A prolonged confrontation over the nation’s debt ceiling — unlike the “fiscal cliff,” which provoked many scary headlines — could truly be grave for both America and the world. While press coverage often mentions the possibility of lowered credit ratings for the U.S. Treasury (again), that might only be the mildest consequence if Republicans in Congress actually refuse to authorize borrowing and avoid default.
Last time the nation prepared to face such an impasse, during the spring and summer of 2011, the chairman of the Treasury Borrowing Advisory Committee — a JPMorgan Chase official named Matthew Zames — laid out a disturbing scenario in a letter to Treasury Secretary Tim Geithner, in which he foresaw a rolling catastrophe that could inflict hundreds of billions of dollars in additional borrowing costs; spark a run on money funds, leading to a renewed financial crisis; severely disrupt financial markets and borrowing, killing fragile economic growth; and push the economy back into recession due to higher interest rates and tightened credit.
In short, the economy would contract sharply and the United States — along with the rest of the world — might well be plunged back into negative growth. If that was true in July 2011, it is equally true today, and there is no reason to dismiss that warning.
But the Republican leadership on Capitol Hill insists that they are willing to take these mind-boggling risks, solely for the purpose of enforcing an extreme austerity regime that has already done permanent damage in much of Europe.
Between the “Boehner rule” demanded by House Speaker John Boehner, which requires a dollar in new spending cuts for every dollar increase in the debt ceiling, and the House Republican budget authored by Rep. Paul Ryan, congressional Republicans evidently want not only to gut Medicare, Social Security and Medicaid, but to “eliminate more and more of the basic functions of government over time,” according to the Center on Budget and Policy Priorities. No education aid, no food safety inspections, no environmental protection, no infrastructure repairs, no cancer research.
From immediate economic jeopardy to long-term national decline, these prospects are obviously appalling — yet many Republican elected officials sound positively pleased about the debt ceiling crisis they have created. Sen. Tom Coburn, Republican of Oklahoma, told a right-wing radio host recently that a government default would actually be a “wonderful experiment.” He assured listeners, quite falsely, that their Medicare and Social Security checks would continue to arrive every month, no matter what, and that only “stupid” spending would be cut.
If Coburn — or any Republican senator — is so eager to test the debt ceiling, perhaps he or she should volunteer to bump up against it first. As the Tulsa World reported in 2011, federal spending in Oklahoma amounts to three times as much as the entire state budget, with Social Security alone accounting for almost $1 billion a month there, and Medicaid and other medical assistance amounting to another $500 million-plus. Coburn’s ultra-conservative, deep-red home state is highly dependent on federal employment and assistance, ranking 12th in retirement and disability payments and 11th in per-capita federal payroll, despite its small size.
So, by all means, let’s find out, as Coburn suggested, whether we can live “on the money that’s coming into the Treasury” without borrowing to finance those monthly pension checks and all those stupid federal jobs — and let’s start in Oklahoma tomorrow. Then let’s roll out the same experiment in every state whose senators and representatives are refusing to pay the bills they have already racked up over the years — especially states, like most of those below the Mason-Dixon line, where federal spending is far higher than the tax revenues remitted to Washington.
Surely that would silence all the loud talk about this “wonderful” experiment in fiscal brinksmanship.