In 2006, then Senator Barack Obama voted against raising the debt ceiling. At the time, he said this:
The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies.
Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better
In 2007 and in 2008, when the Senate voted to increase the limit by $850 billion and $800 billion respectively, Senator Obama did not even bother to vote. He now probably wishes he hadn’t voted on the issue in 2006. Now, of course, the President is singing a different tune.
In an interview to be aired by ABC News, President Obama has admitted that politics drove his thinking in 2006 when he voted against raising the debt limit. “That was just an example of a new senator making what is a political vote as opposed to doing what was important for the country,” Obama said, “I’m the first one to acknowledge it.”
Obama said he now understands why Republicans are concerned about voting to raise the debt limit, characterizing it as a “lousy vote.” He continued, “Nobody likes to be tagged as having increased the debt limit for the United States by a trillion dollars.”
The President added if Senators could see what he sees as President, they wouldn’t vote against raising the limit. “As President, you start realizing…we can’t play around with this stuff. This is the full faith [and] credit of the United States.”
Actually it is more than the full faith and credit of the United States, it is much of what underpins the whole global economy. Senator Obama was wrong in 2006, the failure of leadership would be not to raise the debt ceiling though I have to note that no other country on Earth has the idiotic policy that the United States has of having a legal limit on the amount of bonds the central government can issue. It is a market driven event, not a political one.
Enter now, our bête noir du siècle, because the sheer stupidity and ignoble ignorance of this man far transcends that fit for a mere day, Senator Jim DeMint of South Carolina.From The Hill:
Sen. Jim DeMint (R-S.C.) said on the conservative Laura Ingraham Show he is considering filibustering an upcoming vote to raise the nation’s $14.3 trillion debt limit if it doesn’t contain other fiscal reforms.
That could pose a conundrum for leaders in both political parties, who say it is imperative for Congress to raise the debt ceiling to prevent the government from defaulting on its debt.
DeMint, whom Tea Party activists consider a key ally, urged Republican leaders to draw the line.
“I think Republicans have to decide this is a time to start the fight,” he said. “Not passing the debt ceiling is not going to cause us to default on our debt.”
Well, actually, it leads to a technical default. The US Treasury would be barred from its legal authority to issue bonds that finance government despite the fact there is a global demand for US securities in the capital markets. The historically low level of real and nominal interest rates on Treasury securities is proof that there is still strong demand for Treasury securities.
Bruce Barlett, once a supply-sider who toiled for Rep. Ron Paul but now one of the few who recognizes that the error was Reagonomics, has been sounding the alarm on his blog Capital Gains and Games:
CEA chairman Austan Goolsbee warned Republicans against playing games with the nation’s credit rating by refusing to raise the debt limit and creating a technical default. I have been warning people about this problem for more than a year because I know there is a widespread belief among the nuttier right-wingers that a debt default is just what the country needs to force massive spending cuts into effect. Many stupidly believe that the budget would be balanced overnight because the government couldn’t spend any more than the available cash flow from taxes would permit.
Since I first started writing about this danger, some of these nutty right-wingers have been elected to Congress under the Tea Party banner. Since many have never served in elected office before and know virtually nothing about economics or finance, I don’t think they realize that they are playing with fire when they even hint at the possibility of a debt default. They are like children playing with matches.
He might have added the global economy is the kindling. The failure to raise the debt ceiling would have consequences for global capitalism far beyond our shores. It would destroy the creditworthiness of the United States that would likely lead to the collapse of the dollar as the reserve currency in the global economy. That has implications for any and every central bank that holds or trades in dollars.
Treasury Secretary Tim Geithner sent a letter to Congress last week predicting the government will reach its debt limit by May 16 and would only have until early July before it would default on its loans if the ceiling is not raised. Hence, the technical default.
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