The Debt Ceiling

I've been busy, a dead relative, a case going to trial, and not a lot of time to write.

There isn't much about the Debt Ceiling fracas that I can say that you haven't already heard on NPR, CNN, MSNBC, Michael Lind, Andrew Leonard, Alex Parene, Elliot Spitzer, you name it.

But my loyal readers want a position on the debt ceiling--as if they didn't already know.  My away message on my email has been this for days, as Krugman wrote:  "As Mike Konczal of the Roosevelt Institute puts it, the G.O.P. has, in effect, come around with baseball bats and declared, “Nice economy you have here. A real shame if something happened to it.”"

Is the government bloated?  Quite probably, do efficiencies and cuts need to be made?  Of course they do, they always do.  But on the cusp of recession?  Are you out of your mind?  Even if the government were employing a legion of loafers, all of those people are at least 'working.' They're taking that money home and spending between 90-96% of it.  That's a 1.66 yield on each dollar spent.  Cut the loafers in good times, not in bad.

This has always been, and will always be, one more opportunity to kill the welfare state.  It has nothing to do with the deficit, interest rates have been at historical lows and up until now (there has been absolutely no movement in the market for U.S. treasuries, until it becomes more and more likely that we may in fact actually default on our obligations.

The question is, how far are they willing to take it?  No one likes to admit it, but even Republicans are hooked on the welfare state.  The government backstops their companies, guarantees their banks, runs courts and arbitration panels that make decisions that effect billions of dollars every day.  And those are just the capitalist arguments.  Most Republicans are middle class values voters (I say most, merely because the rich and the super rich are simply too few to count as a majority in any group) and most receive welfare benefits of some kind, whether its medicare, social security, unemployment checks, or other transfer payments.  When the treasury can't service the debt, the government is going to have to decide, who do we pay first?  I take it as a matter of course that non-essential government employees will get furloughed immediately.  But even the non-essential become essential over time.  Case in point, in Minnesota the government has been shut down for weeks now.  All well and good, but now the bars can't restock because the government agency responsible for alcohol licensing is closed indefinitely.

But this is a risk that the Republicans seem to be willing to take.  And this brinksmanship is so extreme that I'm beginning to wonder if they know something I don't.  This seems like bad news for them.  Of course, its a lose-lose for us.  A president who is unable or unwilling to fight for basic entitlements that the entire country benefits from and many of whom are desperate for, gains absolutely nothing from either party by compromising.  He may stave off a worldwide economic calamity, but he'll lose his party and his identity in so doing.  If the Republican presidential field weren't such a sad sack of rejects I'd be more mortified than I am.  Mitt will NEVER get elected, Pawlenty has already been lamed, Gingrich was out before he began, Bachman is the most promising of all, and she's bat shit crazy.

One last point, the Republithugs keep saying its ok if we get past the second of August, because we'll pay the bondholders first.  I agree, we'll have to, world peace depends on it.  But what happens when unemployment, social security, and medicare payments disappear?  What happens when entire divisions of the government cease to work?  That will be terrible for the anti-entitlement party.  But it will be worse for all of us.