While some in the GOP ranks are still trying to play both sides of the street on the debt limit, demanding spending cuts as a condition of passage while reassuring Wall Street that default is not an option, there are definitely some in the Republican caucus who really have no problem with default. In fact, they see it as a weapon, a way to default on people they don’t like. That’s the point of Jim DeMint and Pat Toomey’s letter to Tim Geithner about how to default with dignity:
The Treasury Department suggests that efforts to prioritize debt payments would bring about “catastrophic economic consequences.” Yet, this argument ignores the historical record. As you are well aware, the Treasury had to manage the nation’s finances in the past when the debt ceiling was reached. In 1995-1996, for example, the Department prioritized certain payments – including debt service. During this period, hundreds of thousands of federal employees were furloughed and many programs were temporarily suspended as a result of the two government shutdowns that occurred. And yet, this prioritization did not result in default on our publicly held debt nor did it cause the “catastrophic economic consequences” the administration predicts.
Unfortunately, Washington has shown time and again that it is perfectly content to spend money on whatever suits its whims. That is why the debt limit exists in the first place – to restrict the government’s profligate spending and borrowing impulses and so protect the citizens responsible for paying it all back.
We believe the time has come to employ this particular budget enforcement mechanism to finally force Congress to address the looming fiscal crisis, cut spending, reform entitlements, implement spending caps, and pass a balanced budget constitutional amendment before considering any increase in the federal debt ceiling. These are the contours of the debate before the American people this spring and summer.
In the event of reaching the debt limit in the course of that debate, the decision of whether to use available Treasury funds to honor the United States’ debt obligations – and prevent the catastrophe of default – would ultimately fall to you. Recent comments conflating debt service with other spending notwithstanding, the markets, the courts, and the American people know differently.
DeMint is saying that debt service can be prioritized while government employees get kicked off the job and payments like Medicare, Social Security, disability, food stamps, whatever, go unpaid. This is the logical conclusion of debt denial – the government can just stop paying the people we don’t like anyway.
Whether you think this is a kabuki dance or not (and I’m pretty certain the debt limit will be increased), it’s pretty clear that Republicans want to play out the string on this, and won’t stop until Wall Street makes some tangible signal to raise borrowing costs or come close to a meltdown. We are headed for the kind of moment we saw with TARP, where lawmakers agree to something under extreme pressure. As Digby says, that doesn’t usually go well.
Let’s put it this way. The Tea Party may not be winning any legislative battles outright and they may even fade into obscurity by the 2016 election. But they will have left a mark on American politics. If the Republicans successfully create a phony hysteria over the debt during a severe economic downturn (in which the wealthy are getting richer and richer), forcing huge cuts in spending without even allowing tax increases to be on the table, it’s hard for me to see them as failures.
Agreed.





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Demint is Demented!
Oh yeah, and Clinton has given them a few more tips to work this deficit thing over with. In fact, just today they got together to write a letter to ask Geither to explain debt/deficit to them after they’ve been yelling about it for months now!
http://demint.senate.gov/public/index.cfm?p=PressReleases&ContentRecord_id=7371d3a9-9435-4277-87ef-330fcf689087
When you go into bankruptcy you are not allowed to pay some creditors and not others. This is against the law. If they find that you have chosen to pay off some creditors and not others less than 90 days before you go into bankruptcy, the people you paid may have to give the money back so it can be divided up among all the creditors.
Let’s not forget that Grover Norquist made the repugs sign an agreement not to raise the debt ceiling or pass a deficit agreement.
Just deserts for those that vote on republican electronic magic machines and believe their vote counts or could lead to peaceful change.
Sure tommey “won”in a state with a large majority registered suckers as “democrats”over republican but he “won”.
From the above link I gave which includes the letter at the bottom:
So if you thought Clinton advising and patting Ryan on the back yesterday was bad, he is giving them more advice today!
Yeah, and it’s hard for me to see Barry as a success.
I’m so sick of this bullshit of not placing the blame squarely where it belongs. Barry is as responsible for the phony hysteria over the debt as much as the Rs are. With his “the federal government is just like a family” bullshit. And his failure to use the pressure of Wall Street to raise the debt ceiling with no conditions attached — after he gave the fuckers trillions.
Massive fail — or betrayal. Take your pick.
