"The first rule of political negotiation is never take a hostage you’re not prepared to shoot. That’s advice for House Republicans to contemplate as they gear up for a high-stakes showdown over raising the federal borrowing limit." - WSJ Editorial, January 16th
"The situation is worse than most people realize. McCarthy’s goons really intend to follow through on their threat to cripple America if Democrats won’t go along with cutting entitlements for average working people and regulatory agencies."- Thomas Hartmann, 'House Republicans Playing With Fire With Our Economy', The Hartmann Report
Back in early November Financial Times columnist Edward Luce predicted the "only real damage the GOP House could do is send the stock market crashing." E.g.
FT Columnist Edward Luce Predicts 'Only Real Damage' GOP Could Do: "Send Stock Market Crashing"
Of course, we now know it can be a lot worse, vastly worse if the U.S. goes into default and its credit rating is degraded given the world economy depends on this country as its most trusted borrower. So failure to pay existing obligations would be a global economic calamity. E.g.
by Heather Digby Parton | January 19, 2023 - 8:28am | permalink
The question then - raised by the Jan. 16 WSJ editorial - is the GOP House going to be ready to "shoot the hostage"? That would be the rank and file U.S. citizens who depend on government to pay its mandated bills including Social Security, Medicare benefits, VA benefits etc. For those who think this is all hyperventilation, then consider your 401k cratering - as they did in 2011. This was after the credit downgrade from just approaching default and the DOW falling 614 pts. So I'd advise anyone who believes this is no biggie to watch CBS economist Jill Schlesinger's segment from this a.m.:
How the debt ceiling impacts Americans - YouTube
Basically, what the renegades under McCarthy are doing is holding the government (Biden administration) hostage over "too much spending and debt". Problem is the spending has already been done and now the bills need to be paid. As Jill Schlesinger notes, even halting or delaying Social Security checks can cause a recession, given how much is spent via those checks on the consumer economy - which is already slowing.
First a little known fact: 25% of U.S. debt over a 220-year period was incurred during the 4 years of the Trump administration, via tax cuts and spending. This is relevant as we learned last Friday that Treasury Secretary Janet L. Yellen said that the debt ceiling limit will be reached Thursday and the Treasury Department will begin “extraordinary measures” to ensure the federal government is able to meet its payment obligations.
However, it cannot guarantee the United States will make it beyond early June without defaulting. Yellen was stark and clear in her warning directed at the GOP MAGA terrorists especially when she stated:
"Failure to meet the government's obligations will cause irreparable harm to the U.S. economy, the livelihoods of all Americans and global financial stability."
Adding: "In the past even threats that the U.S. government might default have caused real harm including the only credit downgrade in our history."
Referring to when the GOP also had a House majority and were determined to bring Obama down in an extortion move to default on the debt. Before moving on let's get it straight what the debt limit is. The debt limit, to put it simply, is the maximum amount the government can borrow to pay for its obligations, i.e. what it has already spent money on (Social Security, Medicare, VA benefits, air traffic control etc.).
It has nothing, nada to do with spending on future services or goods. In this venue congress - that is, the House, not the Senate or president - decides what that limit is. If too meager, then it translated to a default - affecting bond holders of U.S. debt (like China) as well as others affected by it. This is why the House has an enormous responsibility to do the right thing and approve of paying all back debts to avoid default. Recall the last time the Reeps played this game of 'chicken' in 2011 when Standard & Poor’s stripped the U.S. of its triple-A credit rating for the first time after the Treasury came within days of being unable to pay VA and Social Security benefits.
In other words, the GOOPs triggered a credit downgrade merely for coming close to default. Now imagine what an actual default at the hands of Republican terrorists would do this time around when the fiscal obligations are even higher.
Moody's Analytics is blunt in its assessment that the results would be "cataclysmic" which translated means "burying the country in deep recession, loss of 6 million or more jobs, and much of the world in even higher inflation because of the Ukraine supply chain associated problems" (Including up to one third of Ukraine's grain supply still being held hostage) Yellen elaborated noting it would cause "irreparable harm" to all Americans as well as global financial instability. This is not being hyperbolic given bond holders trust the Treasury Dept. when it claims their holdings are backed "by the full faith and credit of the U.S. government." But if there is a default, those words become merely hollow mouthings worth no more than an ounce of doggie lickspittle. Again this is given the entire modern financial system is built on the premise that the United States government is the safest borrower on the planet.
But Republicans intend to play with fire on either getting their way with spending prioritization, or bringing the whole house down. Thus, Yellen's warning to McCarthy and the MAGA savages holding him (and the rest of us) hostage to either suspend or increase the debt ceiling. But the Reepo "brainiacs" to use Ali Velshi's term on 'Last Word' Friday night, insist that the debt ceiling "is like a credit card limit"- which it is not.
It is, instead, credit card debt already accrued by spending which must be paid. Or to use LA Times columnist Michael Hiltzik's analogy: "The GOP House are behaving like credit card holders who've put more purchases on their cards than they feel like paying for. So they have decided to stiff the card issuer in the belief it will reduce their balances." Of course, all that really happens is their credit record become delinquent, collection agencies get on their case, and their credit score crashes.
