The current statutory debt ceiling of $14.3 trillion will be reached some time between February and June 2011. At that point, if the debt ceiling is not raised, the federal government can no longer borrow any money, and can no longer pay its bills or service its existing debt, the government will be in financial default.
And on top of that, the government will reach that ceiling based on already passed current spending and debt service, meaning that no band-aid of cutting a few programs of discretionary spending here and there will prevent the ceiling from being reached. It could postpone it by a few weeks, hence the somewhat wide range of expected target dates.
Think about that for a moment.
There's a whole metric assload of brand new freshly minted Republicans and tea partiers storming in to Washington on a platform of "NO MORE DEBT", "STOP THE SPENDING", "CUT TAXES FOR THE MILLIONAIRES", etc., etc., etc., who will soon be forced to take a stand on a bill that will either allow the government to take on another trillion or two in debt, or cause all government borrowing to stop, the government to default on its existing loans, and immediately push the world banking system into panic, likely sending stock markets down 50% overnight.
There's no middle ground there, it will have to be one or the other.
To paraphrase, Whatcha Gonna Do when Debt-a-mania runs wild on you?
This brings us to a fascinating dilemma for Mssrs. Boehner and McConnell, as well as the entire new incoming class of Republicans, and their likeminded predecessors (Demint, Bachmann, Ron Paul, Issa, etc.). No extension to the debt limit can pass in 2011 without significant Republican votes. Same goes for the Senate.
Here we have an entire subset of Congress who adamantly refuses to add on to the debt. Well, here comes your chance to prove it. And just to add to the intrigue, to see how tightly you'll cling to those principles, a smart House minority leader (it won't be Pelosi) will tell his caucus to vote against it, thereby forcing the new House majority's hand. The Democrats may have learned a lot from watching two years of the Party of No...perhaps they put those lessons to use, putting the new far right on the ultimate spot.
So, you're the Republican-led House of Representatives. Do you want to be the party responsible for plunging the free world into an instant depression and worldwide bank panic when the United States defaults on its debt? Or were all those Tea Party friendly sentiments just more of the same common campaign lies, with you willing to sell out all those who believed you when you were preaching your "END THE SPEND" in front of your grassroots gatherings of a couple dozen folks? Are you willing to put yourself on the 2012 Tea Party hitlist like Scott Brown has already done? Are you willing to turn your back so quickly on those who got you there? Or, do you dance with who brung ya and stand by your principles and shut down the entire free world economy to prove a point?
If you're Rand Paul, you're already declaring "no compromise" in your victory speeches. Okay....goody gumdrops.
If you're Harry Reid (or the next Senate Majority Leader, please), let's put Rand to the test. No raise in the debt ceiling can pass without a lot of Democratic votes, but one can pass with the votes of all Republicans and a wee couple of Democrats. First thing you do is, you don't even schedule a vote on it until after the House votes. If the tea partiers in the House do show their backbone and vote down the higher ceiling, then you don't even have to risk anything....but if it passes the House and comes to you, just make sure you get about 46 "no" votes, and there you have it. The Senate Tea Partiers will be held to the ultimate test...and America will be able to see in very short order how strongly they hold their alleged core values.
I, for one, can't wait to watch this play out.
Now, this is true, even if the most hard core Tea Party members all vote "no", and the Democrats in the House vote no, a "yes" vote by the remaining Republicans in the House could still put such a bill at the 218 votes necessary for it to pass. Maybe. Depends on how you define "hard core". But then that makes vulnerable all of those who do vote for it to being put on the Tea Party 2012 hit list, as well, and there are plenty who won their 2010 races by slim enough margins that they won't take that chance.
From an Associated Press article via Huffington Post today:
Rep. John Boehner of Ohio, planning to take over as speaker now that Republicans have won the House, said that over the next few months he'll look at ways to work with his new tea party caucus to pass legislation they will oppose like increasing the debt limit.
Of course, there are already plenty of indications of how this is going to work out, given how some of the Tea Party stars are already showing their stripes. After having campaigned as the ultimate Washington outsider, who does Rand Paul hire as his chief of staff? From the same article:
Tea Party hero Rand Paul moved immediately to name an insider as chief of staff for his Senate office. Doug Stafford, a longtime GOP operative in Washington, has been his top political consultant and is vice president of the National Right to Work Legal Defense Foundation and as a consultant to the Campaign for Liberty.
So much for bringing a fresh outsider's perspective to Washington. Meet the new boss, same as the old boss.
Personally, I'm banking on the Tea Partiers caving in to Boehner and McConnell's demands, for the most part, in exchange for some really sweet committee assignments and earmarks. You know, business as usual. Much like how Rick Scott led one of the greatest Medicare frauds in history and now runs on a "cut government spending" platform. Ambitious folk will say anything to get elected. But when the rubber meets the road, the newly minted members of Congress will lose their moral bearings the very moment the Armey/Koch troops come in to demand legislative repayment for all the attack ad funding that got them their seats in the first place. And so it goes.
Really, it's no different than their insistence on maintaining the unpaid-for Bush tax cuts for the top 2% wealthiest Americans, who are anything but middle class, and eliminating the estate tax which already affects less than 1% of the entire United States population, both of which scenarios are unpaid for and add to the federal debt precisely because they are unpaid for. But it's what the deep pockets that funded Crossroads GPS and the Tea Party Express wanted, so those are the positions you get.
This is not to dimish the serious nature of our rising debt at all. It is a major issue, and it needs to be tackled. We can start be eliminating all existing loopholes in the tax codes...you know, the ones that let companies shift all their costs to U.S. subsidiaries while shifting all their assets to subsidiaries in tax haven countries, so they can pretend they're not profitable here for tax purposes while they continue to make money hand over fist. There's a recent wonderful article about the phenomenon here.
We can also start by ending all farm subsidies now. Why the hell should your tax dollars (and mine) go to a direct handout, right? Sure, that will drive up the cost of food products, and probably put some U.S. farms out of business. But hey, no more government handouts, right? Though it's rather ironic how much of tea party country is in rural, farming America, ain't it. But I digress....
We can also stop with all these science and technology grants to companies where, you know, you build your 30 person design shop here, we'll waive all of your taxes and pay your infrastructure improvements with local tax dollars while you offshore the 1,000 employee factory that actually builds what you design, but in India. We can also stop buying future ultra tech weapon programs that we don't need today and aren't effective against small mountain terrorist insurgencies. Those are all places to start. I'm sure there's more. Beyond, of course, bringing back our entire expeditionary military from Iraq and Afghanistan and South Korea right now. That will save hundreds of billions per year.
But then, even if all of the previous two paragraphs were to come true in the next few months, none of it will prevent us from hitting that dreaded debt ceiling in spring of 2011, which brings us right back to the impending dilemma.
Time to go buy some microwave popcorn. In bulk.