Another Republican Debt Kamikaze

One Virginia Republican suggests that defaulting on our bonds wouldn't be that big of a deal.

Debt Ceiling

As the leadership on Capitol Hill continues to try to do something to avert breaching the debt ceiling next week, there remain many members of the House GOP Caucus who continue to assert that causing a potential economic calamity might be a bad thing:

Many House Republicans emerged from Saturday’s party meeting striking a defiant tone and suggesting they would not simply accept a deal from the Senate. But the climactic days of this crisis could echo the resolution of the fiscal cliff in January, when Boehner put Senate legislation on the House floor that passed with Democratic votes despite the opposition from a majority of Republicans.

“That’s something the Speaker will have to decide,” second-term Rep. Morgan Griffith (R-Va.) said. “But if the Senate trying to create a time crunch, that’s a time crunch that’s damaging to the American people.

Griffith suggested the House should reject an unfavorable agreement from the Senate, even if it resulted in a debt default that severely damaged the economy.

“We have to make a decision that’s right long-term for the United States, and what may be distasteful, unpleasant and not appropriate in the short run may be something that has to be done,” he said.

Griffith, a former majority leader of the Virginia House of Delegates, cited as an example the American Revolution.

“I will remind you that this group of renegades that decided that they wanted to break from the crown in 1776 did great damage to the economy of the colonies,” Griffith said. “They created the greatest nation and the best form of government, but they did damage to the economy in the short run.”

Rather than responding to this nonsense in detail, I’ll simply point readers to my most recent post on the matter at hand. To make it short, the idea that we can breach the debt ceiling and avoid economic troubles is quite simply idiotic. Even if we were able to avoid defaulting on bond obligations, and there are both fiscal and technological reasons why this may not be possible if the crisis continues for more than just a very short period of time, there would still be economic consequences from such an event. Someone who is owed money by the government will not be paid. If it’s not bondholders, it could be  Social Security recipients, doctors under Medicare, employees, contractors, people receiving student aid, or any of the other number of people that get checks from the Federal Government. That failure to pay will have real economic consequences both for the people who are owed money and the people further down the line whom they interact with on the regular basis. A prolonged failure to pay such people will reverberate throughout the economy. Additionally, even if we’re able to pay bondholders, the uncertainty created by the possibility that we might not be able to do so if the crisis continues would clearly have an impact on financial markets, and mostly likely the 401k and IRA accounts of millions of Americans trying to save for retirement.

Griffith’s statements are particularly infuriating, though, because he goes a step further. Not only does he believe that there’ s no real danger from breaching the debt ceiling, he’s arguing that there’s no real need to worry about actually defaulting on his bonds. The fact that he’s tying this into rhetoric about the Revolutionary War makes his comments even more egregious. There is no significant comparison between that event and what he’s advocating. In the first case, the Colonies went into debt to finance a war for Independence. That strikes me as a fairly good reason to go into debt, win or lose. In this case, we’d be wrecking our international credit rating and fiscal stability for no good reason other than trying to prove some idiotic Tea Party premise correct. Not only is a statement like this economically ignorant, it’s entirely irresponsible. And yet the audience that Griffith is really talking to, the Tea Party, will likely cheer disastrous ideas like this on, and cheer them on quite loudly.

FILED UNDER: Congress, Deficit and Debt, Economics and Business, US Politics,
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010 and contributed a staggering 16,483 posts before his retirement in January 2020.

Comments

  1. superdestroyer says:

    Probably the only way for a conservative party to survive in the U.S. is for the Democrats to raise taxes so that the feds do not needs to borrow money. Since the budget deficits the last few years has been around $1 trillion dollars, it would make sense to double income taxes to try to close the deficit.

    When people start having to pay full price for the government that they want, I suspect that a lot more people will move to being fiscal conservatives and there will be a few politicians who decide to focus of the cost-benefit analysis for every government programs.

    What the debt kamikazes should do is propose a massive new tax increase and let the House vote on it without following the Hastert rule. It would probably pass with 100% Democratic Party support and a few Republicans who want bigger government. Maybe the Republicans should propose this as a compromise with the Democrats as a way to deal with the debt ceiling. If taxes are high enough, there is not reason to worry about the debt ceiling.

