There's a Democrat in the White House and there's Republicans in charge of one-half of Congress, so those of you who survived 2011 and 2013 budget crises know what THAT means: Yet another attempt by the goddamn Republican wingnuts hoping to drown the nation in Grover Norquist's bathtub, forcing spending cuts on social aid that they themselves are too afraid to do on their own, and maybe even nuking the global economy just to blame the Democrats for their own sabotage.
So as we're facing another budget battle that could lead to a U.S. default and global economic meltdown, let Stacey Vanek Smith at NPR spell out what's at stake:
One of the outcomes that would happen if the U.S. defaulted would be a major hit to the United States' reputation internationally.
"It would be a disaster and the reputation of the government for meeting its debt obligations would be in tatters," says Darrell Duffie, professor of finance at Stanford's Graduate School of Business...
So much money that the country can right now borrow up to $31.4 trillion, a debt ceiling that will need to be raised or suspended to avoid a default.
And if the U.S. defaults, the interest rate on the country's debt would go up because the U.S. would be seen as riskier: too politically dysfunctional to get its bills paid on time...
An actual default would also deliver a massive shock to financial markets, raising the prospect of a new global financial crisis.
Investment bank UBS estimates the S&P 500 could fall by at least 20%. Bond markets would tumble, and that would send borrowing costs higher across the economy including for already-high mortgage rates.
And banks would be hit as well given that lenders are among the major investors of government debt. As a result, depositors and investors could start to worry about whether banks are on solid ground at a time when the banking sector has recently suffered through the failures of three smaller and regional lenders...
(Economics professor from University of Michigan Justin) Wolfers says if the U.S. defaults and there's no more money to spend, the government suddenly wouldn't have cash to run basic operations, things like schools and roads.
Government workers could get their pay delayed if the government runs out of cash, while businesses that have contracts with the governments might also stop getting paid for a while.
And the list of people who may not get vital government benefits is long, including most prominently veterans who rely on these payments as a lifeline as well as retirees who rely on Social Security payments.
All those missed payments would have a direct impact on the economy...
The shock to financial markets and the impact across the board would be blows of such magnitude that many experts believe would lead to a U.S. recession: unemployment could spike, lending could freeze up and the economy could shrink...
All of these things are wonderful in the eyes of the Far Right, because they can use all of that to blame Biden and the Democrats even though THEY'RE the ones insisting the federal government defaults on our national debt. They've done this shit before, and while they took some of the blame the Republicans didn't lose control of Congress at the ballot boxes in 2012 and 2014 while the Democrats were hit with "both sides at fault" blame by a short-term-memory mainstream media.
The big reason for Republicans holding the debt ceiling vote hostage is that it brought Joe Biden - who lived through these fights ten years ago and promised not to make the same mistakes - to the negotiating table over the Republicans' budget-slashing agenda.
Try to remember, kids: Between 2017 and 2018 the Republicans had FULL control of the budget process, with both wings of Congress AND donald trump in the White House eager to sign off on anything they sent him. The Republicans succeeded in passing a massive tax cut bonanza for the rich, but refused to commit any major spending cuts to balance their budgets. Even they knew full well any slashing of the social safety net like Social Security, Medicare, Food Stamps, and any other public aid would have been political suicide for their party.
Which is why, whenever the Democrats are in partial or complete control of Congress and the White House, the Republicans will do everything they can to force the Democrats to do their dirty work for them and get the Dems held accountable if any social aid does get cut.
But this time around this game of fiscal brinkmanship is a little different, and more terrifying.
There's still a faction of the House Republicans - the Freedom Caucus - that wants more than just the massive spending cuts that the rest of the Republicans would be happy with: The Freedom Caucus doesn't want the debt ceiling to go up under any circumstance. These wingnuts want the federal government to default no matter what.
It's more than just crashing the national and global economy just to make Biden look bad for 2024: These wingnuts are convinced it will bankrupt and flush out an entire federal bureaucracy they fear is too far liberal/Woke for them to ever control. The Freedom Caucus honestly wants to burn the whole government down so that they can take over and rebuild their fantasy utopia on the ashes.
In the previous budget showdowns, these Freedom Caucus members were too few to hold up any compromise deals that were eventually hammered out in 2011 and 2013. THIS TIME, the caucus has the advantage of a tiny Republican majority in the House. Speaker McCarthy has basically a slim five-vote advantage over the Democrats, and all it can take is five angry wingnuts from his own party to nuke every deal and bring on that default.
Making it worse is that McCarthy, in order to gain that speakership, granted his party a "No Confidence" veto power where a single congresscritter could call for his removal. Any attempt to get centrist Democrats to cross the aisle and help him with a budget deal would trigger that revolt.
There's a less-likely scenario where the other saner Republican factions - the ones who will deal for spending cuts but won't cross the line of driving the entire planet over the cliffs - could threaten their own "No Confidence" on McCarthy to force him to ignore the Freedom Caucus, but that would lead to open schism and the Republicans still have enough intra-party discipline not to fall apart like that. Yet.
We are looking at three scenarios at this point:
1) President Biden refuses to play the Freedom Caucus' game of default, and calls on his authority under the 14th Amendment to maintain the nation's full faith and credit: Or even more fun, mint the trillion-dollar coin. That could lead to the House Republicans pushing for impeachment - which will fail - and more likely force a legal court battle that would go to an ultra-conservative Supreme Court that may side with the wingnuts to re-interpret the Constitution to allow economic havoc.
2) Nothing gets resolved, and the debt ceiling triggers a default. The Freedom Caucus gets exactly what they want. The global economy goes into a tailspin and Gods help us if the Republicans use this to regain full control in 2024. More likely is that even the deep-pocket billionaires supporting the GOP are hit hard by the recession to where they hold back on funding, and enough voters get angry enough at the real culprits to instead re-elect Biden and throw enough Republicans out of the House to reflip it back to Democrats.
3) The Freedom Caucus refuses to budge on their stance even with major concessions from Biden on spending cuts, driving enough Republicans in unsafe congressional districts to quit the party and flip the House now to where the Freedom Caucus lose their power. Granted, this is pure wish-fulfillment on my part, but given the hard-line position of that caucus there doesn't seem to be any other sane option left to the nation.
By most reports, we're looking at the debt ceiling to kick in during the first weeks of June.
By all evidence, the Freedom Caucus - as an act of sedition - is more than happy to let our nation fail.
By all rights, saner heads should prevail and kick those self-serving destructionists out of power.
