THE DEBT LIMIT

A VOTE TO SEPARATE THE SHEEP FROM THE GOATS

by Peter Bearse

 

Now we know, at last. The vote to exorcise the media-Halloween specter of “economic Armeggedon” or “Global Meltdown” has been cast. All the hue and cry ended in a whimper. Except for cries of default by “Tea Party” Republicans -- default of courage.

 

The acid test vote on the federal debt limit indicates just how far we’ve got to go -- those of us who spoke about and supported “real change in the way Washington does “We the People”s business.” The Republican veto-proof majority did well to approve a “Cut, Cap and Balance” [CC&B] approach to the issue. Only nine Republicans, including Michelle Bachmann, defected -- because they thought the CC&B cuts didn’t go far enough! Even with this, backed by support of CC&B by nearly 3/4 of Americans polled, the U.S. Senate voted down the initiative with a thud.^[1] House leadership, however, didn’t have the “stones…testicular fortitude” to then draw a line in the sand and say to the Senate and its President: “Enough is enough; this is our position; DEAL WITH IT!”^[2]

 

Thus, as of Friday, “We the People” were confronted with yet another bill and another House vote. The Boehner bill that finally passed was “Dead on Arrival” in the Senate, to become the subject of a backroom deal cut by the Senate President [still smarting from a Tea Party that had the temerity to challenge his senile eminence in 2010], the U.S. President [Teleprompter Reader-in-Chief] and the Speaker of the House [prime sponsor of the boner bill]. So we could look forward to another piece of major legislation cooked up through “secretive deals, gimmicks and tax increases.”^[3]

 

Opportunities -- for the Tea Party to change the GOP or take it over -- all these were highlighted by the tiring debate, fear mongering and “political posturing” over the debt limit. The ultimate possibility, as advocated by several TP-associated Members of Congress (MoCs) led by Rep. Ron Paul, would have been to refuse to vote to increase the debt limit. This would have provided the kind of real barrier to increased federal spending and debt that most people voted for in 2010.

 

During his July 19^th floor speech, Rep. Paul stated: “If the debt is the problem…how is raising the debt limit the solution”? Our current federal deficit is $1.6 trillion [T]. So, we owe the Federal Reserve $1.6T. This is not real debt subject to default. Let them eat it. Then we can get down to serious business. Default is not a matter of “failing to send out checks.” We’ll do that. Effective default is lose of people’s purchasing power and depreciation of their incomes via higher prices & interest rates (&c). This looms whether or not the current debt limit is increased. 

 

According to the mainstream media, compromise failed; Obama won; the GOP and TP lost. But the real losers are “We the People.” For the public was never well-informed. We got a pile of hype and fear mongering, as noted earlier. This included releases from two leading bond-raters, Moody’s and S&P -- whose misrepresentations helped cause the Great Recession! -- that “default” would spell a down-grade of the U.S. government‘s Triple-A-rated debt. What the agencies really stated was that there was a 50:50 chance that they would downgrade the debt within 90 days even if a “technical default” were avoided, if there was no credible plan to reduce the federal debt over the “long term.”

 

Opponents of the limit increase had repeatedly stated, and proponents had not denied, that failure to increase it by Aug. 2^nd need not lead to a technical default. Why? -- Because the Federal Reserve could rearrange the government’s accounts payable enough so that interest payments on the debt would continue to be made in the short term. The President could instruct the Treasury to pay Social Security recipients on schedule [Aug.3^rd]. In the meantime, up to three months, ways could be found so that the federal government would “live within its means” as established by the current, un-raised, debt limit. 

 

Was this scenario feasible? Yes, but here again, the public was ill-informed. On the one hand, media “economics” commentators were talking about anemic GDP and “jobs” reports, how government cutbacks and the threat of “default” were already starting to take the economy back down. On the other, they failed to specify precisely what default meant and what its implications might be, including short-term and long-term impacts on government spending and jobs. MoCs also seemed to be poorly informed except by “BeJesus” reactions to the media and ratings agencies’ fear-mongering.

 

Was the opponents’ scenario also credible? Yes. It is credible as the only position that really comes to grips with the basic problem of national over-spending and huge intergenerational accumulation of unsustainable debt. Over-reliance upon debt had become addictive. Like Nancy Reagan on drugs, somebody had to stand up and insist: “Just say NO!” TP Rep.’s were not altogether “somebody”. With some exceptions, they failed to fulfill a fundamental responsibility -- to provide full, timely information to their constituents. When push came to shove, many lost the spines shown in their campaign advertising. Had they had forgotten the Biblical question: “Are we like sheep…?”

 

The GOP/TP overlap/on-again/off-again alliance failed again to face down Obama. Although the President bears responsibility for immediate negative impacts of the failure to raise the debt limit, it is the GOP’s new, spine-less TP members that should pay the piper in 2012. If the TP is to regain its credibility, it should prepare to run candidates in primaries against those who voted for the “boner.” Like someone vs. Guinta in NH CD1. He was not among the 22 who had the courage to vote against the “boner.”

 

               PETER BEARSE, Ph.D., International Consulting Economist and author of A NEW AMERICAN REVOLUTION: How “We the People” can truly “take back” our government (forthcoming).