Saturday, February 06, 2010

Defaulting Government With a Side of Economic Collapse

As much reading as I do, it's never enough and news aggregators, like The Oil Drum, often turn up some tasty nuggets. Trolling through the 'net before getting some 'rack' (did I tell you how much I like Avatar?) led me to the Drum and this little tidbit. I remember seeing the headline and just bypassing it. Boy what a mistake that was!

The government's debt ceiling has to be raised periodically when you are borrowing to meet your bills and we all know that Uncle is up to his eyeballs in IOUs. Congress has to OK raising the debt ceiling, which they usually do after going through the standard partisan posturing. Otherwise your Grandma won't get her SS check, among other disasters. This time, we came pretty close to a melt down. How close you ask? So glad you did. Five (5) votes difference. You read that right.

With the public debt expected to hit the current cap by next week, the increase -- which was approved on a separate vote, 217 to 212 -- authorizes the Treasury Department to continue borrowing to cover the nation's bills through early next year.


All of the Republicans along with 37 Democrats voted against raising the ceiling.

The posturing was particularly choice this time around.

Republicans voted unanimously to block the increase, inviting the first default by the U.S. government. They accused Democrats of wasting billions of dollars on an economic stimulus package that failed to prevent millions of people from losing their jobs and said the reinstatement of pay-as-you-go rules would do little to reverse the damage. The White House projects that this year's deficit will hit a record $1.56 trillion.

"It would be recklessly naive to go about our business in Washington pretending there won't be severe consequences for the mountain of debt we're piling up," said Rep. Eric Cantor (R-Va.), the number two House Republican. "We've heard a lot about the majority's paygo scheme. But this will not affect any spending that has already happened."

Democrats countered that the budget was balanced when President Bill Clinton left office and that Republican policies -- primarily big tax cuts and the Iraq war -- are responsible for the bulk of the debt the country has accumulated in recent years. Meanwhile, the worst recession since the Great Depression was pushing deficits into record territory before Obama took office.

This all about the Pay As You Go Act, which is now at the President's desk. I read the article and it suggests that the pay-as-you-go provisions are largely empty threats due to a plethora of exceptions. The problem is that the adjustments for current policies and the exempt programs and activities leave little in the way of wiggle room. All of the Republicans, and 15 Democrats, voted against the Pay As You Go Act.

I am astounded that the Republicans, along with their Democrat allies, were willing to vote against raising the debt ceiling because of unhappiness with Pay As You Go. They risked political suicide, not to mention a potentially immediate consequence that would make the events of late 2008 pale in comparison. It's a little like killing the patient in order to cure him, with no TARP or stimulus package available for resuscitation. Even if it was just meant to send a message, they came pretty close to getting what they wished for. That's a dangerous game to play these days.

I understand that spending must be severely reduced and we have to be able to pay our national debts, but bringing down the house that way is not getting the job done. There has to be a better way than this, but it appears our current crop of Congress-critters are genetically unable to make that leap. Amending Pay As You Go is one way. Repealing it and replacing it with a better bill is another. Threatening America's financial and economic survival because you don't like the bill is another matter entirely. I keep hearing claims that the Republicans are the party of "No". I thought it was Democrat exaggeration, but in this case it appears it could be true.

It's an election year people. It's up to us to change the names occupying those offices on Capitol Hill or hold the ones who are there accountable, especially when they engage in posturing in lieu of leadership. There is no Second Coming of Jesus on clouds accompanied by angels and trumpets, and no amazing alien cousins beaming in from some distant world to our rescue. We have to do this one ourselves.

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