They say they will introduce legislation to make the Treasury pay interest on US bonds first and then prioritize other government bills in case Congress does not raise the debt ceiling.
This is a dumb thing.
The GOP says – no, it’s not.
They are calling it a politically palatable alternative to default.
You see, default is bad – it could rattle markets like the “almost default” did in 2011.
And in their Tea Party world, this would not be default.
It’s all part of the grand game of chicken going on now between the House and the President.
The Republicans are quite open they are using the debt ceiling as leverage to get spending cuts from President Obama.
The President is quite open it won’t work.
Here’s the truth:
Prioritizing payments won’t work and it won’t fool the markets who are a lot smarter than the Tea Party dummies in office.
The feds hit the $16.4 trillion debt ceiling, or the legal amount it is allowed to borrow, on New Year’s Eve.
It started moving money around so that the government can continue paying its bills.
But the money tricks run out as early as the middle of next month.
Patrick Tiberi, a Republican from Ohio who heads a tax-writing subcommittee, “No one is talking about default except for the president. He doesn’t need to default because he has enough revenue, money coming in from the taxes that you guys pay to pay bills.”
He’s absolutely wrong and it’s scary this guy is on a tax subcommittee.
It’s like Michele Bachmann being on the Intelligence Committee.
Again, here’s the truth:
The idea is unworkable for a number of reasons, including the fact that tax revenue does not come in at the same rate that payments are due.
Even when the government was operating under a budget surplus, as it did from 1998 through 2001, the Treasury still had to borrow or issue debt to make its regular payments because its income fluctuates month-to-month.
Prioritization is impossible.
If the government started withholding benefits, salaries, rent, contract payments, and so forth, in order to pay off Treasury bondholders it would have a political catastrophe.
Something the GOP seems to be good at creating these days.
If you are a Tea Party Republican, we’ll try to explain this in real simple terms.
Payment prioritization doesn’t stop payments, it just delays them.
Then the upset party sues the government, and probably wins, and it turns into a bloody mess.
And it’ll be all your fault.
Make sense now?