Prospects of Default: Why Are Republicans So Stupid?

Posted on October 8, 2013


I’m not liking either of the major parties in American politics these days.  I may very well never vote for any candidate from either of them again.  But the Republicans take the dubious prize for stupidest, most reckless, and most clueless about… well, just about everything, but at the moment I am thinking of a first-ever default on US debt.

Check out Gregory Korte and Susan Davis’ article in USA Today.  “Debt Limit Breach No Big Deal, Some GOP Lawmakers Say.”  As they write:

“I would dispel the rumor that is going around that you hear on every newscast, that if we don’t raise the debt ceiling, we will default on our debt,” said Sen. Tom Coburn, R-Okla., Monday on CBS This Morning. “We won’t. We’ll continue to pay our interest.”

Coburn and other Republicans argue that the Treasury Department could prioritize interest payments while delaying others. The House has passed a bill requiring the Treasury to do just that.

Okay, this is where it gets just outright stupid.  “Delaying payments,” no matter how carefully prioritized, is in fact default.  Don’t believe it?  Try “delaying payments” on your mortgage or car note and see what happens.

But of course, you wouldn’t do that.  You would “prioritize” your insufficient funds to pay your mortgage and car note, and instead you might decide to delay your minimum credit-card payment.  But then what happens?  Oh, right.  Higher interest fees.  Eventually, if you don’t catch up on your payments, your interest and charges will get to the point that you have no hope in hell of paying it off, and your credit will probably be cancelled.

So who issues credit to the US?  Any entity that holds securities in the US Treasury: bonds, bills, notes and TIPS.  Check out the major foreign holders at the US Treasury website.  China and Japan are the top two investors with well over a TRILLION dollars each.  All told, more than 5.5 TRILLION dollars are loaned to the US Treasury by various foreign entities.

Why?  Because even though the Treasury has been paying a mere pittance in interest in recent years… shoot, you might as well stick your money in a mattress, for all the interest they pay right now… the US Treasury is regarded as one of the most secure places in the world, perhaps THE most secure place in the world, to put your money; and dollars, for all of our economic woes, are still regarded as one of the world’s most reliable currencies.

So… let’s see:  who should we NOT pay on time?  Scrolling down the list… Oh, I know.  How about Peru?  Pffft.  Stupid little country, what can they do?  I’ll tell you what they can do: they can take their 15 BILLION dollars (once they belatedly get hold of it), and go buy Euros, or Pounds Sterling, or Swedish Kronor.  Europe might appreciate the investment, and besides, their leaders have been a little more serious about budget control, haven’t they?

Let enough of THAT go on, and watch the dollar plummet worldwide.

No problem, the GOP might say; we can still sell Treasuries!  We’ll still have investors to prop up our national budget!

Yes.  Yes, we will.  But when you are a known defaulter of credit, creditors will certainly demand a little something extra in exchange for their risk and inconvenience.

Say… does anyone else remember the 16.5% interest rate that the US Treasury was paying to attract investment back in the 1980s?  I remember that, because you know what happens when the Treasury raises rates; the Fed raises rates, and all the banks follow suit.  Back in 1985, after my old hand-me-down clunker died, I had to buy my first car for cash… all of the money I had painstakingly saved from several summers of work… because I never could have afforded the interest.  And the US Treasury had NEVER defaulted.  Still hasn’t.  Yet.

Let it default, and the 1980s will look like a cakewalk.  Good luck ever buying a new anything on credit. No house.  No car.  No seeds for the next season’s planting… you know, there are some pretty fundamental things in this country that run on credit, so we shouldn’t be so cavalier about screwing it all up.

Re-elect NO ONE.