A comment to the last post in this series calls for closing the federal departments that cannot be paid for absent an increase in the federal deficit ceiling. This is what I think of as the Michelle Bachmann position, because representative Bachmann made it an ongoing part of her presidential campaign in 2011. Indeed, it has a certain allure because it would immediately end deficit spending; the feds could no longer spend more than they were receiving in tax revenues. The plan, however, has two enormous defects that make it totally unfeasible.
1) If the debt ceiling is not raised, it is indeed correct that federal expenditures will have to be cut by something like 50%. The next step, however, is to decide which expenditures get cut. Will it be food stamps, aid to education, the border patrol of the US Navy? Will Congress get its budget cut? How about the court system? The answer is that the determination as to which bills get paid and which do not is left, by law, to the president. Sure, Congress could pass laws that determine which agencies are to be closed and which ones are to remain open, but that would take agreement of the House and Senate and the signature of Obama. Good luck with that!
In 2011, Obama actually announced that if the debt ceiling were not raised, he would not pay salaries for the military, among other things. He also threatened to withhold social security payments from retirees. That threat seemed improper since there is a social security trust fund that supposedly exists and which could be used to pay benefits. The problem, however, is that were Obama to cut off benefits, there would be months or even years before the courts could decide whether or not such a cutoff is legal.
The point here is that Obama is prepared to threaten to inflict terrible damage upon all manner of American citizens in the event Congress does not raise the debt ceiling. There is not a politician in the USA who would ever want to see that.
2) Even if the cuts resulting from the debt ceiling freeze were to be made in a rational way, they would still result in a very severe recession or perhaps even a depression. Remember, cutting $1.4 trillion in federal spending would mean, by itself, a reduction in the GDP of between 8 and 9 percent. In the worst days of the recession in 2008 and 2009, we never got to an economic contration that severe. Further, when the super recession hit following the cuts, the feds would no longer be able to soften the blow with counter-cyclical spending like unemployment benefits, food stamps, etc. Those folks who get hit with the effects of the downturn will be on their own. That means that the downturn will feed on itself. The consumer spending coming from those who get hit by the recession will dry up, leading to a further downturn. We will all get a chance to relive the 1930's.
America does not actually have the choice to keep the debt ceiling where it is. Let me rephrase that: absent a desire for economic suicide, America cannot fail to raise the debt ceiling. That is why the Republicans should de-link it from spending cuts. Let's cut in a responsible way. Let's also raise the debt ceiling as needed.
1) If the debt ceiling is not raised, it is indeed correct that federal expenditures will have to be cut by something like 50%. The next step, however, is to decide which expenditures get cut. Will it be food stamps, aid to education, the border patrol of the US Navy? Will Congress get its budget cut? How about the court system? The answer is that the determination as to which bills get paid and which do not is left, by law, to the president. Sure, Congress could pass laws that determine which agencies are to be closed and which ones are to remain open, but that would take agreement of the House and Senate and the signature of Obama. Good luck with that!
In 2011, Obama actually announced that if the debt ceiling were not raised, he would not pay salaries for the military, among other things. He also threatened to withhold social security payments from retirees. That threat seemed improper since there is a social security trust fund that supposedly exists and which could be used to pay benefits. The problem, however, is that were Obama to cut off benefits, there would be months or even years before the courts could decide whether or not such a cutoff is legal.
The point here is that Obama is prepared to threaten to inflict terrible damage upon all manner of American citizens in the event Congress does not raise the debt ceiling. There is not a politician in the USA who would ever want to see that.
2) Even if the cuts resulting from the debt ceiling freeze were to be made in a rational way, they would still result in a very severe recession or perhaps even a depression. Remember, cutting $1.4 trillion in federal spending would mean, by itself, a reduction in the GDP of between 8 and 9 percent. In the worst days of the recession in 2008 and 2009, we never got to an economic contration that severe. Further, when the super recession hit following the cuts, the feds would no longer be able to soften the blow with counter-cyclical spending like unemployment benefits, food stamps, etc. Those folks who get hit with the effects of the downturn will be on their own. That means that the downturn will feed on itself. The consumer spending coming from those who get hit by the recession will dry up, leading to a further downturn. We will all get a chance to relive the 1930's.
America does not actually have the choice to keep the debt ceiling where it is. Let me rephrase that: absent a desire for economic suicide, America cannot fail to raise the debt ceiling. That is why the Republicans should de-link it from spending cuts. Let's cut in a responsible way. Let's also raise the debt ceiling as needed.
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