By the time you read this, the U.S. government may be in default of its debts, starting on Aug. 2. That’s because Congress will have failed to raise the debt ceiling – the maximum amount of the difference between all U.S. government income and all U.S. government spending ever since the government started – by that date.
It’s sort of like you maxing out on your credit card, and your bank won’t raise the credit limit. Except in this case, it’s Congress – over the years – maxing out on the credit card, and this particular Congress refusing for political reasons to raise the limit.
But what does that mean for you and me? We’ve been casting around for explanations of the practical effect and there seem to be precious few. But here’s what we’ve been able to cull from President Obama versus the Republican Radical Right – his bitterest foes, who refuse to believe there’s a problem at all.
“Every family knows that a little credit card debt is manageable. But if we stay on the current path, our growing debt could cost us jobs and do serious damage to the economy. More of our tax dollars will go toward paying off the interest on our loans.
“Businesses will be less likely to open up shop and hire workers in a country that can’t balance its books. Interest rates could climb for everyone who borrows money -– the homeowner with a mortgage, the student with a college loan, the corner store that wants to expand. We won’t have enough money to make job-creating investments in things like education and infrastructure, or pay for vital programs like Medicare and Medicaid.
“Understand –- raising the debt ceiling does not allow Congress to spend more money. It simply gives our country the ability to pay the bills that Congress already racked up. In the past, raising the debt ceiling was routine….We have to do it by August 2nd, or else we won’t be able to pay all of our bills.
“Unfortunately, Republican House members have essentially said that the only way they’ll vote to prevent America’s first-ever default is if the rest of us agree to their deep, spending cuts-only approach.
“If that happens, and we default, we would not have enough money to pay all of our bills -– bills that include monthly Social Security checks, veterans’ benefits, and the government contracts we’ve signed with thousands of businesses.
“For the first time in history, our country’s AAA credit rating would be downgraded, leaving investors around the world to wonder whether the United States is still a good bet. Interest rates would skyrocket on credit cards, on mortgages and on car loans, which amounts to a huge tax hike on the American people. We would risk sparking a deep economic crisis -– this one caused almost entirely by Washington.”
OK, that’s Obama’s assessment of the impact.
Now, we’ll turn to the House Republican Study Committee, which proudly advertises itself as the most conservative wing of the party – and its self-assigned task is to keep the House GOP, which is in the majority, on the “true path.”
They don’t have as wide a sweeping prediction of what would happen if the U.S. defaults. Remember, many of them don’t even believe anything at all will happen.
But if it does, several of them introduced legislation saying “This is what we’ll pay first,” before the government runs out of revenue for August … or beyond.
Consider the following priority list from Rep. David Schweikert, a Tea Party-backed GOP freshman from Scottsdale, Ariz., and one of several Study Committee members to introduce such priority list legislation:
His legislation would give the Treasury “authority to pay military, Social Security, and our bond coupons in the event the debt ceiling is not increased.”
“Over and over we have heard the word ‘default,’” Schweikert said. “The fact of the matter is we have the cash flow available to pay interest on debt if the limit is reached. Paying interest is not default.”
We took a look at the budget to see what could be paid for under his legislation — just for the numbers. Here’s what we found, for the whole year starting this coming Oct. 1: Revenue of $2.57 trillion, Social Security projected to spend $730 billion, the Pentagon projected at $708 billion, including money for winding down the wars in Iraq and Afghanistan, and interest payments on the debt projected at $250 billion.
That left around $882 billion for everything else. Yet Medicare costs $492 billion all by itself, and Medicaid – which more people need because of the Great Recession – costs another $271 billion. Add those two to Schweikert’s scheme and you’re left with, for the year, $119 billion left over, for unemployment benefits, air traffic controllers, veterans hospitals, food stamps, Pell Grants, you name it.
No way all that gets paid for. If you can live with those numbers, go with the GOP. If you can’t, go back to what Obama said.