Debt Ceiling Disaster – Crazy or Criminal?

By Michael Collins

(Washington, DC 1/9/13) Let’s say that on a Monday, you sit down and take a hard look at your finances. Your bills exceed your income, assets are just a feint memory, and there is no relief in sight. Reluctantly, you decide that your only choice is to declare bankruptcy. On Tuesday you say, I think I’ll do some shopping before it’s all over. You proceed to charge $2,000 on your VISA card for some jewelry and other non essentials. On Wednesday, you get a lawyer and file for bankruptcy.

Guess what? You still owe the $2,000 since the court will conclude that you made the purchases fraudulently. You knew you were filing for bankruptcy and made the charges anyway. Even worse, the court may refuse to grant the bankruptcy filing all together as a result of the obvious fraud.

That is exactly what the Republicans in the House of Representatives are doing with their open announcement that they will vote against raising the debt ceiling without their solution to government spending. Since that announcement, has one single deficit hawk stood up and said, We must stop all spending as of this moment since we are proposing to default on those expenditures?

They haven’t said any such thing and they won’t. That would mean an end of all Federal spending in their districts and states. They are more than happy to incur expenditures that they have no intention of paying anywhere close to on time.

Why is the refusal to raise the debt ceiling such a threat to the good faith and credit of the United States of America? Simple. The majority party in the House is engaged in flat out fraud. That party is spending money as it promises to default on the very amounts spent.

It is fraud, pure and simple. The behavior of key leaders attacks the credit worthiness of the country.

You may say, Look, it’s only a temporary default. The loss of confidence still attaches to the action. In fact, the fraud of purchasing after declaring an intention to default is compounded by the grotesque insincerity of the threat. It’s enough to make your head spin.

The Republicans in the House of Representatives are involved in a very real, common conspiracy to commit fraud based on their statements and actions. In addition, they’re lying to the public since a real declaration default is not just extremely improbable, it is impossible. Sovereign states have the ability to issue currency. That unique ability and asset can’t be denied due to a legislative tantrum. Just like individuals and businesses, sovereign states have the very real option to develop a viable plan to work out of a financial crisis

The ever present double standard emerges. It is not OK for us to defraud creditors when we declare bankruptcy but the House can acquire goods and make promises to pay after openly declaring their intention to not pay. Nothing will happen to these politicians as a result of this conspicuous contempt for the law. If it looks like it might, they’ll just pass a law to make their crimes legal.

Every day, we suffer the undeserved indignity of being ruled by fools and fraudsters.


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Michael Collins

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  • Here is my reading of the (dismal) chessboard:

    The GOP has a talking point to the effect that service on the existing debt is but a tiny fraction of revenues and so default per se will not happen. (I believe they are clearly correct, just stating the obvious. This is roughly their answer to the “fraud” accusation and, right or wrong, it’s enough of an answer to full enough of the people…..)

    So their threat here is to force a “government shut-down”, an emergency condition that is (isn’t it?) anticipated as a possibility in federal law.

    The House can force a government shut down by failing to pass a bill to increase the debt limit. My guess is that this outcome is very unlikely because I can’t see any good way for them to explain such a failure to the cameras.

    The House can put the Senate majority in a bind by passing a debt ceiling raise with some nauseous conditions added. If they feel cocky they could use the bill to “defund Obamacare”. If they are feeling cagey, they could use the bill for all manner of entitlement program reform gutting. Well, what happens then?

    The Senate can’t pass it without breaking ranks with the administration but they can amend it and send it back to the House. (They could also just refuse to vote on it but, as with the House taking the “do nothing” route, this seems unlikely to me.)

    I don’t know how likely that round-trip through the Senate is. It would eat some time on the clock. It would force the Senate to reject entitlement forms (which would be hard to explain). Maybe there is a little bit of upside for the House majority to force the Senate to kick back a bill that they can’t pass without amendment.

    And then it is just a question of price. The House need not (for any reason I can see) ever offer a “clean” debt ceiling increase. They can use the increase to extract as many cuts as they think they can get away with. For example, retirement age and means-testing reform might be attached.

    The Senate, or the administration, have the right to reject a non-clean debt ceiling bill but if the problems with the bill seem smallish to the cameras — it would be politically difficult. So the House will (I think) go this route. Empty talk of magic coins and creative interpretations of 14th Amendment don’t change a thing.

    Furthermore, the “price” the House can extract will be quite high: a short-term raise of the ceiling so that this problem doesn’t go away.

    And then immediately following the emergency signing of this concession to the House majority, the sequestration measures will form the next crisis.

    My dismal reading is that the Democrats have no leverage whatsoever here because the GOP has been so tactically skillful at the regional and state level, including having a secure grip on the House. The administration is playing a “misere game” — a game in which there is no winning but only a chance to try to lose as slowly as possible.

    A visionary administration that was good at explaining and “selling” how its vision makes sense could have the leverage the say “F– it. We don’t negotiate with terrorists. The gov’t shutdown goes forward while we take to the airwaves and rally the people.” If the Obama administration had a solid plan and good ability to communicate it, then the “we won’t negotiate” stance on the debt ceiling would be viable. They don’t, so it isn’t.

    The Democrats look, to me, to have lost power (over a long period of time) at the municipal, district, and state level.

    • I should add that there are some “known unknowns” here. In particular, there is the question of the disposition of the politically active capitalist class of big campaign donors.

      Willy Brown (former speaker of the CA assembly and sf mayor) has a weekly column in the SF Chronicle and, a few weeks back, dropped a hint that the Dems could start leaning on the big money donors who (among other thing) support the GOP in some of their strong-hold districts and states. Brown is pretty old and pretty much retired (other than from High Society and some legal work here and there). It’s hard to tell, sometimes, when he is just spit-balling or bluffing and when he’s being serious. But it does seem possible to me that there is at least a tiny chance of breaking the unity of the House majority that way. A cat fight among The Swells might help.

  • Let ’em do it. Yes, lets take the pain right now as they say. Only I think the pain, if handled right by the Dems, would be the repubs and Tea baggers shooting big holes in their feet. It is time to do it, or they will just pull these tricks again and again and again.

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