Cantor Defends Geithner on Debt Ceiling
An interesting split is occurring within the ranks of the Republicans holding the American economy hostage over the debt ceiling. Led by Michele Bachmann, Sarah Palin, Pat Toomey and Tim Pawlenty, the "Default Deniers" not only refuse the acknowledge the global economic calamity that would ensue should the United States fail to increase the $14.3 trillion debt limit, but have accused Treasury Secretary Timothy Geithner of "blatant lies" for saying so. Meanwhile, the" Brinksmen" including John Boehner, Paul Ryan and other GOP leaders admit a U.S. default would produce "financial disaster," but are willing to run that risk in order to extract draconian spending cuts. Today, that GOP schism went public.
Last week, Secretary Geithner met with House Republicans to warn them of the dire consequences if Congress fails to extend the Treasury's borrowing authority by August 2. As he revealed in an interview with ABC News, Eric Cantor took him at his word. As the House Majority Leader explained:
"Secretary Geithner feels August 2 is his deadline," Cantor told ABC News in an exclusive interview for the Subway Series with Jonathan Karl. "I don't question the Secretary of the Treasury other than to say we're trying to get in place real spending reductions -- trillions of dollars of spending reductions -- if the president wants us to increase the credit limit of this country by trillions of dollars."
But while Cantor did not challenge the deadline, other Republicans, including potential presidential candidates, did. Not content to rest there, they called the Treasury Secretary of the United States a liar.
Minnesota Representative and likely GOP White House hopeful Michele Bachmann on Wednesday was among the first to make that charge
According to Bachmann, Geithner "unfortunately resorted not only to scare tactics, [but] in my opinion it was outright blatant lies when he said that we would see the collapse of various things if we didn't allow the government to continue to borrow money, and spend money, that we don't have.
"What the Treasury secretary has failed to tell the American people is that we have it within our discretion to pay our debts first," Bachmann says.
The next day, Sarah Palin echoed Bachmann's slander. As the Wall Street Journal reported Thursday, Palin, whose simple response to the debt ceiling hike was "hells no," blasted Geithner for simply explaining the consequences of Republican failure to increase the debt limit.
It would be "a failure of leadership in the House" if "they were to cave and the debt ceiling were to be increased based on what I believe are Timothy Geithner's false statements to the American people that a catastrophe would befall us all if the debt ceiling isn't raised."
Of course, Republican default denialism didn't start with last week's House GOP conclave. Senator Pat Toomey (R-PA), Rep. Michele Bachmann (R-MN) and White House hopeful Tim Pawlenty are among the GOP luminaries who have joined the ranks of what Dana Milbank first called the "default deniers." In January, Pawlenty declared, "They should not raise the debt ceiling," adding, "I believe they should pass legislation that would allow them to sequence the spending as revenues come in to make sure they don't default." As for the economic cataclysm Congressional failure to boost the debt limit could produce, Pawlenty said last week:
"Well, there are some serious voices challenging that very premise. And the answer is nobody really knows because we've not been at this point before."
Senator Pat Toomey agreed, insisting "there is no danger of a shortage of cash to pay the interest on our debt and to avoid a default" and claim it is "irresponsible for the administration to even implicitly threaten the possibility of a default." Pretending that with a little budgetary sleight of hand, the cataclysm that would be a U.S. default need not be so, well, cataclysmic, Toomey criticized Geithner for "doomsday predictions that could only materialize at his own hand." Instead, Toomey claims, the Obama administration should back his bill which "would require the Treasury to prioritize payments on our debt in the event the debt ceiling is not raised, thus ensuring the U.S. government does not default."
White House hopeful Michele Bachmann (R-MN) similarly declared we don't raise the debt ceiling, but we use the revenue still coming in to pay off creditors first and whatever we think most important second. That way, we "don't violate our credit rating" and "prioritize our spending."
Ezra Klein described Bachmann's fantasy as "the scariest thing I've ever heard on television."
It makes perfect sense unless you, like me, had spent the previous few days talking to economists, investors and economic policymakers about what could happen if we start playing games with the debt ceiling. Their answers were across-the-board apocalyptic. If the U.S. government is so incapable of solving its political problems that it can't come to an agreement on the debt ceiling, they said, that's basically the end of the United States as the world's reserve currency. We won't be considered safe enough to serve as the investment of last resort. We would lose the most important advantage our economy has in the global financial system -- and we'd probably lose it forever. Skyrocketing interest rates would slow our economy and, in real terms, make it even harder to pay back our debt, which would in turn send interest rates going even higher. It's an economic death spiral we associate with third-world countries, not with the United States.
But you don't have to take Ezra Klein's or Treasury Secretary Timothy Geithner's word for it "that if Congress doesn't agree to an increase in the debt limit by August 2, the United States will be forced to default on its debt, potentially spreading panic and collapse across the globe." As it turns out, Republican leaders (and their big business backers) have said the same thing.
In their few moments of candor, Republican leaders expressed agreement with Tim Geithner's assessment that default by the U.S. "would have a catastrophic economic impact that would be felt by every American." The specter of a global financial cataclysm has been described as resulting in "severe harm" (McCain economic adviser Mark Zandi), "financial collapse and calamity throughout the world" (Senator Lindsey Graham) and "you can't not raise the debt ceiling" (House Budget Committee Chairman Paul Ryan). In January, even Speaker John Boehner acknowledged as much:
"That would be a financial disaster, not only for our country but for the worldwide economy. Remember, the American people on Election Day said, 'we want to cut spending and we want to create jobs.' And you can't create jobs if you default on the federal debt."
Nevertheless, John Boehner, Eric Cantor and the other GOP brinksmen are still willing to take the United States up to the economic abyss all in the name of gutting the federal government. Unlike their default denying Republican allies, they at least have the honesty to admit it.