Thursday, June 30, 2011

No Dealing On The Debt Ceiling, Part 24

And now the GOP games on the debt ceiling just got serious.

Standard & Poor's will drop the U.S.'s credit rating from its current triple-A to a D if the government misses its debt payment on August 4, Reuters' Walter Brandimarte reports. S&P's managing director John Chambers explained, "If the U.S. government misses a payment, it goes to D. ... That would happen right after August 4, when the bills mature, because they don't have a grace period." The company would downgrade Treasury bills unaffected by the blown deadline, but not as much.

The Treasury Department says that the federal debt ceiling must be raised by August 2. Two days later, the department must pay $30 billion in short-term debt. But negotiations between the White House and Congressional Republicans have broken down to the extent that some Democrats are debating whether to just declare the debt limit unconstitutional and ignore it.

Say goodbye to the economy.   Say hello to interest rates in the double digits.  This is what the GOP is risking now with their hostage nonsense, and the American people are going to pay dearly for decades for their stupidity.

What will happen of course is that our debt payment will be made.  It will come at the expense of government workers, or soldier's paychecks, or Social Security checks for the month.  But that $30 billion will get paid.  The American people on the other hand...well...

So where do we go from here?  Ezra Klein notes yesterday's presser signifies the negotiations are done.

The best advice I’ve gotten for assessing the debt-ceiling negotiations was to “watch for the day when the White House goes public.” As long as the Obama administration was refusing to attack Republicans publicly, my source said, they believed they could cut a deal. And that held true. They were quiet when the negotiations were going on. They were restrained after Eric Cantor and Jon Kyl walked out last week. Press Secretary Jay Carney simply said, “We are confident that we can continue to seek common ground and that we will achieve a balanced approach to deficit reduction.” But [Wednesday] they went public. The negotiations have failed.

I still think the economic and financial powerhouses and Wall Street tycoons are going to step in and get something done.  Ezra believes differently.

What the two parties are really doing is trying to position themselves politically to survive the consequences of their failure. We don’t yet know if we’ll get to the point where the market will panic, but it could. We’re very likely to get to the point where we have to stop funding certain government services, which could mean as little as delaying payments to military contractors and hospitals or as much as halting Social Security checks. Either way, the public is likely to ignore the political breakdown until the consequences begin. At that point, both parties are hoping they will have framed the debate such that the electorate’s fury falls squarely on the other’s shoulders. That’s what today’s news conference was about.

Who will take the blame for the default?  If we're really down to that question, then we're all screwed.

[UPDATE]  Sen. Reid has just canceled the July 4th Senate recess to work on the debt ceiling idiocy.

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