Since the 112th Congress was sworn in, Democrats have consistently argued that failing to raise the federal debt ceiling would mean financial ruin for the United States. Any comment from Republicans suggesting otherwise — or simply advocating that any vote to raise the debt ceiling be leveraged to extract spending cuts from the White House — has been met with harsh criticism.
Austan Goolsbee, chairman of the U.S. Council of Economic Advisers, earlier this month accused Republicans of “playing chicken” with the debt ceiling. “If we get to the point where we damage the full faith and credit of the United States, that would be the first default in history caused purely by insanity,” Goolsbee said. Treasury Secretary Tim Geithner said failing to raise the debt limit would be “deeply irresponsible” because it would necessarily precipitate a default on the federal debt.
Indeed, most can agree that a default would have catastrophic economic consequences, but there are plenty who dismiss the Obama administration’s assertion that default would inevitably result from a failure to raise the debt ceiling. Last week, Sen. Pat Toomey (R., Pa.) introduced legislation designed specifically to avoid this scenario.
The Full Faith and Credit Act, as the bill is called, would “require the Treasury to make interest payments on our debt its first priority in the event that the debt ceiling is not raised” to ensure that the U.S. does not default. However, as Toomey points out in a recent Wall Street Journal op-ed, he is not saying that the debt ceiling should not be raised. Rather, he argues that the impending vote is an opportunity to enact meaningful spending reductions and reform. “Congress should make increasing our debt contingent on immediate cuts in spending and effective reforms of the spending process that helped get us into this mess,” he writes. “We can do so without jeopardizing the full faith and credit of our country — and we should.”
The legislation is merely an effort to facilitate a meaningful conversation by heading off the worst-case scenario (default), and nothing more. Here’s Toomey in a recent statement (emphasis added):
We need to take the default scare tactics off the table so both sides can sit down at the table and have a serious and honest conversation about cutting spending and instituting structural reforms to put our country’s finances on a sustainable path. The Full Faith and Credit Act will allow us to have that conversation by eliminating the possibility for default in case the debt ceiling is not raised. Failing to raise the debt ceiling is not a desirable situation and would be disruptive, but the worst thing we can do is simply continue the irresponsible deficit spending that jeopardizes our economic future.
Predictably, the left’s reaction has been considerably less nuanced. Democrats and liberal commentators have seized upon Toomey’s bill as part of their ramped up efforts to paint Republicans as heartless fiscal madmen. Indeed, they appear to be delighting in a line of attack that manages to play on two of the most deeply-held anxieties in American politics — Social Security (the program Republicans want to destroy) and China (the debt-financing, job-killing menace).
Here is Sen. Kent Conrad (D., N.D.), chairman of the Senate Budget Committee, speaking at a press conference last week:
I think it is a dreadful idea. Basically what they’re saying is ‘pay China first.’ We’re going to forget about the American public and the things that they need? Somehow they’re secondary? And paying the Chinese and the Japanese is the first priority of this country? I don’t even know how to describe that idea. Except that it’s a very, very bad one.
In doing so, Conrad wrote the headlines for many a lead story throughout the liberal blogosphere. Talking Points Memo jumped on the case today with this gem: “‘Pay China First’ — Republicans’ Wild Plan To Avoid U.S. Debt Default.” An excerpt, which includes the administration’s take on Toomey’s bill:
[A]ccording to the Treasury Department, his plan wouldn’t actually avoid a default, or its catastrophic consequences.
“[T]his idea is unworkable,” said Deputy Treasury Secretary Neal Wolin in a statement. “It would not actually prevent default, since it would seek to protect only principal and interest payments, and not other legal obligations of the U.S., from non-payment. 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.”
…
The Administration thinks such a policy would be tone deaf. “Such a policy would also be unacceptable to American servicemen and women, retirees, and all other Americans, who would rightly reject the notion that their payment has been deemed a lower priority by their government,” Wolin added.
As always, Daily Kos provided some thoughtful consideration with this post — “GOP intros bills to ‘Pay China First’ before Soc. Sec. recipients”:
You might think the GOP hates the poor and the elderly and, really, all of those that rely on entitlement payments of one sort or another. But I’ll bet you didn’t know how much they hate them.
They hate them enough to introduce a bill that prioritizes paying off our debt to China over their monthly checks.
Rep. Xavier Becerra (D., Calif.), who served on the president’s deficit commission and voted against its final recommendations (because it dared to reform Social Security), had this to say:
Hard to believe, but true: members of the new Republican majority have introduced legislation that rips the hard earned Social Security benefits out of the hands of seniors, widows and disabled workers—and hands them over to creditors like China. This ‘Pay China First’ plan would treat retired American workers as second class citizens in line behind foreign lenders even though Social Security had nothing to do with the nation’s $14 trillion debt.
They are all, of course, conveniently missing the point. Toomey’s ‘plan A’ — agreeing to raise the debt ceiling (only) in exchange for significant spending cuts and meaningful reforms to the spending process — is basically shared by most Republicans. Once the GOP makes its opening bid, the debate’s impetus will quickly shift to the Democrats as Leaders Reid and Pelosi presumably try to marshal a coalition against any such cuts, and clamoring for greater “investment.” But with memory of Nov. 2, 2010 still fresh in members’ minds, they should be be hard-pressed to convince their colleagues that “spend first” and “borrow more from China” is a winning strategy.
So it’s only natural that Democrats are turning to such scare tactics. They’re clearly worried, but far less so about the implications of any one bill than they are about the prospect of having to vote ‘no’ on fiscal responsibility.