One Solution to the Deficit Problem: Default
NYT decided to look at the numbers that make up a "Republican budget plan," whatever you'd like to think that is, in its opinion section:
Here are two numbers to keep in mind when thinking about the House Republicans’ budget plan: They want to cut spending on government programs over the next decade by $4.3 trillion. And they want to cut tax revenues over the same period by $4.2 trillion.Or there is Budget fights are a lose-lose proposition from Steven Pearlstein in the Washington Post if that's more your flavor:
Government spending needs to be brought under control. But slashing vital services just to pay for more tax cuts is bad public policy and bad economics.
It won’t fix the deficit, no matter what the Republicans claim.
We’ve seen this play before. President Ronald Reagan promised that tax cuts would spur more economic growth and pay for themselves. During his tenure, the deficit hit what was then a peacetime high of 6 percent of gross domestic product, and he eventually decided that he had no other alternative but to raise taxes to try to close the gap.
It all began in December with the bipartisan deal on extending the George W. Bush tax cuts, followed by a series of continuing resolutions setting spending for the fiscal year that is already half over. The latest came Friday night, just minutes before a looming government shutdown. But even before the details of that compromise were released, the the brinkmanship began over the next crisis, a threatened default by the U.S. government sometime in early July. Republicans now threaten that they won’t authorize an increase in the debt ceiling unless it includes promises of even deeper spending cuts next year and beyond.And what would be so bad about defaulting? Who is the largest creditor of the United States? Here's a big fucking hint, I hope some of my favorite sleazy Congressmen are reading this as we speak so they get this: we pay a fuckload of interest on the "money" we have to borrow from the Fed, including our very own "money" (if you can call pieces of paper with their name on it money) which they don't even print and yet somehow we pay them to be able to use their branded cash. And they're fucking us on the deal. Actively. As in this very second. And repeatedly.
However disruptive a government shutdown might have been, it would be a mild tremor compared with the global financial tsunami that would ensue if the world’s biggest and most trusted borrower were unable to repay its debts when they come due. Among the many disastrous consequences would be a big spike in U.S. government borrowing costs, which when you’re carrying $14 trillion in debt has pretty dire implications for the deficit that Republicans say they are trying to reduce. Every one percentage point increase in interest rates would add $140 billion to interest payments every year, more than offsetting the beneficial effect of all those spending cuts that the Republicans have worked so hard to achieve.
All under the guise of helping.
So why not just default on their asses? We could fuck them back since a lot of what they are holding is Treasurys - everyone knows those are worthless if we can't sell more to the Fed so we can keep paying our interest on them. It's almost too simple, really, no need to make this complicated. It would immediately eliminate all unnecessary government programs, no need to keep bitching back and forth about what we should cut and how until Congress gets another debt ceiling increase. Why not just make it permanently infinity + a bazillion? There's no getting out of payday loans if you keep taking out new ones to pay the old ones.
Here's the extra-genius part: the Fed is fucked anyway, regardless of whether we keep making timely interest payments or not.
News flash: unemployed people don't demand very much money. Employed people do. Employed people also cost employers money, which causes additional money demand. What do you think happens to this very simple formula when employees cost even more money and more taxes are demanded of those employees? The Fed knows it can't give the government a two-handed hand job through buying up Treasurys and feeding in all this money to employed people so the government can swoop in and take large amounts of it. The Fed can't afford to manufacture and distribute that much street money without unleashing rampant inflation. They're stupid but they're not that stupid.
Meanwhile, let's keep thinking the decisions in Washington are actually made on the Hill and not nearby in a more secluded part of town.