  2. OzarkHillbilly says:

    Somebody needs to ask every one of these idiots whether or not defaulting on their home mortgages would be a big deal or not.

  3. superdestroyer says:

    @OzarkHillbilly:

    I think the argument is that just because the U.S. cannot borrow more money does not mean that it will stop paying its current creditors. The real question is what will be cut if the government is forced to operate out of cash flow instead of borrowing.

    If you want to make a comparision to your mortgage, how long would could anyone go it they kept getting cash advances on their credit cards to pay their mortgage. The national debt (I assume publically held) is over $16 trillion. How high does it need to go before we get serious about not sticking the next generation with huge interest payments.

  4. Jim Henley says:

    Doug, your heart’s in the right place here, but I think you’re misreading Griffith. He plainly accepts that breaching the debt ceiling will cause economic damage. He’s saying that that “short-run” damage is worth it for the long-run benefits he imagines will stem from a default. That’s his parallel with the American Revolution: The Founders caused “economic damage” to the colonies for a few years by going to war, but it was all worth it.

    This is completely insane. But it’s a different sort of insanity than the Repubs who’ve been claiming breaching the debt ceiling wouldn’t have much effect even in the short term.

  5. Ron Beasley says:

    I think McConnell can probably get something through the Senate. But this is just another indication that there are too many wacho birds in the House to pass anything without Democratic votes. Kamikazi is an apt description but I think suicide bomber is better in these times.

  6. Jim,

    I agree that there’s a difference between what Griffith said and what people like Ted Yoho have said. The second group is denying that any danger exists, Griffith is aware of the danger and wants the country to feel the pain anyway.

  7. Jim Henley says:

    @superdestroyer:

    How high does it need to go before we get serious about not sticking the next generation with huge interest payments.

    This is muddled thinking. The vast majority of the US public debt is held by Americans – the idea that the Chinese or Saudis or whoever own it all is a misconception. So the next generation of Americans will be paying the interest, but the next generation of Americans will be receiving the interest too.

    What the debt kamikazes should do is propose a massive new tax increase and let the House vote on it without following the Hastert rule. It would probably pass with 100% Democratic Party support and a few Republicans who want bigger government.

    I think you don’t understand what Democrats really want or the fact that the budget doesn’t need to be balanced to get the debt situation under control, where “under control” means stabilized vs. GDP in the long run.

  8. Jim Henley says:

    @Doug Mataconis: Cool. I just don’t think the post itself reads that way.

    I do know that at various points in my libertarian days, I had fantasies of default doing long-run good for the country by forcing drastic constraints in government spending. Not without, you know, some interim difficulty. But on the other side of the debt apocalypse was the minarchist state of my daydreams, by necessity. Or so I thought.

  9. Jim Henley says:

    Meta-comment: I actually think people shouldn’t downvote Superdestroyer’s non-racist posts. Let’s reward non-bad behavior.

  10. superdestroyer says:

    @Jim Henley:

    Since the next generation will own little of the debt, they will receive little of the interest. Just like social security is a poorer deal for each generation, deficit spending is also a poorer deal for each generation.

    When you think of deficit spending as just future taxes that have been postponed, the next generation is getting a raw deal.

  11. superdestroyer says:

    @Jim Henley:

    I suspect the automatic downvotes are just practicing for the coming one party state where everyone who is interested in a career in politics or government will have to mouth the proper words or just give up the idea of having a career. Thus, progressives cannot tolerate any descent or alternative ideas.

  12. @Jim Henley:

    I consider myself a libertarian, but the idea of deliberately running the economy into the ground strikes me as utter insanity

  13. al-Ameda says:

    These folks are as hard to keep down as cockroaches.

    People like Griffith are simply saying that medieval medicine (bloodletting and leeches) is what’s needed to cure our economy. Yes there would be pain but …

    These know-nothings see the current House Republican efforts as a big opportunity, the first steps, toward rolling back the “nanny state” – Social Security, Medicare, Obamacare. They want 1929 again – they want to cause another downturn in order to cure us of socialism.

