Is threatening a default a good way to exert political leverage?

The United States has reached its debt limit and may default on its loan obligations. Some Republicans say they’ll refuse to raise the limit unless they get deep cuts in government spending. Today’s Question: Is threatening a default a good way to exert political leverage?

  • Hiram

    It’s a risky . It assumes the other side is both good, and not stupid, both questionable assumptions in these latter days.

  • Tim

    Only if you’re suicidal.

  • John O.

    The Republicans need to quit acting like tempestuous spoiled brats who tried to pay for a bunch of steak dinners and a large bar tab with Daddy’s credit card and it was declined.

  • GaryF

    It’s not an income problem, it’s a spending problem.

  • Steve the Cynic

    Aren’t these the same folks who pushed through bankruptcy “reform” a few years ago that effectively stigmatized debtors who were hard on their luck? And now they think it’s okay to risk putting the whole country in default?

  • Hiram

    “t’s not an income problem, it’s a spending problem.”

    We are in a recession, and the problem with a recession is income. we don’t make enough. The spending problem is that we can’t spend, we don’t have the money we need to put into the economy to get it going again.

  • Sue de Nim

    The US has never defaulted on its debts in all its history. It strikes me as distinctly unpatriotic to put that track record at risk, not to mention the risk to the world economy.

  • Zeke

    The real issue with the debt limit isn’t whether the government should run a budget deficit or if the deficit is too large. It’s about cash flow and making sure that the Treasury has enough on a daily basis to pay its bills and neither inconvenience nor break faith with those who sold goods and services to the government, loaned it money, or depend on federal programs for life and health. The word “irresponsible” is inadequate to describe those in Congress who use doubletalk to justify refusing to raise the debt limit.

  • Paul

    If “good” = “effective” then certainly it is, just as other forms of hostage taking and terrorism are effective. But if “good” = “morally justified” or “beneficial to society” then certainly it is not, just as other forms of hostage taking and terrorism are not good for society.

  • Rich

    It’s just like with the banks. You have to have as many credit cards as possible to build you credit record and score. The country is in the best of hands.

  • Zack

    The problem is that there are now a significant number of (bad, really bad) actors involved who refuse to see the impact of their posturing.

  • Neil

    Political pressure on who? Themselves? Both sides spend like drunken sailors.

    Neither party has proposed a plan that will balance the budget anytime soon. Meaning we will be piling up debt for a while yet.

    Not raising the debt ceiling is an implausible act and therefore a weak hand to play. Raise the debt ceiling now to placate our lenders, and get on with the hard work of coming up with a balanced budget ASAP.

    Please.

  • Philip

    I was truly amazed the other day when I heard a news broadcaster mention how more and more people are choosing to buy big items (e.g. cars) with cash. He then went on to say that that doesn’t help the economy, because people aren’t taking a loan and moving the financial institution forward. Really? Debt is tantamount to slavery and I highly recommend Crown Financial Ministries, if you want to know a truly healthy way to view money and debt.

  • John

    If we don’t cut our debt the US will not survive. The recent article by Rolling Stone’s http://www.rollingstone.com/politics/news/the-people-vs-goldman-sachs-20110511 tells it all. The information is out there. The problem is our leaders are all bought and paid for by the big banks. For example Goldman Sachs gave Obama $994,795, see this site for proof – (http://www.opensecrets.org/pres08/contrib.php?cycle=2008&cid=N00009638). The data supporting the article from the Rolling Stone came from a new 650 page report that just came out last week “WALL STREET AND THE FINANCIAL CRISIS: Anatomy of a Financial Collapse”, basically shows that the criminal big banks are to blame for where we are right now. http://hsgac.senate.gov/public/_files/Financial_Crisis/FinancialCrisisReport.pdf

    READ, LEARN, AND GET INVOLVED OTHERWISE WE ARE DONE!

    We need to prosecute these criminals, and get our money back!

  • JAMES

    Our Politians have sold us out and have been kicking the can down the road … well— to right now.

    They have been writing checks from the Chi-com’s bank account (and others) to support other failing and corrupt governments, as well as supporting a broken US welfare system, AND the Wall-street / Corporate Richie-Riches.

    The time is soon coming to pay the piper… and guess what… we don’t have enough money to even pay the interest on the loans.

    Thank you very little “Leaders”.

    We are headed toward finical reckoning that this country is not ready to handle.

    The next 16 months are going to be VERY interesting.

    Keep your hands inside the car until this ride has come to a complete stop.

    DTOM

  • James

    John,

    Is it too late?

    DTOM

  • GaryF

    You can’t tax yourself into prosperity.

    It doesn’t matter how much we tax, it’s never enough.

    The insatiable beast called government can never get enough.

    Politicians have been getting more and more people dependant of government so they have to vote for the people promoting more government.

