also leave the federal government crippled in its response to those crises. Imagine trying to deal with a new pandemic when the help we need is in the hands of companies afraid of getting stiffed by the government.
Surely this has all been explained to the ever-expanding nutjob wing of the Republican party. Yet they seem unconcerned, like these little catastrophes have become routine. They’re happy to leave it to Democrats to fix whatever they break.
So how do we counter this unique blend of stupidity and malice? Sadly, most options for raising, delaying, or abolishing the debt ceiling will probably not happen before the current lame duck session ends. So we’ll be left trying to get Republicans to see reason, and we know how that goes.
But tampering with Social Security and Medicare has long been the third rail of American politics, and Republicans have been burned by it often enough to know better. Both programs are overwhelmingly popular, and Mitch McConnell will want no part in gutting them. Even Thune was quick to say that default was “not an option.”
Of course, those two are in the Senate. The real threat will be from the House, which is sure to reach new levels of crazy when they take over in January.
But Democrats are not likely to go quietly this time. They are growing more combative by the day, and they seem to feel the wind is at their backs for the next two years. Spending cuts to Social Security and Medicare will not be on the table. It’s entirely possible they could call the GOP’s bluff, agree to default, and see if they fold. Which might or might not happen.
But it takes two to play chicken. While an actual default would likely be cataclysmic on many levels, it might be the only way to wean Republicans off this habit of weaponizing the norms of government, which is getting old.
For 250 years we paid our debts faithfully. But Republicans think nothing of skipping out on our bills, like the world’s most incorrigible deadbeat dad.
We may have no choice but to let them do it, which means we’ll just have to pick up their mess. Again.
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ReplyDeleteIt seems to me that endlessly printing money to pay for ever increasing entitlement costs is a dangerous experiment that could eventually end badly for us. Where the Republicans fail to be coherent is in trying to stop the bleeding without any type of plan to mitigate the effects. Entitlement reform would be the most challenging act of leadership this country has ever known. Obama took a tiny chip out of it and it was his last major accomplishment. The Republicans clearly aren't for even trying. So much for picking up both ends of the stick.
ReplyDeleteThe question of the debt ceiling isn't about the govt printing money to pay for its expenses, it's about the govt borrowing money to pay for its expenses.
DeleteBorrowing to meet expenses, even to the point of being always in debt to some degree, is such a completely good idea that most of us do it in our private lives, a lot, as an important part of succeeding in life. We borrow to pay for a college education, to buy a car, and we take out mortgages on houses -- to mention just the major episodes of large amounts of debt we incur. In addition to that, most of us use consumer credit for minor purchases, as a convenience.
Of course you can get in trouble living off borrowed money.
One problem is borrowing to pay for things that are in themselves not an investment in the future, or are even destructive of future prospects. Applying this to the entitlement programs you mention, I think investing in medical care and elder care is very important to planning for the future of this country, a future in which those huge burdens are not left loose to crush the children of the elderly and the families of the sick. Borrowing to stop bleeding, and heart disease, and cancer, is far and away a better plan than doing northing about bleeding, and cancer, and heart disease.
The other potential danger of borrowing is if it becomes so excessive that servicing the debt eat up an ever greater share of your outlays. You reach a point where you stop being able to pay creditors on time and in full, and your credit rating drops. That leads to you being unable to service your debt at reasonable rates, forcing you to become dependent on ever more usurious rates, until only loan sharks will lend you money to continue your borrowing.
Basically, what people who use the debt ceiling are doing is threatening to ruin the credit rating of the US. As it is, the US is an excellent borrowing risk. Our use of credit is well in control, and does not threaten to get out of hand to the point that we will not be able to pay our debts. All that would change if the US defaulted, as the Rs seem to think would be a good idea, because the national debt has to be reserviced continually, and the rates that creditors would charge were we to default would rise immediately and sharply, making what is now a perfectly sound and manageable level of debt wholly unmanageable.
Entitlements aren't the problem, at all, not even one component of the problem. If anything the social safety net should be strengthened, because that improves this country's future prospects of prosperity and productivity, quite aside from individual happiness and well-being. That's the entitlement reform we need. The problem is entirely a party that wants to destroy our ability to borrow at reasonable rates, because they want to create a situation in which the US no longer has any choices to make about its future, but is forced by its creditors into an austerity that will end our wise investment in the social safety net.
Don't accept their ideas about some non-existent debt crisis, fueled by supposedly unsustainable spending on the safety net, forcing us into a foolish and destructive austerity which will benefit nothing except their political ambitions. The Rs are the only problem here.
Glen, I stand corrected. I suppose the money-printing doesn't start until the Fed buys our debt, which they have been known to do in recent times. I agree with you that our social safety net is an asset worth protecting and even bolstering. I do think there are things we could do to bring down delivery costs, but those improvements are antithetical to the purposes of immensely powerful corporate interests in the legal, insurance, and medical industries, who support the Republican agenda.
DeleteThe R party gave us privatized schools and prisons and the evidence suggests that by comparison, publicly operated alternatives are not nearly so bad by comparison as they predicted. But, then that seems to be evidence that normal citizens and Democrats care about.