  14. Jim Henley says:

    @superdestroyer: Dude. Do you think bondholders are immortal? Today, bonds are held by Generation A. Generation A is going to die. Inevitably the bonds will pass to Generation B. In precise parallel, today Generation A pays the interest on bonds. We’ve already covered Generation A’s certain fate. At a certain point, Generation B will both own today’s bonds (or those bonds successors via rollover) and have to pay the interest on them. There are no ageless vampire-lord bondholders! It only seems that way sometimes.

  15. Jim Henley says:

    @superdestroyer:

    I suspect the automatic downvotes are just practicing for the coming one party state where everyone who is interested in a career in politics or government will have to mouth the proper words or just give up the idea of having a career. Thus, progressives cannot tolerate any descent or alternative ideas.

    Nah. I’ve gotten bogus downvotes myself, and I am practically Emma Goldman. There’s also the local phenomenon that, somehow somewhen, the comments section of this nominally conservative blog got captured by liberals. On a site where right-wing commenters maintain hegemony things would go quite otherwise.

  16. al-Ameda says:

    @superdestroyer:

    I suspect the automatic downvotes are just practicing for the coming one party state where everyone who is interested in a career in politics or government will have to mouth the proper words or just give up the idea of having a career. Thus, progressives cannot tolerate any descent or alternative ideas.

    So, mere disagreement with your opinions equals “cannot tolerate any descent or alternative ideas”? Really?

  17. Woody says:

    Liked a lot of the post and the commentary.

    I guess I’ll just add that I’ve lost what little respect (translation: no respect) for the SDS, the Weathermen, the Chicago Seven et al.

    Had they only cut their hair, wore dull suits, and compared themselves to Jefferson/Lincoln/Jesus every fourth sentence, they could have nearly brought down the US Government in the ’60s.

    Libruls r pikers. Man.

  18. OzarkHillbilly says:

    @superdestroyer: So… I can take that as a “YES!!! I am willing to default on my home morgage!”

    No? Than you don’t have the courage of your non-convictions.

  19. Tony W says:

    @superdestroyer: Sure, except this is not a debate about deficit spending. This is a debate about paying the bills we already authorized. If you want to talk about deficit spending, there is an established budget process where the hard decisions can be made.

    Unfortunately, nobody wants to go there at the moment – instead pretending the debt ceiling is relevant to the amount we’re spending. Can’t blame them – imagine Republicans actually having to vote against aid to the poor, veterans’ benefits, meals-on-wheels, etc.

    It’s just like Mr. Bush spending deficit money to fund wars, and saying that he was not raising taxes. I imagine you bought that argument at the time.

  20. Steve V says:

    @Jim Henley: I think the downvotes might be because people are tired of superdestroyer’s schtick about the country becoming a one-party state, which s/he makes a point of throwing into virtually every comment thread on the site.

  21. superdestroyer says:

    @Steve V:

    If the U.S. were not so obviously on a path to a one party state, I would not point it out so much. I just find it odd that progressives write about politics as if all voters are college educated whites.

    I always thought that the U.S. should get to a one party state sometime around 2030 based just on demographics. I thought the time table was moved up by the incomptence of the GW Bush Administration. How the failures of the Congressional Republcians is moving the time table up again. Based upon what is happening in politics now I doubt if the MSM will waste the time to cover the pointless Republicans primaries in 2016 since no Republican will stand a chance of winning.

    The real question for the future is what happens to policy and governance as the Democratic Party gains power and there is no restraint on what they can do. I find it odd how progressives do not want to talk about the future other than it will be a land of milk and honey. How that will occur is never discussed.

    The first question to discuss as the U.S. becomes a one party state is whether the Democrats will raise taxes enough to fund all of the entitlement programs that they desire or will the massive annual budget deficits will continue into the foreseeable future. I suspect that the deficit spending will continue for a very long time because Democrats like getting their government at a huge discount.

  22. Jim Henley says:

    I suspect that the deficit spending will continue for a very long time because Democrats like getting their government at a huge discount.

    Earlier you said that if House Repubs proposed a bill to reopen the government funded by a massive tax increase 100% of House Dems would vote for it. PLEASE MAKE UP YOUR MIND.

