What Fresh Hell Is This?

February 1, 2011

Senator Toomey's Solution To Our Debt Ceiling "Crisis"

He spelled it out in this WSJ piece:
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."

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.
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!].

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.


Pgh_Knight said...

ok... so what is the answer?

Raise the debt limit? Default on our debt? Simply print more money?

I am interested in hearing your alternatives.

Anonymous said...

The debt limit must be raised.

Here's the "don't raise the limit" alternative:

If we don't raise the limit, or even threaten it seriously.....

Savers everywhere, already reeling from their discovery that US mortgages were a disastrous investment, now panic at the thought that US Treasury securities (The ultimate widows and orphans safe investment), may default. $billions are dumped into the bond markets. The cost of borrowing for everyone skyrockets. (If Treasuries can default, everyone else is even riskier.)

The world's economy suddenly has no idea of what to do, how to price goods and services, what can be produced, what is affordable.

We return to barter.

The Tea Party rejoices, as we must pay our medical bills in chickens.

rich10e said...

spare us the hysteria and BS...look at GE at the fed trough, then Immelt get a big advisory gig;Clinton's Robert Rubin was another parasite; now Barry has another Wall Streeter in Daley. Daley's a dble dipr;politics and finance.And Barry is the biggest phony of them all...

Pgh_Knight said...

I am troubled that gtl's ONLY solution is to rasie the debt limit. I would think somewhere in there we can cut spending.

Anonymous said...


To bring the deficit down to a place where the debt limit does not require a raise, wouldn't be "cutting spending." It would be "slash and burn." I found it interesting that your list of possibilities did not include raising taxes.

Discretionary spending, the stuff that conservatives always rail about cutting, just isn't that big a part of the budget, compared with the non-discretionary stuff: Interest, Defense, Medicare, Social Security. And the discretionary spending that is left, well,,,,,For instance: Do you really think that Sen. Thune will allow the annual give away to Red States called the Farm Bill, to be cut?

Anonymous said...

rich, what's the point of all that?

rich10e said...

gtl...i didn't think someone who would say "The Tea Party rejoices, as we must pay our medical bills in chickens." would understand it.