Debt Ceiling Stuff

Ezra Klein writes about The scariest thing I’ve ever heard on television "At about the 1:50 mark in the clip atop this post, I make a face I’ve never made on television before. The segment was on the debt ceiling, and ‘Last Word’ host Lawrence O’Donnell played a clip of Rep. Michele Bachmann giving her plan. In short, her plan is that 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.’ Makes perfect sense.

At least, 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."

He followed up with Bad debt ceiling ideas, Part II. "Sen. Pat Toomey, whom Weigel interviewed here, has introduced legislation stating that creditors get paid off first (which would mean that the government would shut down operations to use that money to pay off investors). Beutler notes that the Treasury has already declared this plan “unworkable,” as “adopting a policy that payments to investors should take precedence over other U.S. legal obligations would merely be default by another name, since the world would recognize it as a failure by the U.S. to stand behind its commitments.”"

"The market is worried about our long-term debt load. What we need is a plan that puts us on a better path going forward. The ability to do this gradually and thoughtfully is a great gift. But Toomey and Bachmann don’t want to do this gradually and thoughtfully. They want to let the debt ceiling run out and then start trying to cut spending while exempting creditors in real time. They want to do it, in other words, abruptly and riskily. They want to create crisis conditions when we have the luxury of planning."

He also points out that Ryan's (so serious) budget would require raising the debt ceiling, Republicans can’t meet their own deficit and spending targets. And he points to Matt Miller going mad about it, ‘The Shining’ — national debt edition. "Well, debt limit mania has driven me to a similar frenzied state. If my wife came across my manuscript it would read, “The House Republican budget adds $6 trillion to the debt in the next decade yet the GOP is balking at raising the debt limit. The House Republican budget adds $6 trillion to the debt in the next decade yet the GOP is balking at raising the debt limit.” I thought about making this week’s column that one sentence printed over and over 30 times. It would have been the opinion page equivalent of a Dada-esque protest against the inanity of the debate — and a cry for every news outlet to focus on this simple, clarifying fact."

Digby shows who owns the US debt and says "I have an idea. How about we tell the wealthy US investors that we won't be able to pay them back at the promised rate instead of the social security recipients? Let's just see what happens.":