The only good thing I can see coming out of the debt ceiling negotiation follies is that we get to separate the serious people from the unserious people from the truly unserious people, by which I mean the flat-earthers, by which I mean Michele Bachmann.
I wouldn’t pick on Bachmann specifically — there’s a boat load of flat-earthers — but she is one who’s actually running for president of the United States of Would-Be Deadbeats. And there are serious people who put her in the top tier of Republican candidates, which should tell you something, or maybe it should tell you everything.
In a news conference the other day, Bachmann said we should not listen to the president or the speaker of the House or the Senate minority leader or the Fed chairman or analysts from Moody’s or the Chinese or the IMF or the Chamber of Commerce or the bond marketers or virtually every American economist from left, center or right or, for that matter, any financial expert.
No, she said, we should listen to Bachmann. And she says there’s nothing to worry about because, well, she says there’s nothing to worry about. That if we don’t pass the new debt ceiling, the sky won’t fall. And the markets won’t either.
“And don’t let them scare you by telling you that the country’s going to fall apart and that we’re going to default on our debt,” she says.
She’s right. We wouldn’t default on our debt. We’d pay the Chinese and the other creditors. But we would have to default on our obligations. We would default on our promises. We’d toss away a couple hundred years of market good will and leave the world wondering how this could happen.
You don’t choose to default on your promises. You default when you have no other option, when the bank is taking away your house, when the repo man is gunning your car’s engine, when the bankruptcy lawyers have you on speed dial.
Bachmann says the folks at Treasury can just move a few dollars around. They can “prioritize” — our word for the day — their spending, sort of like the family that decides not to go out for dinner on the weekend.
Unfortunately, people who don’t have much money can tell you how they really prioritize, which is to decide whether to buy food or pay the rent.
If you want to know what the real options are, they are laid out for you in a study by the Bipartisan Policy Center. Go to the center’s website, and there’s even an interactive part that allows you to decide which bills to pay.
The author is Jerome H. Powell, who was undersecretary of the Treasury under George W. Bush. He says it’s simple. Money comes in. The bills come in. And there isn’t enough money to pay the bills.
In August, he says, the projections show that $172 billion will come in and there are $306 billion in bills. That’s a 44 percent shortfall, which is not, by the way, how you get your credit score up.
He presents a range of scenarios, In scenario No. 1, if you chose to pay interest on treasury notes, Social Security, Medicare, Medicaid, defense vendors and unemployment benefits, you’ve paid out $172.7 billion, which is all the money you have.
That means you can’t pay for troop salaries, veteran affairs, federal worker salaries, food/nutrition services, the FBI, the federal courts, health and human services, federal highway administration, EPA, IRS refunds, Small Business Administration, Federal Highway Administration, HUD, Department of Labor and $52.8 billion in other spending.
And it’s worse than that. We need to roll over $500 billion in maturing bonds, meaning if the bond market is downgraded, the bonds will cost more, the interest on the debt will rise, the interest on the housing market will rise, the cost for businesses to borrow will — yes, you’ve got it — rise.
Powell says experts agree that “even a brief default would create potentially catastrophic risk to the financial system . . . .”
These are guys who rarely speak in terms of catastrophe. They don’t predict Armageddon on Wall Street. They prefer to predict bull markets. They use terms like “deficit trajectory” and “ratios of debt to GDP.” But this is the time when catastrophe seems to fit.
In Washington, politicians have been playing chicken, seeing who blinks, who walks out on whom, who has chutzpah, who mispronounces chutzpah. You expect, in the end, though, they’ll do the right thing.
They have to, don’t they? Because in the real world, where we live, the prospect for disaster is so so real that no serious person could fail to take it seriously.
E-mail Mike Littwin at mlittwin@denverpost.com.
