Sen. Patty Murray (D-WA) tells the Republicans to stop acting like children because otherwise real people are going to get hurt:
“The possibility that seniors could be denied Social Security benefits is frightening,” Murray said. “Rather than accuse the President of scare tactics, my Republican colleagues should tell the extreme voices in their own party that it is time to act responsibly.”
“Senate Republicans have put us in this position by walking away from every attempt at finding a long-term solution to our national debt….They continue to deny that their irresponsible actions will have real consequences for the American people. This is not about bumper sticker politics. This is about real people, who could be hurt if Republicans fail to act reasonably and responsibly.”
In the mean time, presidential wannabe Michele Bachmann says both stupid and crazy things:
“This is a misnomer, that I think the President and the Treasury Secretary have been trying to pass off to the American people, and it’s this: that if Congress fails to raise the debt ceiling by $2.5 trillion that somehow the United States will default and we will lose the full faith and credit of the United States…”
“That is simply not true. Revenue will continue to come in to the United States Treasury. It’s merely the President’s obligation and the Congress’s to make sure that the interest is paid on the debt. We’re grateful that revenues are sufficient to be able to pay interest on the debt.”
This is stupid, on one level, because of Ms. “J.D. from Oral Roberts University” mistaken use of “misnomer”. A “misnomer” is an error in naming something, whereas I suspect she wanted to use the word “misunderstanding.”
But it is stupid on another level by the fact that she is misinformed. Since mid-May the U.S. Treasury has been tapping its fiscal buffers—shifting money around between its bank accounts and delaying pension contributions—all this so that the government’s bills get paid.
In August, the buffer runs out. The government will have to borrow money in order to pay all of its bills, because revenues will fall substantially short of the bills owed. And there are no more buffers.
Sure…we can pay military families, pay service on the debt, and a few other things. But about 1/2 of the Government’s bills will go unpaid as of Aug 2. The LA Times runs down the numbers:
In August, the government is expected to collect about $172 billion in revenue and will face about $307 billion in bills, according to an analysis by the Bipartisan Policy Center, a Washington think tank. So, in theory, the government would have the money to pay a little more than 55% of its bills during the month. But which bills to pay? Interest on existing debt comes to just under $30 billion, Social Security checks are $50 billion, Medicare is another $50 billion, payments to military contractors for weapons, fuel and other costs comes to $32 billion and salaries for active-duty military personnel come to about $3 billion. Add in unemployment benefits ($13 billion for the month), and the government would already have run out of money without paying a single civilian employee or running any of its domestic programs, including courts, disaster relief, national parks, veterans benefits or welfare programs.
However you slice it up, some bills will not get paid, and a lot of people will be hurt in the process.
A second, and perhaps the worst, effect will be the long-term impact on bond interest rates:
The federal government has been able to borrow money at very low interest rates because investors around the world look at U.S. government securities as a very safe place to put their money. If the government’s ability to pay its bills came into question, the people who buy bonds almost certainly would demand a higher interest rate. That would ripple quickly through the economy. In a letter to Congress and the president Tuesday, the Business Roundtable, Chamber of Commerce and other business leaders warned: “Treasury securities influence the cost of financing not just for companies but more importantly for mortgages, auto loans, credit cards and student debt. A default would risk both disarray in those markets and a host of unintended consequences.”
Bachmann’s error is believing that a failure to pay your bills on time doesn’t affect your credit rating.
That belief is ignorant. And that ignorance poses a clear danger to our country.