October 8, 2013

Fox News has been promoting the idea that if America fails to raise the debt limit, President Obama can just pick and choose who to pay with the revenues we have -- so actually, he's the cause of any default. That's a lot of nonsense of course, but Fox put out one of their favorite conservative economy hacks, Peter Morici to prove it to the Fox loyalists.

{Video clip} Lew: We've never gotten to the point where the US has operated without the ability to borrow, it's very dangerous. The reality is there are no good choices if we run out of borrowing capacity and we run out of cash.

Camerota: Hi Peter, Just yesterday, Secretary Lew called the possibility of, hitting the debt ceiling would be catastrophic, but other economists have said that that's too strong, that we could actually hit it and life would still go on and we could still service our debt, which side are you on?

(The "Megyn cutout" of the day was Alisyn Camerota and the show is America's News Headquarters, which looks like another hour of America's Newsroom in the time slot before. Gretchen is the new "official" Megyn cutout since she took the second hour of her time slot over for good.---Heather) See how Fox News measures defaulting on the national debt and frames the question? Life would still go on, has now become the Republican benchmark for when they try to destroy the government. If we all don't die from heart attacks in our sleep then everything is just fine. And she knows Morici is a conservative shill so that's also a phony question.

Morici: We certainly can service our debt, it's important for the American people to understand that the government will continue to collect taxes out of their paychecks. 250 billion dollars a month. The interest on the debt is less than 25 billion dollars a month, less than ten cents on the dollar. This comes down to who gets paid. Which bills get paid get put off a few days whether he stiffs our banks so to speak, whether he pays the interest on the debt. He's got that option. He's refused to address it.

If we default, it is the will of the president.

Yes, Obama shut down the government out of contempt of conservatism. Oh, wait. No he didn't. Conservative economists like Morici, should understand what will happen to the global economy if these jackasses actually refuse to raise the debt limit because we help stabilize the entire global economy, but he's acting like another deadender. A tea party fanatic who's mission in life is to destroy the federal government except when they need it for their own personal good. Listen to his lying liars defense of tea party Republicans, who have angered many of their republican colleagues over this shut down.

Morici: You can't really blame them after the way the president has negotiated in past situations. Consider the fiscal cliff, the tax increases. You know Mr. Boehner went in and said we'd like some spending cuts to go along with 200 billion dollars a year of additional taxes and he says you get none. They've learned that unless you have a situation like this, they can't get this president to move.

It was the tea party that scrapped a Grand Bargain with President Obama during the last debt ceiling negotiations that would have been horrible for the middle class, but Obama bent over backwards during that negotiation and Speaker Boehner couldn't get anything done on his side so the used the sequester to broker a last minute deal to save face. How much of a hack is Peter Morici? Here's his latest piece on the Fox news website. House Republicans may be the country’s last hope to avoid financial ruin Can he really believe that? As Duncan always says, conservatives don't care about the debt at all and never did.

Chuck Toddler just tweeted something to the effect that McConnell tried to tell the teabaggers that the spending levels Dems agreed to should be seen as a win and the teabaggers didn't see it that way. Of course not. They don't care about "spending levels." Nor do they care about the deficit. They care about the things listed below, and of course sticking it to that man in the White House who doesn't belong there.

Brad Plummer has been writing some great pieces on this: If we hit the debt ceiling, can Obama choose which bills to pay?

Both the Treasury Department andfinancial analysts agree this could lead to Armageddon. Large swaths of the global financial system are structured around the idea that U.S. debt is the safest in the world. If that assumption was ever called into question, chaos would ensue.

Some Republicans, however, are now downplaying this possibility: If the United States does breach its debt ceiling, they'll note, why can't President Obama just pick and choose which bills to pay? Surely he could just keep paying bondholders in order to avert a financial calamity while delaying payments for everyone else, right?

"There's always revenue coming into the Treasury, certainly enough revenue to pay interest," Rep. Justin Amash (R-Mich) told National Journal.

But there are a few big problems with this "prioritization" plan: For one, it could prove extremely difficult for the Treasury Department to prioritize payments in this way and avoid default. This is murky terrain, both logistically and legally. Second, even if the Obama administration could put bondholders first, breaching the debt ceiling would still cause massive disruptions elsewhere in the U.S. economy.


The Treasury Department maintains that it has no ability to pick and choose which bills to pay if it's short of cash. According to the agency's inspector general, its computer systems are designed to "make each payment in the order it comes due." Full stop.

Under this view, if Congress fails to lift the debt ceiling, the U.S. government will only have money to cover about 65 percent of its bills. Some payments will simply fail to clear. Perhaps a payment to a defense contractor comes up short. Maybe a Social Security check bounces. Maybe an interest payment to bondholders fails.

That last possibility is the most worrisome. If the U.S. government misses a payment to bondholders, the consequences could be severe. "A default would be unprecedented and has the potential to be catastrophic," warns Treasury. "Credit markets could freeze, the value of the dollar could plummet, U.S. interest rates could skyrocket, the negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse."

Other financial analysts agree. A missed debt payment could cause the entire financial system to seize up. "Let us be perfectly clear," warns a note from RBC Capital Markets, "crossing the debt ceiling would be catastrophic."

Conservatives always complain about bureaucracy and how badly the government runs so why do they think President Obama can just pick up the phone and redirect billions of dollars in payments at the drop of a hat? Read Plummer's entire piece because he goes through the different scenarios that can happen, including if we're able to prioritize the payments.

Okay, now let's imagine the Treasury Department somehow figured out how to revamp its systems to prioritize bondholders. And they skirted all the legal questions.

Even in this scenario, a debt-ceiling breach could still cause economic havoc. Remember, once we blow past the debt ceiling, the U.S. government will only bring in enough revenue to cover about 65 percent of its expenses. The government would have to cut back on something else, whether it's Social Security or Medicare or veterans benefits or any of the millions of other payments it approves each day. More than $100 billion would get sucked out of the economy over the coming month.

These morons are willing to cause tremendous pain and chaos in America as well as the entire global markets out of hatred for Obama and then they'll whistle like nothing has happened.

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