Dang the Republicans believe that only real men
eat souffleare brinksmen (but the Vichycrats love enabling them).Betrayal, by me. Obama lied his way thru the campaign.
Second the emotion.
Not fail because they are doing exactly what they want and getting it all with their pawn in the WH.
Not betrayal because his true masters have always been the rich and wall street. See the people he surrounds himself with.
COMPLETE AND UTTER BETRAYAL to the American people because he took an oath during his “coronation” to do so.
Of course it was all lies. And we bought it hook, line, and sinker.
NO MORE!
Yes. Worthless enabling Democrats- morally incapable? Vomit.
Yeah, just who does Clinton work for? Anybody know?
What good and who cares about the party if the people keep getting shit for policy and wind up with zero quality of life in America? Kick these people out of Washington. Who can stand to watch Claire McCaskill on the tube? Or Ed Rendell? Or Geithner? Or Duncan? Big Ick. The people are getting screwed. Who gives a crap about the party.
got a name for ya! PETE PETERSON! that is who employees these losers,,although I think Clinton is just a really screwed up person all by himself.
Why would they stop?
Okay, you’re saying that the Rs mean to start us on the path of failing to meet some govt obligations, such as those to Medicare or SocSec recipeints, while scrupulously avoiding default per se, the failure to meet obligations to actual creditors. Well, if you can go that far in your willingness to think the unthinkable, think about why they would relent, why they would lift the ceiling.
They won’t. Well, they certainly won’t relent as long as the priority of payment in the national bankruptcy goes their way, and the US does indeed pay creditors in preference to meeting its other obligations to programs and people the Rs don’t mind screwing. This is not like the govt shutdown, a hostage situation in which neither side wants to see the govt shut down, and the Rs just threaten that, threaten to kill the hostage, in order to get some policy ransom. The Rs want Medicare and SocSec ended. They don’t mind seeing the hostage killed. They’re only pretending this is another hostage-taking in order to bring their own moderates along.
If even that, if even screwing only pensioners while scrupulously meeting every obligation to creditors, still results in the bond vigilantes tightening the terms on which the US can borrow in the future, well, that’s just icing on the cake to these folks. They’ve blocked what they call “tax and spend” already, so if those hitherto mythical bond vigilantes appear and block “borrow and spend”, they win. We will then have an actual national bankruptcy, not just the fake put-up job we have now. We actually won’t be able to afford SocSec and Medicare.
The only way to stop them is to, right now, put forward a bill specifying who gets paid first in the event the US doesn’t have the money to meet all its obligations. Our side will say that creditors take a haircut first, before the govt fails to meet any other sort of obligation whatsoever. And among creditors, the US distinguishes whcih of them can be forced to take a haircut, up to a 100% haircut if that proves necessary, based on downstream harm to vulnerable counterparties. Individual bond holders will be means-tested, and tough luck if you’re wealthy. Institutional creditors get taken over under resolution authority to keep the downstream damage under control, and tough luck to their shareholders.
Let them propose their alternative order of priority in who gets paid and who doesn’t. They’ll either cave immediatley on the ceiling, or all lose their seats before that game is over, and good riddance.
I wish I knew what really to expect. I do think that if there is a fear of default on some of our debt the market will react badly and that in itself will put pressure to raise the limit. It will also cause a reaction among banks and others and credit will dry up. That will impact employment. But I don’t know when that sort of thing will happen. Before then maybe lots of people get laid off. That could be the real disaster. Right now I don’t know how this plays out.
“We are headed for the kind of moment we saw with TARP, where lawmakers agree to something under extreme pressure.”
That “moment” was an economic *collapse* in 2008 …
Spot on -
Seems DeMint wants the debt law to be obeyed while laws requiring the US to pay others are voided.
A law that requires one to break the law must be unconstitutional – so why doesn’t Obama just tell the world he will ignore the “debt limit law”?
We can arrange trust fund movement – and are doing so – so as to make the first default not in May – but rather in August (8/2 estimated).
Clinton’s comment shows that as always he understands the system – his comment took the pressure off the Dems to rush to a deal.
Start minting platinum coins already.
http://moslereconomics.com/2011/01/20/joe-firestone-post-on-sidestepping-the-debt-ceiling-issue-with-coin-seigniorage/
Gipper or Bobby, doesn’t matter.
Maybe the NWO will usher in a One World Currency.
The Executive Branch no longer pays attention to any laws that might restrict its actions.