THE BLOG
07/25/2011 01:51 pm ET | Updated Sep 24, 2011

Dual-Loyalty Republicans

The British hacking scandal and the U.S. federal debt crisis are revealing who really governs these two countries.

The British scandal reveals that Rupert Murdoch, the global media mogul, has intimidated the British government for years. Top officials in Scotland Yard even helped Murdoch's son and employees cover up an investigation into their illegal hacking of cell phones and their payments of hush money to victims.

With his capacity and willingness to end the political career of anyone who refused his dictates, Rupert Murdoch determined who would run the British government and what they would do. It was government by private proxy.

The federal debt crisis also reveals a similar political tyranny in Washington. In this instance, a Washington political insider named Grover Norquist exercises the control. He does it through an organization named Americans for Tax Reform, which he created in the mid-1980s and runs.

His stated purpose is to shrink the federal government by denying it tax revenues. His means is to persuade or intimidate elected officials into signing a no-new-taxes pledge, which Norquist politically enforces.

Most voters are unaware, I suspect, that 236 Members of the House and 41 Senators in the current 112th Congress made two pledges when they entered office. One was to uphold the Constitution, the other was to uphold Grover Norquist's no-new-tax pledge.

By signing the Norquist pledge, these Congressional officials, virtually all Republican, created a dual loyalty -- one to uphold the Constitution and the other to uphold the no-new-tax pledge.

The pledge, moreover, is broad based. Norquist defines it to include as a "tax increase" the elimination of any special tax breaks to corporations or the rich. Thus, all existing tax breaks are forever locked in, regardless of how unfair or regressive or costly and all government spending, other than for defense, can only be cut.

Today, most Republican Members of Congress cannot vote for any debt deal that involves anything that Norquist might define as a "tax increase" without risking their careers. And, he has defined all the revenue proposals in the current debt negotiations as a tax increase.

This dual loyalty of Congressional Republicans has brought the U.S. to the very edge of a financial crisis that is comparable to the bank collapse of 1929-33, which triggered a decade-long Great Depression.

While Republicans claim that a federal debt default would not matter economically consider this: the 2008 decision by Federal Reserve Chairman Bernanke and Treasury Secretary Paulson to allow Lehman, the giant investment bank, to fail and take bankruptcy resulted in the virtually shutdown of the global financial system for months. Before that bankruptcy, everyone assumed that giant U.S. financial institutions were so big that the U.S. government would never allow them to fail. Afterwards, no one could be sure their money was safe and thus the global financial system closed down almost immediate.

To re-ignite global finance, the Federal Government had to enact a $700 billion bailout and the Federal Reserve had to create more than $13 trillion of aid for corporations and banks.

The 2008-2009 financial crises will be minor compared to what happens if the United States defaults on its debts. The trust of global lenders that the U.S. government never defaults on its debts -- developed over more than 2 centuries -- will be forever shattered. The dollar will risk its position as the global reserve currency. Borrowers who use U.S. Treasury instruments as collateral are likely to be required to provide additional assets or pay more interest.

After a federal default, the interest costs on the national debt will rise because U.S. government securities will no longer be risk free. Just a quarter point increase in the annual price of borrowing applied to $15 trillion of federal debt will be $37.5 billion annually. This will trickle through the economy to housing, auto, business and credit card debt as well. All of us will pay and in many ways.

The question voters must ask themselves in the 2012 elections is whether dual-loyalty Republicans can govern in the best interests of the United States and its people. If the U.S. government defaults on its debts in August 2011, as now appears possible, they will have their answer.

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