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Opinion A horror-film cliche is playing out in Washington. Will Democrats stop it?

cigaretteman

HR King
May 29, 2001
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By Catherine Rampell
Columnist |
October 27, 2022 at 5:23 p.m. EDT


Halloween approaches, and a horror-film cliche is already playing out in Washington. You know the trope: A maniac has pledged to commit carnage. But rather than taking common-sense precautions, the other characters keep making dumb, shortsighted decisions, walking straight into that spooky basement (or whatever).

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Per usual, shouting at the TV doesn’t seem to help our hapless victims. So let’s try a column instead.

In recent weeks, Republican politicians have repeatedly threatened fiscal and financial chaos — a budgetary bloodbath, if you will — by holding the debt limit hostage. House Minority Leader Kevin McCarthy (R-Calif.), the likely speaker if Republicans win a majority in the midterms, has said he’ll use the debt limit as leverage to force spending cuts and maybe limit Ukraine funding.







Several Republican lawmakers vying for the House Budget Committee chairmanship have likewise declared a willingness to cause a financial crisis if Democrats don’t agree to slash Medicare and Social Security.
Catherine Rampell: Republicans' secret economic agenda? A global financial crisis.
Democrats have whined about these threats. Yet they have foolishly ruled out the obvious measures needed to prevent this horror flick from manifesting.

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For those unfamiliar with the term, the debt ceiling is the statutory limit for how much the federal government can borrow to pay bills it has already incurred, through past spending and tax policy decisions. Republicans often say their regular refusals to raise the debt ceiling are about fiscal prudence and reining in spendthrift Democrats.

There are a few problems with these claims. Among them: The national debt has grown phenomenally under Republican leadership, too. During his first three years as president — i.e., even before covid-19 — Donald Trump signed into law roughly $4 trillion in new debt, through both tax cuts and spending increases. Republicans had no qualms about raising the debt limit then.


Additionally, the debt ceiling doesn’t have any direct effect on tax or spending levels; again, Congresses past made those decisions. Because lawmakers almost always spend more than they expect to collect in taxes, borrowing is required to make up the shortfall. Raising the debt limit should be pretty much pro forma, akin to paying off your credit card bills each month.
Whatever purpose the debt limit may have once served, it’s now only a liability. Opportunistic, egocentric lawmakers have realized it’s a useful hostage to take when making wild demands, because the debt ceiling has to be raised. Our existing bills must be paid.

The consequences of not doing so would be catastrophic.
Defaulting on federal debt obligations would call into question the full faith and credit of the United States, something barred by the Constitution. It would also likely disrupt critical payments, such as Social Security benefits and military salaries.










Moreover, financial markets have long assumed there’s nearly zero chance the U.S. government would default. That’s part of the reason global investors lend us money on the cheap. If the U.S. government instead reveals itself to be an unreliable borrower that sometimes stiffs its creditors, investors might demand higher yields in exchange for future lending.

That would raise U.S. borrowing costs — and ultimately increase the federal debt. So much for fiscal responsibility.
Worst of all: Virtually every other asset’s riskiness is benchmarked against those supposedly safe U.S. Treasury securities. If we skip out on our bills for funzies, that would call into question not only the riskiness of U.S. debt but almost every other asset investors buy — and send shock waves through financial markets.
That’s how you end up in a global financial crisis, on top of whatever recession might already be coming our way.










The GOP has become nuttier since previous debt-ceiling showdowns, and default (accidental or otherwise) appears more likely this time around.

Democrats could neutralize this threat by raising the debt limit now or after Election Day, before control of either chamber of Congress might switch. That’s a temporary fix, though.
Better would be permanently ending this recurring game of chicken by abolishing the debt limit altogether. Or, raising the limit so high that it never binds. Give it some patriotic branding — “The 1,776 Quadrillion Dollars Act” or “The Never Forget 9-11 Septillion Dollars Law” — and call it a day.
Catherine Rampell: Abolish the debt ceiling, no strings attached
Instead, leading Democrats are walking into the scary-movie basement.
Senate Budget Committee Chairman Bernie Sanders (I-Vt.), who caucuses with the Democrats, recently ruled out eliminating the debt ceiling. Days earlier, President Biden said that abolishing it would be “irresponsible.” Presumably they fear that confused Americans might believe Republicans’ false claims about fiscal responsibility.



The better solution would be to explain to people why maintaining the current cycle is dangerous and idiotic. Biden’s message could be something like: Congress passes a budget every year. That determines how much we borrow, end of story. This extra vote is worse than pointless; it leads to frequent and unforced crises. If Congress doesn’t want more debt, it should budget less spending or higher taxes.
In the meantime, will Congress figure out what seems so painfully obvious? You in danger, girl.

 
With a title like that, how could i resist.

Frankly, I'm more concerned with Treasury's opening moves to monetize the debt so we can become just like other third world countries.
 
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