In Which I Explain the Debt Ceiling and Financial Apocalypse to Rand Paul and Sarah Palin
The Republican misinformation geyser continues to erupt unabated. Today, let’s focus on a pair of statements from tea party champions Sarah Palin and Sen. Rand Paul (R-KY) who seem to completely misunderstand the deficit, the debt ceiling, the economic status of the United States and what would happen if we default on the debt (spoiler: it’ll be very bad).
Yesterday, Rand Paul tweeted that the solution to the debt ceiling crisis is for the United States to “cut up the credit card and balance our budget.”
Interesting, considering how since 2009, the budget has been balanced more rapidly than at any time in modern history. A congressman from Florida, Dennis Ross wrote yesterday, “For the first time since the Korean War, total federal spending has gone down for two years in a row.” Ross is a Republican who supports a the passage of a clean continuing resolution, and Politifact declared his statement to be unequivocally “TRUE.” Of course it is.
The deficit, specifically related to Paul’s call for a balanced budget, has declined by more than 50 percent and, by the end of the president’s second term, it will have dropped to around two percent of GDP. That’s superb especially considering the deficit was a record $1.4 trillion four years ago.
As for the debt, do we really need to perform this dance again? Yes, the debt is high, continues to rise and long-term debt will eventually become problematic. But why is the current debt so high? Several things, according to CBPP and Bloomberg: two wars during the Bush years; the Bush tax cuts; the Great Recession; and the bailouts (TARP, the stimulus, etc). So if the GOP is this radically against long-term debt, why didn’t they speak up years ago? A question for the ages.
So, yeah, I realize numbers make Rand Paul’s brain itch, but there they are.
Speaking of itchy brains, former half-term governor of Alaska, Sarah Palin, tweeted the following:
POTUS is basically saying,"Yes, we're bankrupt, but unless I get a blank check to keep debt growing I shall not engage the American people."
— Sarah Palin (@SarahPalinUSA) October 8, 2013
She clearly doesn’t understand what the debt ceiling is all about. Allow me to explain.
First, the United States isn’t bankrupt. Politifact, when it declared a similar statement by Ron Paul to be “FALSE,” wrote the following:
Your paycheck doesn’t cover your bills every month. But you have a great credit score, use your credit card to cover the difference, and have no trouble paying your credit card bill. Would you describe yourself as “bankrupt” or “impoverished”?
To believe the U.S. is bankrupt, you’d have to believe the economy has failed, corporate profitability is dead, productivity has dropped off, tax receipts are declining, our credit rating is in the crapper, our annual budget deficits are skyrocketing, the dollar is abandoned and we can no longer pay our debts. None of that is true. In fact, quite the opposite.
Any casual observer of, well, the news can probably rattle off a list of other positive economic developments including a recovering housing sector, a record high stock market, increased job growth, declining unemployment, reduced annual deficits, increased domestic energy production and so forth.
And besides, whatever happened to American Exceptionalism? Mrs. Palin?
As for the debt ceiling, the president isn’t asking to “keep the debt going,” whatever that means. He and other rationally-thinking humans are simply demanding that Congress do its duty to authorize the means to pay interest on loans that have already been spent on other things Congress itself previously authorized. In other words, we have an obligation to pay the interest on our existing debt. And if we don’t do that, suddenly U.S. creditors get jittery, our credit worthiness evaporates — everything falls apart.
Palin might not realize that we reached the debt limit back in May, but Treasury Secretary Jack Lew has been using various accounting tricks to stave off a default. Those tricks will unfortunately run out on October 17. After that, the Treasury will have to meet spending obligations of roughly $60 billion, give or take, every day using just $30 billion in cash reserves and whatever tax revenues are collected. It won’t be enough — not by a long shot. The CBO reports that the U.S. would run out of money by October 20. At that point, the great collapse would begin. Lawsuits by the thousands against the government from unpaid contractors would pile up. The dollar would collapse. Social Security checks would go unpaid. Global financial markets would crash. Mass hysteria.
Dozens of economists, bankers and market experts predict it will be a “financial apocalypse.”
And right there, the intransigent Republican Party will have precipitated the actual bankrupting of America — its citizens along with it, and the worst economic disaster of our time, perhaps in the entire history of the U.S. It’d be a meltdown which two world wars, Osama Bin Laden, Vietnam, Watergate and several presidential assassinations failed to manifest. Ironically, it will have happened at time when the U.S. economy was gaining strength, while deficits were declining and while 30 million Americans were on the verge of attaining affordable health insurance.
It’s that latter item that’s animated the Republican strategy to unnecessarily shove us to the brink yet again. That, and because people like Rand Paul, Sarah Palin and the tea party which they represent simply do not understand how fiscal policy and the economy function. And if they do understand, yet are playing this game anyway, it’s almost worse than not understanding at all. If that’s in fact the case, they deserve the shame and scorn of an entire nation; left, right and center.