  23. john personna says:

    @Jim Henley:

    Can you downvote him if you think the claim that the US can stop using new credit [and still meet debt payment] is obviously and factually false?

    Experts tell us it is impossible two ways. There is too great a mixture of bond durations in place, and there are absolutely no systems (human or automated) capable of managing such a thing. It is doubly impossible.

  24. Ron Beasley says:

    @Doug Mataconis: This reassures me Doug, although we may disagree on many things I now know you are at least sane.

  25. The funny thing is that Morgan Griffith was always pretty establishment when he was in the Virginia House of Delegates.

    I think this is a perfect example of Representatives that know what they’re doing is batshit insane but they’re so scared that their insane base will primary them if they don’t do it.

    For another Virginia example, see Rob Wittman. The folks in the rural part of his district are so batshit crazy (they’re the ones that almost put Catherine “ballot box or bullet box” Crabill into the state’s House of Delegates) that they would primary him without a second thought, but he also has a lot of government workers (and noncrazies) in Spotsylvania, Stafford, and Prince William counties that will kill him if the shutdown keeps going. Right now, he’s still pandering to the crazies.

  26. superdestroyer says:

    @Jim Henley:

    IF the Democrats have to compromise with the Republicans, the Democrats will vote for a huge tax increase. Rep. Pelosi has openly talked about wanting to raise taxes and many Democrats would quickly vote for tax hikes.

    However, if there are no Republicans to blame for the tax increase, I suspect that no only would the Democrats not be so quick to raise taxes but would very quick to raise spending on entitlements to pay off all of the blocks inside the Democratic Party.

    Does anyone really doubt that if the Democratic Party faces no real opposition that they would try for a guaranteed incomes, open borders, and much higher public sector employment

  27. superdestroyer says:

    @john personna:

    The FY13 federal budget paid interest of about $240 billion. The feds should be able to easily meet those payments in FY14 without new borrowing. The FY14 budget deficit should be around $500 billion. Are you really going to argue that is the federal government was forced into it that it could not cut that amount from a $3.6 trillion dollar budget.

  28. john personna says:

    @superdestroyer:

    I don’t have to “argue,” I can trust experts on the maturity of the bonds and the systems in place.

    It is crazy talk to think the US can turn on a dime to a new “spend cash available” system.

    And stubborn crazy talk gets downvotes.

  29. john personna says:

    (Note also the lumpiness of the income stream.)

  30. Phillip says:
  31. steve s says:

    Superdestroyer gets down votes because superdestroyer says stupid things. Not that hard to understand.

  32. C. Clavin says:

    You don’t have to be stupid to be a Republican.
    But if you’re stupid chances are that you’re a Republican.

  33. superdestroyer says:

    Phillip,

    The problem with Mr. Echevarria is that he is really a Democrat. I doubt if someone who was donating to the political campaign of Chris Dodd is really a Repubicans http://www.campaignmoney.com/political/contributions/joe-echevarria.asp?cycle=08

    Despite all of the talk about Wall Street being Repulblicans, it is one of the most liberal areas in the U.S. because the people who work on Wall Street are wealthy enough and clever enough to avoid all of the downside of the nanny state while getting rich selling things to the Nanny State.

    There was no need for Occupy Wall Street because the Congressional Black Caucus, the Congressional Hispanic Caucus, and the Congressional Progressive Caucus are already to the left of most of Occupy Wall Street. All the OWS wanted was the government to give them a job and pay off their student loans. The left of the Democratic Party is already in control and is only limited by whatever remains of the Republican Party.

    Once again, the real question for the future of politics is what is going to happen to politics and governance when the Republican Party fades away and there is no restraint on the Democrats. Whatever someone on Wall Street says is meaningless to that question because they generally cannot image that the U.S. is going to become a one party state due to demographics, let alone the collapse of the Republican Party.

  34. Jim Henley says:

    @superdestroyer: Your argument makes sense if any tax increase at all is deemed a “huge tax increase.” Otherwise, not.

    Do note that I, personally, would support “guaranteed incomes, [more] open borders, and much higher public sector employment.” In a heartbeat. Also single-payer healthcare. I’m tempted to explicitly call out higher rather than lower social security as another thing I support, but that’s probably covered by a guaranteed income; so instead, let me add lowering, not raising, the retirement age. (The first thing we should have done in 2009 is lower the retirement age to 62, raising it one year every year thereafter until it was at 65.) But as others have pointed out, my sort don’t control the real, existing Democratic Party.

