I Love Palin And Bachmann, But They’re Completely Wrong About The Debt Ceiling

by John Hawkins | July 11, 2011 5:21 am

Back in the private dining room in Pella, Palin shared some of those policy positions. On the debt ceiling, she takes the hardline view. “It is not the apocalypse,” she said, and questioned the need for the urgent negotiating sessions Republicans and Democrats were conducting in search of a debt-limit agreement (ongoing at press time). “The fact is that we have $2.6 trillion in revenue coming in, and if we just use some common sense there–take that revenue, service the debt first, take care of national priorities–we don’t have to increase debt.”

…Palin made it clear that she’s against any deal that raises the debt ceiling and would hold House Speaker John Boehner’s feet to the fire if he agreed to one. “No, we have to cut spending. It is imperative, and I will be very, very disappointed if Boehner and the leaders of the Republican Party cave on any kind of debt deal in the next couple of months.” — Newsweek[1]

On Thursday, (Bachmann’s) position appeared to have solidified into a no-vote under any circumstances. “I will not vote to increase the debt ceiling,” she said firmly in her first television ad, which began airing in Iowa. — The Washington Post[2]

We don’t know for sure how the debt ceiling fight is going to ultimately play out. We do, however, know how it began: Republicans were shooting for 2 trillion dollars worth of CBO scored cuts while the Democrats wanted a “clean” raise of the debt ceiling. The debate now seems to be over roughly 2 trillion dollars worth of CBO scored cuts vs. 4 billion dollars of cuts/tax increases.

Wisely, the GOP seems to be eschewing any tax increases and holding out for the 2 billion in cuts. Some Republicans are demanding more. They want a Balanced Budget Amendment in addition to the cuts to vote on the debt ceiling. This would be good for the country, but it’s impossible to pass right now; so it won’t happen. Still, even if it won’t work, it’s a useful position because it gives McConnell and Boehner more leverage. Suddenly, asking for “only” 2 billion in cuts, which would actually be a nice step in the right direction, seems more reasonable. It also prepares the ground for another push in 2012, when, God willing there will be a Republican President and enough GOP senators to give it a chance at passing.

This is where both Michele Bachmann and Sarah Palin go wrong. It’s no secret that I’m a big fan of both of them, but the position they’re both taking on the debt ceiling is irresponsible. It’s nothing more than playing the old “I’m more conservative than you” game, because if either of them were President or even in a position where they had to take real responsibility for the positions they were advocating, both of them would be in favor of finding a way to raise the debt ceiling.

Now, some people are probably thinking, “Wrong! We don’t have to raise the debt ceiling! I’ve heard people say we won’t immediately default!”

This is PROBABLY true[3].

Republican Sens. Pat Toomey of Pennsylvania and Jim DeMint of South Carolina, for example, say the Treasury could pay the interest on its debt after borrowing authority expires. But Treasury Secretary Timothy Geithner has rejected that proposal, dubbed “prioritization,” calling it, in a June 28 letter to DeMint, “unwise, unworkable, unacceptably risky and unfair to the American people.” Among other things, Geithner says that investors may not buy new securities when $500 billion in U.S. Treasury debt matures in August.

Could Treasury “prioritize” other payments? Several analysts say it could. The Bipartisan Policy Center has estimated that Treasury would have $172.4 billion to use in August to make payments.

Under one scenario, according to the Bipartisan Policy Center report, Treasury could use all inflows for August to pay for just six big items: interest on existing debt, Medicare, Medicaid, Social Security, unemployment insurance and defense contracts. But prioritizing those obligations would mean there’d be no money left over for whole federal departments (Labor and Commerce, for example) or federal salaries or Pell grants for college students.

Note that this would in effect, cause large portions of the government to shut down — and if the American people were to conclude that the GOP wanted that to happen, the punishment at the ballot box in 2012 would be severe. It also could spook investors and cost us hundreds of billions of dollars in higher interest rates and have repercussions that we haven’t even considered yet. In other words, it’s far from risk-free and not even something we should want even over the short term.

That doesn’t mean the GOP should cave — conservatives and the American people do want a deal to reduce spending. But, the American people also don’t want the government to shut down, they don’t want to risk our AAA credit rating, and they don’t want to spook investors in our country — all of which would happen if Sarah Palin and Michele Bachmann were to actually get the position they’re advocating, which is a permanent refusal to raise the debt limit.

People may not want to hear it, but the reality is that the debt limit is going to have to be raised. If the Ryan plan were adapted tomorrow, then guess what? We’d still have to raise the debt limit. At this point, we’re too deep in the hole and we’ve spent too much money to get around raising the debt limit. What we need to do instead of refusing to accept reality is to take more steps to keep from having to increase the debt limit AGAIN. That means getting these cuts now, fighting for further cuts this year and next year, and then defeating the Democrats in 2012 so we can make even deeper cuts. Simply refusing to raise the debt limit isn’t some sort of magical fix for this problem and people shouldn’t treat it as if it is.

  1. Newsweek: http://www.newsweek.com/2011/07/10/palin-plots-her-next-move.html
  2. The Washington Post: http://www.washingtonpost.com/politics/bachmann-mulls-pledge-against-debt-limit-increase/2011/07/07/gIQAlsIZ3H_story.html
  3. PROBABLY true: http://www.mercurynews.com/politics-government/ci_18448184

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