GOP Debt Ceiling Truthers Want You To Listen To Them, Not The Experts. What Could Go Wrong?

10/16/2013 10:59 am 10:59:49

There's still hope that catastrophe could be averted as a deal to raise the debt ceiling gains traction in Congress, even among Republicans who have already shut down the government and who have appeared willing to do almost anything to delay or dismantle the Affordable Care Act. Of course, there's no guarantee that negotiations will succeed, especially since a bloc of vocal conservatives has seemed to dig in its heels and invite the economic calamity of which President Barack Obama and pretty much every reputable economist has warned.

Below are some Republican arguments as to why no one should worry about the rapidly approaching debt ceiling crisis, as well as some actual economists and experts who are telling them they're completely wrong:

'Default Is Actually Good!'

A small group of Republicans have suggested that damaging the economy with a default would ultimately benefit the nation by proving that we're willing to get serious about reining in long-term debt.

Rep. Morgan Griffith (R-Va.)

"We have to make a decision that's right long-term for the United States, and what may be distasteful, unpleasant and not appropriate in the short run may be something that has to be done. I will remind you that this group of renegades that decided that they wanted to break from the crown in 1776 did great damage to the economy of the colonies. They created the greatest nation and the best form of government, but they did damage to the economy in the short run." -- The Hill, Oct. 12

The expert opinion:

"[Default would be] utterly catastrophic ... There isn't life beyond default ... This would be a very rapidly spreading, fatal disease ... Europe was paralyzed at the possibility of an Italian default, which was a 2 trillion Euro economy ... You're now talking about the underpinnings of finance." -- Deutsche Bank co-CEO Anshu Jain, Oct. 12

Rep. Ted Yoho (R-Fla.)

"I say, 'You know what, I know we need the money, and I'm gonna pay it, I'm just not paying you today' ... And so they say that would rock the market, capital would leave, the stock market would crash, interest rates would go up. I said, 'Let me give you my feeling: Interest rates are gonna go up anyways' ... And I think our credit rating would do better, if we did that [default] ... We don't have a money problem, we have a spending problem." -- The Huffington Post, Aug. 8

"I think, personally, [not raising the debt ceiling] would bring stability to the world markets." -- The Washington Post, Oct. 8

And his walk-back: "And if we address our problems, and we say, 'Brett, I owe you money -- you know I owe you money, and I'm going to pay you. I'm going to pay you with interest. But we just need a little breathing room here to reorganize our debt.'" -- Business Insider, Oct. 14

The expert opinion:

"A default would be unprecedented and has the potential to be catastrophic: credit markets could freeze, the value of the dollar could plummet, and U.S. interest rates could skyrocket, potentially resulting in a financial crisis and recession that could echo the events of 2008 or worse." -- U.S. Treasury Department, Oct. 3

"If there is that degree of disruption, that lack of certainty, that lack of trust in the U.S. signature, it would mean massive disruption the world over, and we would be at risk of tipping yet again into a recession ... When you are the largest economy in the world, when you are the safe haven in all circumstances, as has been the case, you can't go into that creative accounting business." -- Managing Director of the International Monetary Fund Christine Lagarde, Oct. 14

'But We Won't Actually Default!'

A relatively large segment of Republicans appear convinced that the Treasury Department could limp along, paying off its debt obligations for an extended period of time without technically going into default.

Rep. Steve King (R-Iowa)

"The money masterminds decided we would hit that date (the debt ceiling) sometime in about July. And we timed some things to have that debt ceiling debate in July. Well, it didn't come, because the Treasury was using what they call extraordinary measures ... Which means they tapped into every account they possibly could, they delayed the payments that they could in other areas. And we rolled this debt ceiling from what was hitting a wall, 'default' they call it, in July, into all the way over now they say it's Oct. 17. Well, we shouldn't accept that as the date beyond which we can't go without what they call default, we can go a long, long time. We can go indefinitely without hitting default. So I don't think it's really going to get, the continuing resolution is going to get into default, if we define these things correctly. And it troubles me a little bit that I see our House leadership use the language of default on the debt ceiling." -– Tyler Cralle radio show, Oct. 7

The expert opinion:

"If you don't do it in time, confidence will evaporate, consumer confidence will sharply decline ... Businesses will stop hiring, consumers will stop spending, the stock market will fall significantly in value, borrowing costs for businesses and households will rise ... We'll be in the middle of a very severe recession and I don't see how we get out of it. There's no monetary policy response in the current context. We're already at zero interest rates." –- Chief economist at Moody's Analytics Mark Zandi, Sept. 18

Rep. Joe Barton (R-Texas)

"Well, we have in my household budget some bills that have to be paid and some bills that only paid partially. ... I don't think paying the secretary of energy's travel expenses have to be paid 100 cents on the dollar. We've got more than enough cash flow, more than enough cash flow to pay interest on the public debt when it comes due and the House Republicans have passed a prioritization bill. This talk about default by the U.S. Treasury is nonsense. The president can be smart or the president can be stupid. And I would assume as smart as President Obama is when push comes to shove, he'll be smart. So we are not going to default on the public debt. But that doesn't mean that we have to pay every bill the day it comes in." – CNBC's "The Squawk Box," Oct. 7

The expert opinion:

"This is crazy talk. While the Treasury Department could prioritize interest payments after October 17 -- the day the Treasury Department says it no longer has legal authority to pay the nation's debts -- and not pay Social Security and Medicare, this would buy a few days at most. Meanwhile, interest rates will soar, stock prices will plummet, the global economy will begin spiraling downward, and millions of Americans wouldn't receive their Social Security and Medicare. So why are Republicans talking like this? Because they want to sound as if they're willing to blow up the economy if they don't get their way. A crazy person with a bomb is much scarier than someone holding a bomb who looks and acts reasonable." -- Former Labor Secretary Robert Reich, Oct. 8

'What's The Big Rush?'

A group of Republicans have insisted that the debt ceiling doesn't need to be raised by Oct. 17 because the government won't actually default on its debts until after that date. The government will still bring in taxes and other revenue, they argue, meaning the Treasury Department can still use that money to service the national debt. It's possible that Treasury could prioritize which types of obligations to meet, but it would also be illegal for it not to fulfill government contracts, pay Social Security recipients, or pay doctors under Medicare and instead pay down the debt.

Sen. Pat Toomey (R-Pa.)

"First of all, there's zero chance the U.S. government is going to default on its debt. It's unfortunate that people have conflated this idea of not raising the debt ceiling immediately on Oct. 17 as somehow defaulting on our debt. You know, we bring in tax revenue about 12 times as much money as it takes to pay our interest in our debt. There's no way that any Treasury secretary or administration would willfully choose to have the catastrophic results that would occur if we actually defaulted on our debt when it's not necessary." -- MSNBC, Oct. 9

The expert:

"I'm not part of the rating agency, so that's coming from a different part of my organization. So in my view, if the U.S. government does not make a payment, either whether it be on U.S. Treasury debt -- that would certainly be a default. If it didn't make its payments on other obligations, in my view, that would be a default in anything perhaps but name. It'd be almost semantic. But clearly either way, it would be very hard on the economy and it would be the prescription for a very deep recession." -- Moody's Chief Economist Mark Zandi, Oct. 12

Sen. Roy Blunt (R-Mo.)

"The credit rating went down, according to Standard and Poor's, as I recall it, because Congress wasn't doing anything to get the spending under control. It had nothing to do with the debt ceiling. Of course, you pay the interest on the debt. It's part of the debt obligation. Prioritize the order in which you pay your bills? That's no definition of default I've ever heard used in any way. Default is when you don't pay your loan. Prioritizing how you pay your bills is prioritizing how you pay your bills." -- The Huffington Post, Oct. 7

The expert opinion:

"Look, here's the very simple economics. What they are trying to say is that the Treasury can pay off our creditors based on daily cash flow. Revenues come in even after the debt ceiling is not raised. But what they cannot say is the following: Can the Treasury pay all of its bills? Of course not. So if the Treasury decides to pay one creditor but not a Social Security beneficiary, not a soldier, not a defense contractor, that is default by another name. So they are -- they couldn't be more wrong. -- Senior fellow at the Center on Budget and Policy Priorities Jared Bernstein, MSNBC, Oct. 9

Suggest a correction