  35. Tyrell says:

    One solution would be to form a committee of citizens (no politicians) to look at the various issues and come up with a compromise that everyone can work with and makes sense. That’s how things in the real world are done. You take a problem, put your heads together, and solve it. None of this grandstanding, posturing, playing the media, or soap boxing. Put them in a room with lots of good food and you will have a solution in three hours. One stipulation: Congress and the president must agree ahead to approve it, no bugging out.
    “I ain’t seen the sunshine in I don’t know when..I’m stuck in Folsom Prison and time keeps dragging’ on” (“Folsom Prison”, Cash)

  36. Jim Henley says:

    @Tyrell: This falls foul of deep, deep problems:

    1. Polls show the citizenry is genuinely, sharply polarized politically. The polarization of Congress reflects the public (modulo district-drawing shenanigans).
    2. You are talking about creating a new institution, your “committee of citizens.” Someone has to do that – set up the rules by which the members of this committee are chosen; how their work proceeds; how the committee ratifies a decision (majority vote? super-majority vote? consensus? force-ranking and dot-voting?); how long it has to work; what its portfolio comprises; just to name a few. Creating new, functional institutions from scratch is not simple. Among other things, who will do that? Answer: members of the existing institutions that are failing us.
    3. It’s actually impossible for the decisions of this Nonce Commission to bind future or even present Congresses, unless you make constitutional changes. That means a constitutional convention – a great big doorway to who-knows-where? – or the amendment process. There hasn’t been a successful amendment to the constitution in 21 years, and it was narrow and technical. There hadn’t been another amendment for 21 years prior to that (the more significant 26th that lowered the voting age). Maybe you think that means we’re due! 🙂 But the aforementioned polarization and fact that the amendment process runs through the existing failed institutions militate against you getting what you want.
    4. In the real world we don’t actually form committees of random dudes and dudettes to solve problems. Because random dudes and dudettes aren’t necessarily qualified, and committees usually suck.

  37. Grumpy Realist says:

    @Tyrell: But these people ARE solving the problem: the problem of getting primaried on the right. The fact that they will destroy the credit of the US while doing so is just a side effect.

    After all, these are the same people who refuse to believe in evolution or global climate change. Why should they believe anything that a bunch of experts called economists tell them?

    That’s the problem with Tinker-Bell physics. At some point you discover that Mother Nature doesn’t give a crap if you think your Magic Pixie Dust gives you the opportunity to fly: you jump off the Empire State Building, you go SPLAT.

  38. Jim Henley says:

    @superdestroyer:

    If the U.S. were not so obviously on a path to a one party state, I would not point it out so much.

    You’re conflating a couple of concepts here:

    1. The demographic doom hanging over a specific white, nationalist reactionary party dedicated a a particular configuration of “small government” convenient to locking in the gains of the country’s legacy overclass. This is a real thing: long term, the GOP in its present form can’t survive as a democratic institution. There’s a small but IMHO non-zero chance it tries to turn all the Dominionists in the officer corps and little corporals in local law enforcement to non-democratic effect before that happens. But as a contender in free and fair national elections, yeah: doomed.

    2. The end of partisan politics and “the two-party system” as such. There’s just no reason to think the forces in the American setup that strongly favor the flourishing of two competing political parties are going to stop obtaining. European countries where “conservatism” is to the left of contemporary American liberalism still find things to have politics about, and political parties for.

    I just find it odd that progressives write about politics as if all voters are college educated whites.

    Don’t forget: unlike, oh, Texas state legislators, we expect nonwhites to vote too! 😉

  39. superdestroyer says:

    @Jim Henley:

    But the question is what are you willing to give up to get that much bigger safety net. Progressives always talk about a massive safety net is something that is free.

    Do you really want to become like Western Europe where a large portion of the population has given up having children or the chance for grandchildren to pay for a nanny state that is still not sustainable in the long run.
    Unless Americans are willing to make real sacrifices, they are not willing to support a massive nanny state.

