Default Will Be on Geithner’s Hands
The United States hit it’s debt ceiling on May 16th. Since then, the Treasury has taken steps to avoid “default” until August 2nd. The Treasury has the authority – and the obligation – to prioritize spending to service debt payments thereby avoiding a default.
That is what a group of 17 Republican Senators wrote to Treasury Secretary Timothy Geithner earlier today. If the U.S. defaults on its debt, it will be Geithner’s fault. Republicans then used figures from the Congressional Budget Office (CBO) to bolster their argument as well as a report from a Congressional Research Service. Senator Pat Toomey has even introduced legislation that would require the administration to prioritize in such a way that takes default off the table.
So why won’t Geithner agree? I think it’s pretty obvious. If default is taken off the table as it should – and could easily – be, then the Obama administration has no leverage. They can claim all they want that conservatives are the reason our country defaulted on its debt. In reality, all Geithner has to do is prioritize spending and we’re fine. But he won’t.
No, he and President Obama would rather resort to political rhetoric in order to gain favor with their base and scare the American people:
“If investors around the world thought that the full faith and credit of the United States was not being backed up, if they thought that we might renege on our IOUs, it could unravel the entire financial system.… We could have a worse recession than we already had. A worse financial crisis than we already had.”
Again, all Geithner has to do is make servicing our debt a priority. All would be fine. Everyone breathe. Unfortunately that won’t happen. Geithner tries to explain away his rationale:
“A homeowner could decide to “prioritize” and continue paying monthly mortgage payments, while opting to cease paying other obligations, such as car payments, insurance premiums, student loan and credit card payments, utilities, and so forth. Although the mortgage would be paid, the damage to the homeowner’s creditworthiness would be severe.”
Right, if we make debt payments and pay for things we don’t need while ignoring things we do. There are lots of “goodies” that the government funds that aren’t necessary (e.g. the Department of Energy, or funding for public broadcasting), why wouldn’t he stop paying those programs?
If President Obama and Geithner were serious about keeping America from defaulting, then they would say that our debt payments would be a priority after August 2nd and there’s nothing to worry about. But where’s the political gain in that?