The Debt Ceiling Cracks

Since we hear a lot about the Constitution from both political parties, and a wearying amount from certain factions, we thought it has been very interesting that there's been so little said about Section 4 of the 14th Amendment. That happens to say, “The validity of the public debt of the United States…shall not be questioned.”

But as we careen into the debt ceiling crisis (again), Andrew Sullivan archly notes this is exactly what the GOP is doing. "For the GOP to use the debt ceiling to put a gun to the head of the US and global economy until they get only massive spending cuts and no revenue enhancement is therefore the clearest sign yet of their abandonment of the last shreds of a conservative disposition."

A conservative does not risk the entire economic system to score an ideological victory. That is what a fanatic does. And when that fanatical faction was responsible for huge spending binges in the recent past, for two off-budget wars costing $4.4 trillion, a new Medicare benefit, and tax revenues at a 50-year low relative to GDP and tax rates below the levels of Ronald Reagan, this insistence is lunacy, when it isn't gob-smackingly hypocritical.

Bruce Bartlett at the Fiscal Times points out, "...a potential debt default is far more than a domestic consideration; it is a matter of foreign policy":

Republicans are playing not just with fire, but the financial equivalent of nuclear weapons. Perhaps at one time when the federal debt was owned entirely by Americans we could afford to take a chance on debt default because the consequences would only be internal. But today, more than half of the privately held public debt is owed to foreigners; the Chinese alone own more than $1.1 trillion of Treasury securities. Moreover, many countries use Treasury securities as backing for their own currencies. Thus the impact of default would be felt internationally, disrupting finances and economic policies throughout Asia, Europe and Latin America.

None of this seems to have much of an impact on Tea Party Republicans like freshman Senator Marco Rubio, who was on morning television (again) today, insisting that the debt ceiling was easily solved by rearranging spending priorities.

Problem is, those spending priorities that most impact debt are the big ones: Medicare and Social Security. Who is going to have the guts to touch those as we officially enter into election season? Meanwhile, three credit agencies--Standard & Poor's, Fitch and Moody's--have warned the U.S. that debt default and inability to take action in reducing the deficit would lead to a downgrade in the U.S.'s credit rating.