Tiger Beat on the Potomac (thanks Charlie!) Saturday’s email thingie tells us that the Republicans have a genius plan for how to hold the gubmint hostage while at the same time not cause too much damage to the US Credit Rating. It goes something like this:
Amid the debt ceiling standoffs of 2011 and 2013, and warnings of global economic catastrophe, a novel proposal gained traction on the right: Rather than defaulting on bond obligations and sparking a broader calamity in the markets, the federal government could, once the ceiling is reached, simply pick and choose which bills to pay.
Such “debt prioritization” schemes never went anywhere. Democrats branded their proponents “default deniers” and firmly opposed their efforts. The standoffs were resolved, and the notion of favoring bondholders first was forgotten by all but a devoted band of conservative budget hawks.
Now what’s old is new again: Amid another looming debt showdown, WaPo’s Jeff Stein, Leigh Ann Caldwell and Theodoric Meyer scooped details of a brewing GOP plan to put a bill on the House floor instructing the Treasury Department to prioritize 1) debt service payments, 2) Social Security, Medicare and veterans benefits and 3) military funding absent a bipartisan agreement to raise the borrowing cap.
It sounds like check kiting to me, you know, on a national scale. The WaPo says:
In the preliminary stages of being drafted, the GOP proposal would call on the Biden administration to make only the most critical federal payments if the Treasury Department comes up against the statutory limit on what it can legally borrow. For instance, the plan is almost certain to call on the department to keep making interest payments on the debt, according to four people familiar with the internal deliberations who spoke on the condition of anonymity to describe private conversations. House Republicans’ payment prioritization plan may also stipulate that the Treasury Department should continue making payments on Social Security, Medicare and veterans benefits, as well as funding the military, two of the people said.
And we will note that first in line at the trough are their billionaire pals who own the debt. Last on the list: you, me, and your Nonna. Back to TBotP:
Prioritization is also unlikely to protect the U.S. credit rating, which saw downgrades amid the previous fiscal standoffs. Bondholders might be protected but others due federal payments might not, with WaPo noting that the proposal would force Uncle Sam “to halt payment for as much as 20 percent of money that it has already promised to spend.”
And we will add that the US Government has many moving parts. Shutting it down means things like the FAA stops flights (not that it is any different for Southwest Airlines), the ports close, the supply chain gets eff’ed-up again, and the GOP’s favorite bugbear, the Border goes completely unguarded:
The controversial proposal, which has not been finalized, “would still leave out huge swaths of critical federal expenditures on things such as Medicaid, food safety inspections, border control and air traffic control, to name just a handful of thousands of programs,” the trio note.
And something you might not realize, there is not just one federal payroll. There are hundreds (maybe thousands) as each branch of the government has their own, each department has at least one (and many have several) and sometimes one entity pays the others as they subcontract other expertise for a given project. I would guess that every day somewhere in the vast federal octopus that there are hundreds of payrolls running. It would be nearly impossible to pick and choose which ones to shut down and keep the federally mandated reports running. There are also unions involved which means that there are contractual obligations, so expect law suits with damages, too. Now, even if they could do this, imagine the cost of turning them all on again.
And penalties and interest gets added to the national debt, so it is a brilliant Republican plan as you can see.
As I said, this is like check kiting on a massive scale.