Bruce Bartlett: "It is the most monumental insanity"

"It is the most monumental insanity"
Conservative historian Bruce Bartlett explains why Tea Party thinking on national debt ceiling is "idiotic"
By Andrew Leonard

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So what happens if we get to early March, U.S. borrowing hits the limit, and House Republicans refuse to raise it? What would be the immediate consequence?

Well, first of all, the Treasury has certain ways that they can get around the limit for a little while. They have some legal authority to move things around. For example, a large part of federal employee retirement funds are covered by special securities issued by the Treasury and the Treasury is permitted to not make regular contributions to the fund on a temporary basis, as long as it makes up the difference later on. And there are other tricks of this sort. There are even some economists who believe that the Treasury has an unlimited bag of tricks to do this. Personally, I don't think so.

I think there really is a hard limit, but when we would hit that limit I don't know. But assuming we do, what would then happen is that the Treasury would lack the cash flow to be able to pay its bills. Every single day the Treasury has bills to pay, Social Security benefits, interest on the national debt ... But if the debt ceiling is not raised, the only cash it would have to pay those bills would come from the tax revenues that come in on a day-to-day basis -- from the payroll tax or from income tax withholding. But that would not be enough to pay the bills that are due that day, so somebody at the Treasury is going to have to decide -- as individuals do when their pay doesn't cover their credit cards and other debts -- who gets paid this month and who doesn't. And, of course, there is a problem with this, because not everybody can be put be off. By law, Social Security benefits have to go out on the first of the month. But the Treasury literally would not have the cash in its account to cover those benefits, or to pay interest on the debt -- at which point you have a default. Any time the precise terms of a bond are not adhered to -- if you don't receive exactly the amount of money you were promised, on exactly the day it was promised -- you have a default, and that is what would happen under this circumstance.

But we've never let that happen before.

It's never happened before. And I think many people in financial markets, and perhaps even in Washington, just assume away the possibility. They cannot conceive of the insanity of allowing the debt to default. But what I keep trying to explain to people is that these Tea Party people really are that crazy. And I'm just tying to get people to believe me.

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http://www.salon.com/news/debt_ceiling/index.html?story=/tech/htww/2011/01/05/bruce_bartlett_on_tea_party_monumental_insanity

buy skipping payments to addressees in Republican Congressional Districts.

lender of money to the government, and it is to THAT corporation, THE FED, that a massive amount of our government's money goes.

to the treasury, by law. BTW the FED only owns roughly 40 percent of our debt, more than China, but China does not refund the interest.

it is not part of the debt of course with the last gasp the prior congressional pukes had to try to push it into the public that our ss insurance is part of the national debt when it is not.

I anticipate they will and still try to screw us all.
If they pull SS payments I will have nothing, and nothing to lose.