Let's subject RoJo's comments re government debt default to our own little truth squad | WisCommunity

Let's subject RoJo's comments re government debt default to our own little truth squad

Sen. Ron Johnson (Tea Party-Wisconsin) is adamant that the Obama administration is spending wildly and that the current government shutdown and a possible federal default (that may be caused by failure of Congress to approve a new debt ceiling) are no big deals, that it won't lead to economic anxiety or even a downturn in the international markets. Indeed, Johnson insists that under default where the federal government can't pay all its bills, it will still be able to...pay all its bills!

Johnson apparently thinks there will be enough revenue under a debt ceiling freeze to cover interest and principle payments to US Treasury bond holders, which is the way the national debt is financed. However, that means everyone else to whom the government owes money would either get stiffed or have to wait longer for their money. No problem with that, according to Johnson, who like most of his fellow teahadists would be happy if the government didn't do much beyond run the Defense Department. He was interviewed by Salon.com and at one point in the rather strange and circular interview there was this Q&A (boldfacing added):

SALON: So if we come to … Oct. 16 and the debt ceiling has not been raised, should the markets be concerned at that point?

JOHNSON: Not if you had a responsible administration. There would be no cause for concern. We have more than enough revenue flowing to the federal government, if the spending was properly prioritized, there’s no reason whatsoever to default on any of the debt.

And I, I utterly reject the administration’s claim that this isn’t about new spending, that we’re just paying off old bills. Well, well, the reason you have to increase the debt ceiling is because of new deficit spending. If we weren’t running deficits, if we weren’t spending more than we were taking in, there would be no reason whatsoever to increase the debt ceiling. So if you manage things properly – and listen, I’m a business guy, I’ve got to prioritize spending in all my business career to prevent my business from going bankrupt. The federal government has got to start doing that eventually as well.

And there – again, so if you properly prioritize spending, there’s no reason that we should be talking about some kind of catastrophic market event or some kind of catastrophic economic event. With responsible leadership, that – we shouldn’t even be talking about that. That – in other words it doesn’t have to be Armageddon if you did a little planning, if you were responsible about this.

There's a lot in what Johnson's ramblings that's pretty much off the rails. To begin with, hs own business aside, the only thing threatening to force the United States of America into quasi-bankruptcy is the GOP's refusal to approve a debt ceiling increase without massive Democratic concessions to previously, legitimately defeated Republican policies. But the key error is this:

It's Johnson and the other members of Congress and not the president who appropriate money and decide how to raise revenue for federal programs. The president spends what Congress appropriates; he can't spend more or less, and he's obliged under the Constitution, along with Congress, to pay back the government's debts. Indeed, under Obama, federal spending is down and deficits though not the national debt itself have declined rather dramatically. It's true that federal revenues have declined, too. That's because of the Great Recession that preceded Obama's tenure, and the steady but slow recovery hasn't returned revenues to their historical norms.

Then there's the fact that, in a major economic downturn, government needs to prime the pump when private financial pipelines are frozen. Hence the federal Economic Recovery Act and it's nearly one trillion dollar price tag. Many economists thought the government needed to spend half again or twice that amount to ensure a robust recovery, but Republicans refused, preventing any such robust recovery even though the GOP happily went along with the Bush administration's hundreds of billions of dollars in TARP subsidies to Wall Street and the banking industry, which was teetering on collapse. You see, as per Sen. Mitch McConnell's pledge, Republicans felt the need to oppose Obama and Democrats on everything, in service to future Republican gains, even if routine bipartisanship had to go out the window in the process. It was, in short, government by people who don't want government. It was the only way Republicans could get 100% of what they wanted. Compromise meant everyone else should be forced to concede entirely.

In Johnson's little pocket universe, the administration is irresponsible because it did what Congressional majorities were willing to authorize. Obama certainly was forceful in presenting his argument for a federal response to the recovery, and by various presidential prerogatives managed to ek out enough votes among legislators to make it happen. But despite clear evidence the spending was essential to break the economic free fall, Republicans have railed against Obama as a spendthrift. Never mind that past Republican presidents including George W. Bush regularly received Congressional approval to raise the debt ceiling, while turning fat surpluses into huge deficits, borrowing heavily, and pushing iresponsible tax cuts while incurring heavy future obligations that nation must now begin paying down.

Johnson also claims the federal government "has more than enough revenue flowing" in to avoid a debt default -- if, in his words, the debt payments were "properly prioritized." By that he refers to a quaint, speculative line of thinking in ultraconservative circles to the effect that the Treasury Department can choose which debts to pay first in the event of a debt ceiling freeze; if Treasury chooses wisely, conserva-thinking goes, the delayed payments won't roil the markets and cause economic distress or uncertainty.

However, if that were true, then 1.) Why would the Republicans even bother to threaten not to approve a debt ceiling? After all, it wouldn't be much of a threat if it didn't have dire consequences; and 2.) Why wouldn't delayed payments to anyone still be seen as a US default, which is, as we pointed out earlier, unconstitutional on the face of it? If, for instance, Treasury decided to pay bond holders first and that meant the Pentagon couldn't pay federal contractors when billed or the Social Security Administration didn't have the cash to send out monthly checks to retirees, wouldn't that create uncertainty and anxiety, too? Apparently, Johnson doesn't think so. Obama easily shot down this silly notion earlier this week in his news conference, when he said that if, as a homeowner, you decide to pay your mortgage but skip or delay payments on your car loan or credit card balance, your credit rating will go down and you will face late-payment penaltiies. Same with the feds. But Johnson imagines otherwise.

But in Johnson's simplistic and mostly erroneous view of the world, Obama is an irresponsible spendthrift responsible for economic downturns and deficits incurred not only before he was elected but in some cases before he was born. And so Johnson is willing to risk destroying the US and possibly world economies to put the president in his proper place. Moreover, he's quite willing to criticize Obama for not acting more nonchalant in the process.

There's one word summing up the truthfulness and logic in Johnson's views: FAIL!


October 10, 2013 - 2:34pm