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Debt Denial Reaches Logical Conclusion: Just Stop Paying People Republicans Don’t Like

While some in the GOP ranks are still trying to play both sides of the street on the debt limit, demanding spending cuts as a condition of passage while reassuring Wall Street that default is not an option, there are definitely some in the Republican caucus who really have no problem with default. In fact, they see it as a weapon, a way to default on people they don’t like. That’s the point of Jim DeMint and Pat Toomey’s letter to Tim Geithner about how to default with dignity:

The Treasury Department suggests that efforts to prioritize debt payments would bring about “catastrophic economic consequences.” Yet, this argument ignores the historical record. As you are well aware, the Treasury had to manage the nation’s finances in the past when the debt ceiling was reached. In 1995-1996, for example, the Department prioritized certain payments – including debt service. During this period, hundreds of thousands of federal employees were furloughed and many programs were temporarily suspended as a result of the two government shutdowns that occurred. And yet, this prioritization did not result in default on our publicly held debt nor did it cause the “catastrophic economic consequences” the administration predicts.

Unfortunately, Washington has shown time and again that it is perfectly content to spend money on whatever suits its whims. That is why the debt limit exists in the first place – to restrict the government’s profligate spending and borrowing impulses and so protect the citizens responsible for paying it all back.

We believe the time has come to employ this particular budget enforcement mechanism to finally force Congress to address the looming fiscal crisis, cut spending, reform entitlements, implement spending caps, and pass a balanced budget constitutional amendment before considering any increase in the federal debt ceiling. These are the contours of the debate before the American people this spring and summer.

In the event of reaching the debt limit in the course of that debate, the decision of whether to use available Treasury funds to honor the United States’ debt obligations – and prevent the catastrophe of default – would ultimately fall to you. Recent comments conflating debt service with other spending notwithstanding, the markets, the courts, and the American people know differently.

DeMint is saying that debt service can be prioritized while government employees get kicked off the job and payments like Medicare, Social Security, disability, food stamps, whatever, go unpaid. This is the logical conclusion of debt denial – the government can just stop paying the people we don’t like anyway.

Whether you think this is a kabuki dance or not (and I’m pretty certain the debt limit will be increased), it’s pretty clear that Republicans want to play out the string on this, and won’t stop until Wall Street makes some tangible signal to raise borrowing costs or come close to a meltdown. We are headed for the kind of moment we saw with TARP, where lawmakers agree to something under extreme pressure. As Digby says, that doesn’t usually go well.

Let’s put it this way. The Tea Party may not be winning any legislative battles outright and they may even fade into obscurity by the 2016 election. But they will have left a mark on American politics. If the Republicans successfully create a phony hysteria over the debt during a severe economic downturn (in which the wealthy are getting richer and richer), forcing huge cuts in spending without even allowing tax increases to be on the table, it’s hard for me to see them as failures.


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David Dayen

David Dayen