  40. Jim Henley says:

    @superdestroyer: With higher taxes and much lower military spending and a healthcare system with the efficiency of, oh, France, we can easily afford a robust, Scandinavian-level safety net. I don’t buy the “post-welfare-state ergo propter-low birthrates” causality. But were it true, immigration provides the population base to keep the welfare state going.

    Do you really want to become like Western Europe

    I want to become like Scandinavia, actually, but with much better weather.

  41. stonetools says:

    This Kamikaze dive has been the result of forty years of non-stop right wing propaganda from “think tanks” like the Hoover Institution, the Cato Institute, the Heritage Foundation, the AEI, and right wing media like Reason.org. All of these bodies repeat the Reagan line “Government is the problem”. According to all these bodies, government consists completely of time-serving bureaucrats issuing business-killing regulations and taking our hard-earned money and giving it to “those people.” The Tea Party people we sent to Congress actually believe that nonsense, which is why they were hot to shut down the government. They seem surprised to find out that the government actually does things like caring for veterans, controlling contagious diseases, running national parks, etc.
    Unfortunately, these Tea Party geniuses believe that the default will be no big deal, since the Heritage Foundation told them this too. Its why I’m skeptical we’ll avoid default. These people truly believe the bullsh!t fed to them by the right wing propaganda machine these past forty years. The chickens are coming home to roost

  42. fred says:

    I fail to understand why Gov Christie is a shoe in for re-election in NJ. The DNC should be doing everything to support the DEM candidate and tell NJians of the awful job Christiie has done in the state. Yes, he was governor when natural disasters hit and takes credit for doing what? If
    Snooky was governor she would have done the same job…asking for and getting help from the feds and Pres Obama. As a blue state and seeing how the GOP are acting in congress and senate right how, voters should turn out in their millions to elect a DEM governor in NJ. Dont concede to the GOP and terroristic TP NJ voters. Go out and vote in the democratic candidate as your next governor.

  43. wr says:

    @superdestroyer: “If the U.S. were not so obviously on a path to a one party state, I would not point it out so much”

    If it was so obvious, then you wouldn’t need to keep saying it — everyone else would accept it as fact.

    I think even you understand it’s not obvious to anyone but you. It’s just that you think it’s because you’re smarter than everyone else, and everyone else thinks it’s because you are either seriously disturbed mentally or just not very smart.

  44. superdestroyer says:

    @Jim Henley:

    Western Europe proves that when taxes go high enough that the choice is between living a comfortable lifestyle or having children. Those Scandinavian countries along with countries like Germany show that the birthrate keeps going lower.

    Also, if taxes go high enough, all of the high end business, the artisian business, the luxury businesses will shrink. Look back at what NYC looked like in the 1970’s and you see what happens when taxes go very high. What is amazing is how disconnected progressives are to not understand the state of the economy and the level of taxation.

    Image what the future looks like with fewer healthcare, much fewer defense, fewer manufacturing jobs, and fewer energy jobs. Do progressives really believe that everyone can be a freelance writer? How low can the workforce participation rate go. How much taxes are people going to be willing to pay for the children of recent immigrant who refuse to learn English and who live in their own enclaves?

  45. superdestroyer says:

    @wr:

    How many links do I have to provide to show that many people are beginning to realize that the U.S. in on the path to being a one party state. There are real political scientists, wonks, and writers who have begun to realize that a conservative party cannot exist in a country where most children are born to unwed mothers, most people do not pay income taxes, and most people are dependent on the government.

    As politics becomes about entitlements, one party is more than enough to run the government. A few Republicans realize that every dollar of deficit spending benefits the Democratic Party. A few Republicans realize that every entitlement program just creates more automatic Democratic Party voter. What is amazing is how the establishment Republicans refuse to do anythng about creating more automatic Democratic Party voters and that those establishment Republicans seem to be adjusting their career goals to just live off of the scraps that the Democrats are willing to throw them.

  46. Jim Henley says:

    @superdestroyer:

    Western Europe proves that when taxes go high enough that the choice is between living a comfortable lifestyle or having children.

    Nope. It proves nothing of the sort. Also, all the other things you said were wrong.