For months conservatives have been patiently explaining that, unless Treasury Secretary Tim Geithner chooses to do so, there is simply no risk of the United States defaulting on its debts regardless of whether Congress raises the debt limit by August 2nd. The facts are simple and straight forward: the federal government takes in about $170 billion a month in revenues, but it only pays out $29 billion a month in interest payments on the debt. So Geithner could easily meet all of the federal government's debt obligations and still have around $140 billion left over for other spending. That $140 billion is far short of the $300 billion in spending the federal government is scheduled to spend for all of August, but missing any those payments would not qualify as a default on the debt.
Before when conservatives would make these elementary points, outlets like Politico labeled them “default deniers.” But now, as Geithner's self-imposed August 2nd deadline looms, many of the left are beginning to realize the conservatives were right. Witness Talking Points Memo founder Josh Marshall, who admits, under the header “Dumbfounded,” that “there are many things I do not understand about the progress of this so-called debt negotiation.” Marshall continues, “There's enough money coming into the Treasury to service the payments on the current debt. But if you don't borrow more money you have to shut down vast amounts of federal outlays.”
This is all true. But then Marshall continues: “And the most logical places to start are with Social Security payments and Medicare reimbursements. Stuff like cutting Social Security checks in half starting the following week. … So why the adamant refusal to put this in front of the public? It seems quite clear to me that if what was coming in early August was an immediate 50% cut in Social Security payments and/or a similar cut in salaries to members of the military and a lot else that the tenor of this whole conversation would be quite different.”
But there is nothing “logical” about cutting Social Security and Medicare payments. As the Bipartisan Policy Center has confirmed, Geithner could pay: the interest on the debt, all Social Security obligations, all Medicare and Medicaid obligations, all Defense contractor bills, all Veterans payments, and all active duty troops; and still have almost $7 billion left over for other items.
Yes, Geithner would still have to cut overall federal spending by 44%, and that would have economic consequences. But those consequences would not be as bad as defaulting on the debt would be. Not paying civilian federal workers would be unpopular, but not paying active duty troops would be far more unpopular.
Not raising the debt limit would cause a limited government shutdown, not default, as Obama has been claiming. The reason why Obama has not been honest with the American people about that fact is because he wants to maximize their fear. And the Politicos and TPMs of the world have been playing along.
Around the Bigs
The Washington Examiner, Obama seeks pragmatist mantle in debt-ceiling struggle: Obama attempted to cast himself as a centrist pragmatist yesterday, admitting in a press conference that Medicare needs reform, and even leaking to the press an offer to raise the Medicare eligibility age. Obama is still insistent on “the largest possible deal” and he again threatened not to sign any short-term extension of the debt limit.
Reuters, Obama, lawmakers fall short on debt deal: Negotiations after Obama's press conference Monday were tense, including a terse exchange between Obama and Speaker John Boehner, R-Ohio. After Obama reminded Boehner that Republicans had already for Medicare cuts as part of Rep. Paul Ryan's, R-Wisc., budget, said, “Excuse us for trying to lead.”
Pew Research Center, Public Now Divided on Debt Limit Debate: Currently, 47% of Americans are more worried that raising the debt limit would” lead to higher government spending and make the national debt bigger”, while 42% are worried that not raising the limit would “force the government into default and hurt the economy.” Two months ago the split was 48-35.
The Washington Post, ‘Flexibility’ may help states meet key part of health-care law: The Department of Health and Human Services released rules regulating how states must set up their Obamacare health exchanges Monday. In an acknowledgement that many states are not on track to meet a 2013 deadline to have a system ready for HHS to approve, the rules allow HHS to grant “conditional approval” to state plans. This will allow HHS greater flexibility to choose which state markets they will set up themselves.
The Wall Street Journal, U.S. Tackles Housing Slump: After acknowledging that housing “hasn't bottomed out as quickly as we expected,” Obama is considering enlarging the government's role in the market. The lead idea mentioned by The Journal is for Fannie Mae and Freddie Mac to “relax their rules on loans to investors.”
The Washington Post, Panetta appears to link al-Qaeda presence with Iraq invasion: Defense Secretary Leon Panetta told troops in Iraq: “The reason you guys are here is because on 9/11 the United States got attacked.” Panetta followed up later: “I wasn’t saying, you know, the invasion — or going into the issues or the justification of that. It was more the fact that we really had to deal with al-Qaeda here; they developed a presence here and that tied in.” The Post article claims the link between Iraq and al Qaeda had been “refuted by President Obama and many Democrats.”
South Carolina: Sen. Jim DeMint, R-S.C., will host a presidential forum on Labor Day, September 5th, for GOP candidates. The event will not be a debate. Instead, three panelists: DeMint, Rep. Steve King, R-Iowa, and Robert George, founder of the American Principles Project, will question each candidate. Only candidates above 5 percent in Real Clear Politics poll average will be invited. If the event were held today, former Minnesota Gov. Tim Pawlenty and former Utah Gov. Jon Huntsman would not make the cut.
Perry: Texas Gov. Rick Perry called New Hampshire Senate President Peter Bragdon last weekend to gauge his support should Perry choose to enter the GOP primary.
The Volokh Conspiracy's Kenneth Anderson took issue with The Washington Post's coverage of Panetta's statements on Iraq and al Qaeda. After Panetta's statement The Post article claims the link between Iraq and al Qaeda had been “refuted by President Obama and many Democrats.” Anderson points out that “refuted” does not mean the same thing as “denied” and that The Post was making an editorial statement if they stuck with “refuted.”
The Heritage Foundation's Brian Darling reports that Sen. Jeff Sessions, R-Ala., has introduced legislation to force seven calendar days of transparency before any debt limit deal is passed by the Senate.
The Weekly Standard's Daniel Halper posts video of Obama telling ABC News he has no regrets about joking “”Shovel-ready was not as shovel-ready as we expected.”
The Washington Post's Greg Sargent reports that Sens. Patty Murray, D-Wash., and Chuck Schumer, D-N.Y., are complaining that Obama's debt limit negotiations cuts “risk squandering the major political advantage Democrats have built up” on Medicare.
Atrios worries when the first Republican ad accusing Obama of proposing to raise the Medicare eligibility age will run.
ThinkProgress' Matt Yglesias' thinks Obama should let the Republicans cave and just pass a clean debt limit hike.