Bad debt ceiling ideas, Part II
By Ezra Klein
WashPost
Dave Weigel and Brian Beutler both e-mail to say that Rep. Michele Bachmann is not alone in in proposing scary, reckless, incoherent theories of how to hit the debt limit without doing any damage to the economy. Sen. Pat Toomey, whom Weigel interviewed here, has introduced legislation stating that creditors get paid off first (which would mean that the government would shut down operations to use that money to pay off investors). Beutler notes that the Treasury has already declared this plan “unworkable,” as “adopting a policy that payments to investors should take precedence over other U.S. legal obligations would merely be default by another name, since the world would recognize it as a failure by the U.S. to stand behind its commitments.”
I’m not sure if this is exactly the same as Bachmann’s idea, but let me make a different point. Let’s grant the Toomeys and Bachmanns of the world everything their theories need. Let’s say that as long as we pay back our creditors first, the market will leave us alone. Let’s say it all works out fine. It’s still a bad idea.
The market is worried about our long-term debt load. What we need is a plan that puts us on a better path going forward. The ability to do this gradually and thoughtfully is a great gift. But Toomey and Bachmann don’t want to do this gradually and thoughtfully. They want to let the debt ceiling run out and then start trying to cut spending while exempting creditors in real time. They want to do it, in other words, abruptly and riskily. They want to create crisis conditions when we have the luxury of planning. And why?
(More here.)
WashPost
Dave Weigel and Brian Beutler both e-mail to say that Rep. Michele Bachmann is not alone in in proposing scary, reckless, incoherent theories of how to hit the debt limit without doing any damage to the economy. Sen. Pat Toomey, whom Weigel interviewed here, has introduced legislation stating that creditors get paid off first (which would mean that the government would shut down operations to use that money to pay off investors). Beutler notes that the Treasury has already declared this plan “unworkable,” as “adopting a policy that payments to investors should take precedence over other U.S. legal obligations would merely be default by another name, since the world would recognize it as a failure by the U.S. to stand behind its commitments.”
I’m not sure if this is exactly the same as Bachmann’s idea, but let me make a different point. Let’s grant the Toomeys and Bachmanns of the world everything their theories need. Let’s say that as long as we pay back our creditors first, the market will leave us alone. Let’s say it all works out fine. It’s still a bad idea.
The market is worried about our long-term debt load. What we need is a plan that puts us on a better path going forward. The ability to do this gradually and thoughtfully is a great gift. But Toomey and Bachmann don’t want to do this gradually and thoughtfully. They want to let the debt ceiling run out and then start trying to cut spending while exempting creditors in real time. They want to do it, in other words, abruptly and riskily. They want to create crisis conditions when we have the luxury of planning. And why?
(More here.)
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