House Republicans are pushing the
“Default Prevention Act“, which of course does not prevent default but actually prioritizes who gets paid and who does not.
Or, as some experts put it,
“default by another name”.
That’s right, Republicans are pushing for default, but only for some
people. Republicans are using this misnamed bill to direct the Treasury
Department to prioritize payments.
Guess who is at risk of not getting paid? Come on. You know the answer already.
That’s right. Veterans, our troops, seniors, school lunch programs… Real Americans.
Guess who gets paid? Chinese bondholders.
Here’s a breakdown of how this might play out, per the Ways and Means Democrats:
Who might not get paid under the Republican plan:
American troops in harm’s way
Retired and disabled veterans
Doctors and hospitals that treat Medicare patients
American small businesses who provided goods and services
School lunch programs
Universities doing medical research
College students who earned Pell Grants
Taxpayers due refunds from the IRS
Other Americans due payment or benefits from the federal government
Other federal trust funds holding Treasury bonds (Medicare trust funds,
FDIC, highway and airport trust funds, the Federal Housing
Administration, etc.)
Who would get paid under the Republican plan:
Treasury bond holders from China, Japan, Iran, Iraq, and the Cayman Islands Banks, mutual funds, and hedge funds
Social Security Trust Fund (Social Security would be
allowed to continue spending contributions American workers have made
to its Trust Funds)
Other “private bondholders” (insurance companies, some pension funds, individual investors)
Democrats are hesitant to make charges in absolutes,
but the fact of the matter is that any group not specifically protected
is vulnerable. Republicans could have written a bill of exclusion but
instead they wrote this bill that only specifies who will get paid. They
could ostensibly pass more legislation later, but right now, their
priority is to pay China.
Republicans are very proud of this, calling it a “long-standing”
Republican study coven (rsc) initiative. Chairwimp Bill Flores
(R-Texas) claims, “By removing the threat of default, Congress will be
able to tackle the problems at the root of Washington’s out-of-control
spending more aggressively.”
That makes no sense. It’s a lot of buzzwords tossed
together but the math doesn’t work. You control spending by not buying
things you aren’t going to pay for, not by refusing to pay your credit
card bill. What this is is another attempt to use previously agreed to
debt as a way of enacting a Republican agenda. This is at its heart, a
profoundly anti-conservative attitude. This is the attitude of frat boys
running up daddy’s credit card and then balking at working to pay any
of it off. But Republicans haven’t been fiscally conservative for a long
time now.
Of course, things don’t actually work this
way. Republicans keep trying this “prioritizing” payment as a backdoor
way to cut funding for programs they don’t agree with and to prioritize
the things they do, without having to go through messy and tough to get
elected on public debate.
The lunatic fringe wingnut think tank the American Enterprise Institute
tried to explain this to Republicans in years past when they refused to
raise the debt ceiling, which is another way of saying they refused to
pay our bills. Again. To do so, the think-tank quoted Tony
Fratto, former Treasury Department assistant secretary and senior shrub White House flunkie, “The idea that Treasury *could* prioritize
– even if desired – is fanciful & misunderstands federal financing
requirements.”
Oh. So this is all about defaulting.
This is all going down in the Ways and Means
Committee, where they are doing a mark up of this legislation today.
This is where a lot of bad deals get pushed through and the public is
unaware of it.
Ranking Member Sander M. Levin (D-MI) charged in an
opening statement (remarks as prepared) that it puts China and other
foreign bondholders ahead of our own citizens and will seriously damage
our economy:
Even if such
prioritization were possible, it would put China and other foreign
bondholders before our own citizens at a time when they can least afford
it. Some of those potentially impacted by default would be military
service members – including those currently deployed; doctors and
hospitals that wouldn’t receive Medicare payments; and hardworking
Americans who wouldn’t get payments for school lunches, veterans’
benefits, or student loans.
If Republicans proceed on this course, it will be
the third time they have done serious damage to our economy by
threatening to default. When the Republicans brought us to the brink of
default four years ago, the stock market plunged and S&P downgraded
our credit rating for the first time ever. In 2013, Republican default
threats and the government shutdown cost us 120,000 jobs and slowed GDP
growth just as the economic recovery was taking hold.
The GAO estimated that the 2013 impasse cost the
U.S. around $70 million due to an increase in the cost of borrowing. It
also increased the borrowing costs for businesses and for individuals
with home mortgages, car loans, and other debt. GAO also noted that it
cost us credibility – for the first time in our history, investors
concluded that short-term Treasury bonds might be too risky to buy,
because of the risk of default.
Republicans defaulting on debt has become the norm
in their continued run away from fiscal conservatism and responsibility,
but this is a low blow that they need to own.
Not only is this not how things work, but the notion
that Republicans are pushing to prioritize Chinese bondholders before
our veterans, seniors, and children is something they should own
publicly, maybe while they’re waving those flags and pretending they
support the troops.