Thus, in the Republican MAGA terrorists' case they plan to 'stiff' millions of Americans leading to job losses and evictions from homes in the wake of a debt ceiling breach driven by a fanatical austerity mindset. The patter on FOX is that the GOP "prioritization" plan is going to hurt Biden and the Dems, but the truth is the tactic is targeting ordinary Americans. Millions of us.
The GOP proposal (still in draft stage) would call on the Biden administration to make only the most critical federal payments if the Treasury Department comes up against the statutory limit on what it can legally borrow. For instance, the plan is almost certain to call on the department to keep making interest payments on the debt, according to four people familiar with the internal deliberations. House Republicans’ payment prioritization plan may also stipulate that the Treasury Department should continue making payments on Social Security, Medicare and veterans' benefits, as well as funding the military
But such hypothetical proposal that protects Social
Security, Medicare, veterans benefits and the military would still leave out
huge swaths of critical federal expenditures on things such as: food stamps for needy families, Medicaid, food
safety inspections, border control and air traffic control, to name just a
handful of thousands of programs.
According to Neil Bradley, executive vice president of the U.S. Chamber of Commerce:
“Prioritization doesn’t work. We had this discussion a decade ago, If the U.S. government skips its payments to America’s seniors or skips its payments to bondholders, both of those things call into question the full faith and credit of the United States government and our commitment to paying our bills. And both of them have pretty catastrophic economic consequences.”
According to Stephanie Kelton, former head of Senate Budget Committee, who appeared on All In last night:
"This isn't like setting part of the house on fire, the whole house is vulnerable if we were to push the limit. It is really like burning everything down.".
Hence she's "more nervous this time" than she was in 2011. As for the GOP prioritization plan she noted it is merely "picking winners and losers", but affording no stability. As she stated:
"These are the people who complain about the government picking winners and losers but it's exactly what they're doing. Like they say they want to prioritize paying bond holders but where does that leave the rest? Who do you stiff? Do you stiff health care providers, government contractors, air traffic controllers or veterans who need their VA benefits and seniors who rely on Social Security? There is no computer system or keyboard where you can go in and program these selections and halt a default. It doesn't work like that, so these guys haven't given it ten seconds of thought."
Indeed. And so even as the MAGA -led House prepares to set the world's financial system on fire, the corporo-media insists on obsessing about the 'drip, drip, drip of Biden's found classified files. An issue which is not even newsworthy (given even the conservative WSJ admitted they were likely left behind in a 'rush' during the change in administrations in 2016-17). In the words of one Washington Post letter writer:
"Accidentally retaining classified documents happens frequently. So, the mere discovery of such documents in President Biden’s possession was not newsworthy. But, by reporting on Mr. Biden’s retention of documents, newspapers signaled it was somehow newsworthy without extenuating circumstances."
See Also:
by Karen Dolan | January 28, 2023 - 6:13am | permalink
And:
by Joan McCarter | January 19, 2023 - 8:03am | permalink
Excerpt:
There are lots and lots of reasons why the nation is looking down the barrel of a catastrophic debt default, in which for the first time ever one of the major political parties is actively working to make it happen. There’s also a lot of blame to go around. Most of it goes to the author of this whole political strategy, Mitch McConnell, but he had help along the way.
And:
What happens if the government defaults on its debt? It wouldn’t be pretty.
And:
by Joan McCarter | January 15, 2023 - 8:03am | permalink
Excerpt:
New reporting from the Washington Post is dire. The House GOP is planning for a breach, ”part of the private deal reached this month to resolve the standoff between House conservatives and Rep. Kevin McCarthy (R-Calif.) over the election of House speaker.” Sources tell the Post that the proposal would call for making interest payments on the debt, and whatever else they spent on—and what would be allowed to stop—isn’t yet specified.
Treasury Secretary Janet Yellen informed congressional leadership Friday that the Treasury is going to start taking “extraordinary measures” next week to keep the U.S. from breaching the debt ceiling. To be clear, we aren’t bumping up against it yet—that’s likely to happen this summer, possibly as late as September. The timing depends on any emergency or unexpected spending that arises, and how much revenue is brought in this spring in taxes.
And:
by Thom Hartmann | January 17, 2023 - 7:40am | permalink
Excerpt:
The United States is hitting our self-imposed debt ceiling this Thursday.
Outside of Treasury Secretary Janet Yellen, it doesn’t seem that anybody in Washington or our national media is taking seriously the House Republican threat to crash our economy if Democrats don’t agree to gut aid to higher education, the EPA, Social Security, Medicare, and Medicaid.
But the situation is worse than most people realize. McCarthy’s goons really intend to follow through on their threat to cripple America if Democrats won’t go along with cutting entitlements for average working people and regulatory agencies.
And the consequence, if history is any guide, could well be a worldwide depression that might even throw us into World War III.
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