Friday, January 04, 2013

Will The GOP Threaten a Partial Government Shutdown?

The GOP establishment, as noted in a prior post today, seems to have realized that it needs to retake control of the party primary process to lessen the odds of lunatics and anarchists being elected to Congress.  However, that does nothing to rein in those lunatics, rabid dogs and near anarchists Republicans already in Congress, particularly in the House of Representatives who seem hell bent to destroy the nation's economy - along with the finances of countless American families - in their quest to cut government programs and federal spending on programs the Christofascists and Tea Party loons dislike.  The country has made it past the "fiscal cliff" crisis, but now there is the upcoming debt ceiling crisis where some wonder how much damage the Congressional Republicans will do in their quest to pander to extremists.   A piece in Huffington Post looks at this question and speculates on what may be upcoming.  Here are excerpts:

The just-completed deal to resolve the so-called fiscal cliff has created an even greater cliff down the road. By the end of February, lawmakers will have to grapple with $1 trillion in sequestration cuts that are scheduled to take effect and the need for a debt limit increase. Shortly thereafter, they will have to deal with the end of a continuing resolution to keep the government funded

Any one of these issues on its own would be difficult to resolve. Taken together, they could produce complete gridlock, which itself would have deep economic consequences.

President Barack Obama has pledged that he won't negotiate over the debt ceiling as a matter of principle. But Republicans are still insisting that they will extract as many concessions from the talks as they can.

Sen. Pat Toomey (R-Pa.) said on MSNBC's "Morning Joe" this week, "we Republicans need to be willing to tolerate a temporary, partial government shutdown" in order to achieve spending cuts and entitlement reforms.

On Friday morning, meanwhile, House Speaker John Boehner (R-Ohio) told members that he was prepared to use the debt ceiling fight as leverage to get spending cuts.

A Republican Senate aide added on: "We all know this deadline is coming. In regards to the CR [U. S. government credit rating] vs the debt ceiling, a downgrade will likely occur if spending is not cut, not if Congress were to refuse to debt ceiling temporarily."

But there would, indeed, be different consequences depending on which event is used to extract spending cuts. If, for example, Congress passes a debt limit increase but fails to pass a continuing resolution, the government can continue to borrow funds to pay its existing bills. But it would cease to operate as normal. As the Congressional Budget Office noted in a 1995 report:
Failing to raise the debt ceiling would not bring the government to a screeching halt the way that not passing appropriations bills would. Employees would not be sent home, and checks would continue to be issued. If the Treasury was low on cash, however, there could be delays in honoring checks and disruptions in the normal flow of government services.
On the other hand, if Congress were to pass a continuing resolution but not raise the debt ceiling, the government would be operating on dwindling funds. Over time, the Treasury would fail to meet its obligations on salaries and wages, retirement funds and social security benefits.

And then there would be the macro and global impact. As a 1979 Government Accountability Office report noted:
At a minimum, however, the government could be subject to additional claims for interest on unredeemed matured debt and to claims for damages resulting from failure to make payments. But even beyond that, the full faith and credit of the U.S. government would be threatened. Domestic money markets, in which government securities play a major role, could be affected substantially.
More recently, JP Morgan's managing director outlined the consequences in a letter to the Treasury Department. Among the impacts projected were the following:
  • A rise in Treasury's long-term funding costs;
  • A contraction of credit;
  • A reduction in the purchase of Treasuries by foreign investors on a permanent basis or even sell off exiting holdings;
  • A downgrading of the U.S. sovereign credit rating;
  • A possible run on money market funds;
  • The destruction of market confidence.
Every American needs to be concerned about what the GOP extremists may do - and needs to understand that we are no longer dealing with rational individuals when it comes to the Tea Party members of Congress.  These individuals live in some alternate universe.

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