The public strategy seems straightforward – the minority party holds the national debt hostage in an attempt to force the majority party to voluntarily undo three generations of their own progressive policy. On face value, it seems brilliant.
The Republicans, after all, are largely responsible for deficit and the worst depression since Prozac. When they took power under Bush, there was a $235 billion surplus. When Bush left office, the national debt stood at $10.6 trillion and deficits, based on Bush/Republican approved spending, were projected to increase by $9 trillion in the next 10 years. Of course, those estimates didn’t include 9% unemployment continuing to depress tax collections and increasing unemployment benefits, or Obama’s increased war spending. The national debt is now $14.3 trillion (41.8% of which is owed to the Fed and Government agencies) and the Republicans are using this hostage situation to provide political cover for their responsibility and to push the blame on President Obama.
Our democratically elected leaders, Republican and Democrat, constitutionally authorized the spending, but not taxes to pay for it, which requires the Federal Government to borrow the money to pay for what Congress has spent. Not allowing our government to borrow the money needed, sounds an awful lot like fraud. Conspiracy to commit fraud.
The Federal Reserve, Treasury Secretary, head of the IMF, Moody’s and the US Chamber of Commerce have suggested that forcing a government default is nuts and will cause havoc in the markets. Surely they won’t go through with it.
Of course, there’s that other issue. Two months ago, the House Republicans voted in lockstep to turn Medicare and Medicaid in to state voucher programs. Republicans have caught a lot of flack from seriously pissed off voters since they did. Ryan’s bill was DOA in the Senate. But, now, all they have to do is get the Democrat in the White House and at least four Democrats in the Senate to vote with them on a variation of the Ryan plan. They’ll get what they want and, perhaps, have an unelectable Democrat to run against in 2012.
It’s not that the Republicans want Grandma thrown out on the street, starve or to die from lack of health care (collateral damage)*. They just don’t want to have to listen to lobbyists and their campaign contributers complain about employers being forced to pay a share of payroll taxes. Republicans would much prefer Medicare be privatized so their health insurance buddies could keep their hands in the Federal wallet. Republicans would much prefer Social Security be privatized so they could enable their Wall Street buddies to gamble Grandma’s money. Republicans would also much prefer both Social Security and Medicare become voluntary voluntary so their rich pals could opt out.
On the other hand, Republican leaders would prefer poor people and their children be thrown out on the street, starve or die from lack of health care (that’s what prisons are for). Republicans are anxious to do away with federally required Medicaid believing that until our poor are paid wages competitive with the third world, there will be no new jobs.
Their brilliant strategy is not really just about the policy. The real plot is more sinister. Should the Dems not cave, the Republicans will get what they really want – a government, at least until the next election of a Republican or they lose the House, without enough money, but with seriously higher interest rates on the deficit. The problem for Republicans is that current average interest rates on the national debt are only about three percent (3%), costing about the Treasury only about $30 billion a month. Debt is not starving the government enough. Short-term default will cause rates to double or better – benefiting rich Republican campaign contributers while also starving the government of the money needed for social programs.
So what’s gonna happen? Will Obama read section 4 of the 14th Amendment and the Perry V US court case to Boehner – “The validity of the public debt of the United States, authorized by law… shall not be questioned.”? Will the Fed just forgive their part of the debt (theoretically, they could) so there isn’t a need for debt extension? Will there be a run on Treasury debt with China and the Saudis cashing in, causing rates to skyrocket and the Fed to intervene? Will the Tea-Party Congresspeople suddenly decide what they are doing is un-American(perhaps, Michelle Bachmann will say so)? Will the business lobby (aka: the Chamber) start calling Republicans and threatening something worse then death to get the needed debt increase passed? Will the Senate pass a version of whatever comes out of the House – hoping members of a conference committee could turn it into something tolerable? Will Obama blink – hoping that voters will be so outraged that Republicans are voted out of office in 2012 and the law can be overturned? Stay tuned. Whatever happens, the Republicans are risking the world and they plan to win – no matter what.
* Grandmas who practice personal responsibility and free-market capitalism, don’t have to worry. Unless she gets cancer. Or helps her unemployed children. Or worked for a firm that underfunded her pension. Or her job was off-shored. Or her children grow up to be Republicans.