For months, some political leaders and commentators have argued that failure to raise the debt ceiling would necessarily cause the U.S. to default on its debt. President Obama's Council of Economic Advisors chairman, Austan Goolsbee, recently warned, "If we get to the point where you've damaged the full faith and credit of the United States, that would be the first default in history caused purely by insanity. I don't see why anybody's talking about playing chicken with the debt ceiling."He doesn't want to do this, [nudge] but if the ceiling isn't raised, then [nudge, nudge] spending cuts will have to be [wink, wink] sudden and severe [say no more!].
In fact, if Congress refuses to raise the debt ceiling, the federal government will still have far more than enough money to fully service our debt. Next year, for instance, about 6.5% of all projected federal government expenditures will go to interest on our debt, and tax revenue is projected to cover about 67% of all government expenditures. With roughly 10 times more income than needed to honor our debt obligations, why would we ever default?
To make absolutely sure, I intend to introduce legislation that would require the Treasury to make interest payments on our debt its first priority in the event that the debt ceiling is not raised. This would not only ensure the continued confidence of investors at home and abroad, but would enable us to have an honest debate about the consequences of our eventual decision about the debt ceiling.
TPM has an analysis of Toomey's legislation.
If passed, Toomey's plan would require the government to cut large checks to foreign countries, and major financial institutions, before paying off its obligations to Social Security beneficiaries and other citizens owed money by the Treasury -- that is, if the U.S. hits its debt ceiling.In three words: Pay China First!
But let's be clear. As The National Review Online points out:
The Full Faith and Credit Act, as the bill is called, would “require the Treasury to make interest payments on our debt its first priority in the event that the debt ceiling is not raised.” However, as Toomey points out in a recent Wall Street Journal op-ed, he is not arguing that the debt ceiling should not be raised. Rather, he argues that the impending vote is an opportunity to enact meaningful spending reductions and reform. “Congress should make increasing our debt contingent on immediate cuts in spending and effective reforms of the spending process that helped get us into this mess,” he writes. “We can do so without jeopardizing the full faith and credit of our country — and we should.” [emphasis added.]That's where they're going. If you don't let us cut the spending now, we'll have legislation in place to severely cut the spending later. Banks first, people later.
The folks who caused the economic downturn (aka those benefiting from the GOP-led deregulation of the financial industry) will still get paid while the people who need the help have to shoulder the burden.
Money protects money. The rest of us have to sacrifice.
That's what the GOP wants. That's what Pat Toomey wants.