"Hey, Why Don't We Just Default?"

The United States does a lot of weird fucking things. First, they are one of the very few countries that has a legislated limit on what it can borrow, which is called a "debt ceiling." Secondly, they elect a bunch of Tea Party Republicans, who are provably crazy, lying, stupid, or all three.

After a year of hearing about fiscally responsible they were going to be once elected, the Teapublicans entered into the most extraordinary deal with the Obama administration. In return for a two year extension of the Bush tax cuts, the President would be given hundreds of billions of dollars in new "stimulus" spending. All told, Obama and the Republican leadership managed to throw away a cool trillion dollars - not a single cent of it paid for with spending cuts or tax increases.

At the best of times, which these are not, it would be an awesomely dumb deal. Intelligent people aren't widely known for disposing of vast sums of money in ways that will accomplish precisely nothing. Honest people do not then go about preening about their fiscal responsibility.

If this were a dishonesty contest, however, the Teapublicans would easily win. They spent twenty two months decrying stimulus spending and then turned around and gave the "socialist" Obama dump trucks full of it, only to get an extension of tax cuts that demonstrably failed at doing what they were supposed to in their first decade.

Now they're promising their semi-literate followers that they are going to vote against raising the debt ceiling. This, my friends, is not fiscal responsibility, nor is it conservative. The Tea Party - who I sadly didn't take seriously - is turning out to be to the budget and the fiscal survival of the United States what Mohammad Atta was to the friendly skies.

I would full-throatedly support a vote against raising the debt ceiling if the GOP-Tea Party had a plan for what to do next, specifically by cutting the deficit in a meaningful way. They don't. They categorical refuse to cut defense and rethink American foreign policy, they won't even talk about Social Security, and they actually campaigned on "restoring" Medicare. Those three programs, combined with interest on the debt, account for approximately 83% of the budget.

What they did promise to do was get rid of earmark spending, which is a paltry $50 billion every year. And to be fair, they did. They call it lettermarking now, instead. Other than that, nada. Zero. Zilch. They've come up with $50 billion in spending cuts that they aren't actually being cut, against a deficit that is over a trillion and a half dollars and going nowhere but up.

If you're interested in the wrongheaded thinking of the Tea Partiers, the psychopathic hillbillies at Red State have kindly laid it out for you. I encourage you to read it. The simple mindedness and outright dishonesty therein is actually physically intimidating. They, like the professional politicians and talk show hosts they parrot, have no plan. At least no serious plan. They're throwing nickles at a monster made of thousand dollar bills.

So, we've established that there are no serious spending cuts on the table. Even Paul Ryan - who I actually respect - is proposing reforms that won't take place in any meaningful way for at least 15 years. So what happens if the debt ceiling isn't raised and there are no spending cuts?

Well, the United States defaults on its obligations is what.

This does not mean that default is impossible, however, because there is always a danger that Congress will not raise the debt ceiling in a timely manner, meaning that the Treasury may not have sufficient cash to make interest payments or redeem maturing securities. If that happens, there would be a technical default.

As of right now, outstanding debt subject to limit is a little over $13 trillion and the debt limit is $14.3 trillion. At the rate the Treasury is borrowing, it can continue for about 10 months before the debt limit must be raised again. It has been difficult enough, politically, to raise the debt limit when Democrats control both houses of Congress. But next year there is almost certain to be a very substantial increase in the number of Republicans in both the House and Senate, with Republican control of the House being well within the realm of possibility.

The party opposite the White House always demagogues increases in the debt limit to score cheap political points. Economist Donald Marron calls the vote on raising the debt limit a tax on the party in power. Barack Obama knows this very well. As a U.S. senator he voted against a debt limit increase in 2006, saying that the necessity of raising the limit was “a sign of leadership failure.”

To be sure, the debt limit has always been raised in time to prevent a default, although Treasury sometimes had to push the limits of the law to move money around to pay the government’s bills. However, I believe the game has changed because Republicans have become extremely bold in using the filibuster to make it extraordinarily difficult to pass any major legislation without at least 60 votes in the Senate.

Furthermore, a growing number of conservatives have suggested that default on the debt wouldn’t be such a bad thing. It is often said that default would lead to an instantaneous balanced budget because no one would lend to the U.S. government ever again. Therefore, spending would have to be cut to the level of current revenues.

Writing in Forbes last month, the Cato Institute’s John Tamny was enthusiastic about the prospects of default. Said Tamny, “It’s time we learn to love the idea of a U.S. default . . . For Americans to worry about a debt default is like the parent of a heroin addict fearing that his dealers will cease feeding the addiction.”

While acknowledging there might be some pain from default, he dismissed it as trivial compared to the enormous blessing of a massive reduction in federal spending.

Left unsaid by Mr. Tamny is that sudden, unsupervised heroin withdrawal can possibly kill you.

Look, if the Teapublicans had some kind of a plan that wasn't rooted entirely in fantasy, I wouldn't hold them in such contempt. But they don't. If they didn't have the courage to propose deep, painful cuts during a campaign that they could hardly lose, they aren't going to allow them to occur as because the bond market forces them to. They simply don't have the balls. They aren't going to cut Social Security, Medicare or defense and there isn't much left for them to cut.

So what happens then? After a default, the GOP will be faced with the choice of either voting for truly massive tax increases or belatedly raising the debt ceiling after America's credit is already destroyed. To continue John Tamny's heroin analogy, they'll relapse ... and addictions are never better after a relapse. There's no such thing as a false default. And no one in their right mind is going to invest in Treasury bills after a default, particularly if it seems likely that the same debate is going to occur every six to twelve months.

Having ranted like a lunatic about it for nearly seven years now, I think that I've proven my bona fides on the debt. That's not true of the Red Staters, who were awfully quiet when Bush and the Republicans were burning huge piles of money. There were a lot of Republicans who thought I was nuts in 2004. I don't hear that very often now.

What I'm telling you, especially the Tea Party voters out there, is that a default isn't the answer. The debt has to be addressed in a serious, but gradual way. You're not going to see the conditions that balanced the budget in the late 90s (marginally higher taxes and the tech bubble) anytime soon. Austerity is going to be needed in America, but doing it in the face of a default is meaningless.

The people that you've elected aren't just stupid. Stupidity is at least entertaining. These motherfuckers are dangerous.