The Painful Price of Republican Lies
In recent weeks, polls by CBS and Gallup showed that Americans by a 2-to-1 margin oppose raising the nation's $14.3 trillion debt ceiling. Among Republicans, the gap is a staggering 70% to 8%. Yet the Ryan GOP budget passed by the House would add $6 trillion in new red ink over the decade and require, as Speaker John Boehner admitted, that Congress boost the debt limit now and repeatedly in the years to come. Nevertheless, to extract draconian spending reductions while preserving tax cuts for the wealthy, the GOP "default deniers" pretend their grandstanding won't lead to an economic calamity for the United States and the world. Of course, with their mythmaking and outright lies about the debt, taxes, health care, Iraq and so much else, Republicans are risking the default of the American economic and political systems alike.
As Dana Milbank noted in the Washington Post, It's not just Treasury Secretary Timothy Geithner warning "that if Congress doesn't agree to an increase in the debt limit by Aug. 2, the United States will be forced to default on its debt, potentially spreading panic and collapse across the globe." Former Bush Treasury chief Paul O'Neill and Ronald Reagan himself famously described the economic apocalypse which would ensue.
Yet the default deniers like freshman Pennsylvania Senator Pat Toomey insist "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.
Writing in Slate, Annie Lowrey paints a similarly disturbing picture of the aftermath of the Republicans' debt ceiling terrorism when the Treasury's borrowing options come to an end this summer:
Within 72 hours, Congress has a deal on President Obama's desk, raising the ceiling to $16 trillion in exchange for balanced budgets to take effect in fiscal-year 2015 and some serious cuts now. Treasury starts issuing new bonds and making all payments on existing ones. But the market panic requires the Federal Reserve to reboot its emergency programs, disrupts the housing market, permanently raises the United States' borrowing costs, reshapes the world bond market, and shaves more than a percentage point off GDP growth--enough to throw the economy back into recession. Globally, investors no longer consider the dollar the reserve currency of choice.
When it comes to the potential damage caused by the Republican economic suicide bombers, Americans don't need to take Annie Lowrey's or Ezra Klein's word for it. Over the past few weeks, the U.S. Chamber of Commerce, Wall Street executives, the National Association of Manufacturers and a host of the GOP's other big business allies have warned the Republican leadership that the party's grandstanding risks an economic calamity for the United States. As The Hill reported, the same business backers who bankrolled the GOP's overwhelming victories in November has had enough of the fear, uncertainty and doubt coming from Messrs.' McConnell, Boehner and Cantor.
Groups such as the National Association of Wholesaler-Distributors (NAW), the U.S. Chamber of Commerce and the National Association of Manufacturers (NAM) plan to step up their advocacy for a debt-limit increase as the deadline for congressional action draws closer.
Lobbyists for several major trade associations told The Hill that they have already had discussions with first-term House Republicans about the necessity of lifting the debt ceiling to avoid a default on U.S. debt.
As one Wall Street executive described the carnage Republicans are about to cause:
"They don't seem to understand that you can't put everything back in the box. Once that fear of default is in the markets, it doesn't just go away. We'll be paying the price for years in higher rates."
Last week, the Wall Street Journal highlighted the growing concern at the reliably Republican U.S. Chamber of Commerce:
The U.S. Chamber of Commerce waded into the fight over increasing the government's borrowing limit on Friday by urging members of Congress to raise the debt ceiling "as expeditiously as possible."
The business community's chief lobby in Washington made the case in a letter to lawmakers signed by Bruce Josten, the group's head of government affairs, arguing that failure to pass legislation authorizing an increase in borrowing by Aug. 4 "would create uncertainty and fear, and threaten the credit rating of the United States."
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."
Despite their current posturing, John Boehner, Mitch McConnell and GOP Congressional majorities voted seven times to raise the debt ceiling under George W. Bush. During his tenure, the U.S. national debt doubled, fueled by the Bush tax cuts of 2001 and 2003, the Medicare prescription drug plan and the unfunded wars in Iraq and Afghanistan. McConnell and Boehner voted for all of it. But now that a Democrat is in the White House, they proclaim that the debt ceiling vote is a "great opportunity" to reduce U.S. deficits.
Writing today in the Wall Street Journal, former Federal Reserve vice chairman Alan Blinder worried about the economic and political damage the Republicans' unprecedented debt ceiling gambit would cause:
[S]hould the view take hold that threats to default are now a permissible weapon of political combat in the world's greatest democracy, U.S. government debt will lose its exalted status as the safest asset money can buy--with unpleasant consequences for the dollar and interest rates.
Fights over the budget are normal and proper in a democracy, especially when the two parties hold dramatically different views. But threatening to default should not be a partisan issue. In view of all the hazards it entails, one wonders why any responsible person would even flirt with the idea.
Sadly, this is now standard operating procedure for a Republican Party whose leading lights freely admit their claims were "not intended to be a factual statement."
The consequences of GOP duplicity for politics and public policy alike are devastating. Contrary to Republican claims, the Affordable Care Act is not a "government-takeover of health care"; its repeal would add to and not reduce the deficit. Tax cuts don't pay for themselves. The federal estate tax does not destroy family farms and small businesses. We did not go to war with Iraq, as President Bush claimed in 2005, "because we were attacked." (As an October 2003 PIPA survey showed, even after the invasion of Iraq, majorities of Americans continued to believe Bush administration claims about Saddam -Iraq's role in 9/11, an alliance between Saddam and Al Qaeda, and Saddam's WMD -all long since proven false.) The list goes on and on.
While the release of President Obama's "long-form" birth certificate reduced the ranks of the Birthers, in the days before the mission which killed Osama Bin Laden a PPP poll found that 51% subscribed to the Birther fantasy, "only 28 percent said they think the president was born in the United States." The President was surely right when he described the "sideshow":
"We do not have time for this kind of silliness. We've got better stuff to do. I've got better stuff to do."
But while the right-wing mythmaking over Barack Obama's birth certificate was a distraction, the default of the United States would be a disaster. As Secretary Geithner described GOP brinksmanship over their scheme to end Medicare and gut Medicaid:
"If Republicans try to impose that plan on this country as a condition for raising the debt limit, then they will own the responsibility for the first default in our history, with devastating damage to the nation."