    Well, it doesn’t work that way any more. That is an old way of thinking.

    Greece is the word…………

  • Jason

    Making rash threats to force a default on American debt just shows how desperate republicans are to advance their radical agenda. They would destroy the national and world economy just to avoid a fair tax system.

  • Steve the Cynic

    “We need to prosecute these criminals, and get our money back!”

    Nice idea, John, but it won’t happen. The money doesn’t exist. It never did. It was all just borrowing against the value of assets, especially real estate. That value evaporated when the housing bubble burst. While the bubble lasted, we thought we were wealthier than we really were, and so we spent beyond our means– not just the government, but individuals, businesses and non-profits, too. Our real problem is that we value the wrong things. We confuse GDP with national well-being, and we measure indivisual happiness by our financial resources.

  • Carrie

    It’s all a game of chicken with extremely huge consequences. They will raise the debt limit. They have to do it because otherwise we will default on what we already owe. Get it done and then fight about what cuts and yes, tax increases, need to be made to deal with our deficit.

  • JBlilie

    The GOP doesn’t have the cojones to cut the Big 4, the only things that will make the difference: Defense, Medicare, Medicaid, and Social Security. They want to hide behind Obama.

    The GOP is a one-trick pony: If times are bad, give tax breaks to the wealthy. If times are good: Give tax breaks to the wealthy. This cannot be either morally or economically correct.

    Everyone was sharing in the economic growth in the US before Reagan. Since Reagan: It’s all gone to the top 5%.

    The GOP have already shown their hand: In January, they threw themselves in front of the train to prevent the top 2% of US earners from getting a 5% income tax increase — a move that increased the deficit by a large amount.

    The GOP want only the middle and lower class to bear the cost of deficit reduction and hold the wealthy (once again; and the people most able to contribute) hamrless in this.

    It’s simply absurd.

    I’m not the first to note this: Maybe the most salient politcal coup of the late 20th century was the GOPs pursuasion of the (white) lower and middle classes to vote against their own economic interests by distracting hem with the Gs: God, Guns, and Gays (and blacks — the Nixon plan for the South).

    To echo (the execrable) Dr. Phil: How’s that working out for you?

    Take a look at the income and wealth charts for quintiles (historical tables) at the Bureau of Labor Statistics: The top 5% have gotten all your productivity gains for the last 30 years.

    The GOP are playing brinksmanship and holding up the international standing of the US in order to hold harmless the top 2% of earners in the US from helping solve the budget deficit!

    Wake up!

  • Raul

    How’s that ” Hope and Change” mantra working now?

    If my credit card is maxed out, I don’t add another credit card to pay the first one_ I stop spending and pay the debt down. The DFL has said months a go we would default if the deficit is not raised_ well, we didn’t default but the George Soros groups are happy we are at this point….check his holdings to see how much gold he has recently sold off, Mexico just bought tons of gold because their government said they don’t trust the status of the American dollar. Yet, Ford built a new plant in Mexico, Catepillar built a new plant overseas. GM signed production deals with China. HOPE and CHANGE means more of the same corrupted politics. Just as AIG got bailed out because Goldman Sachs was overly invested in AIG and would have had huge losses if AIG was not bailed out.

  • John

    DTOM, it probably is too late; food, water, guns, ammo, gold, silver.

    Steve the Cynic, I agree with you about the bubble but it still would be nice to see the criminals in jail or maybe just executed.

  • uptownZombie

    We need to prosecute these criminals, and get our money back!

    *cough* Iraq war *cough*

  • Raul

    To Jason’s comment:”Making rash threats to force a default on American debt just shows how desperate republicans are to advance their radical agenda. They would destroy the national and world economy just to avoid a fair tax system.”

    The only radical agenda is what is described by the Progressives and Obama. The Distributing Wealth mantra is RADICAL because it is not found in our Constitution and is what is professed by Socialism / Marxism. Obama’s number one supporter, billionare George Soros with his 100 some 504c radical groups, stands for advancing his plan for the The Open Society, one world governance, one world currency.

    So, to all Progressive bloggers, recall that it was Senator Harry Reid who gave the marching orders last month to have DFL’ers use the term RADICAL and EXTREME in order to gain false support by denigrating any conservative talk. And along with that idea, who is it that plays the racism card? Well it occurs from the MNBC, ABC and CNN cable commentary hosts;e.g. MNBC host asks Newt , ” Isn’t saying that Obama is the food stamp president, biggoted?” So MNBC implying food stamps is only used by for blacks, seems that MNBC is either playing the race card to demean those who hate Obama’s policies or they themselves are bigots. ???

  • Debbie

    Raising the debt limit only guarnatees the government will spend more. The simple truth is unless there are spending cuts the only way to meet the current obligations for public employee salaries, benefits and pensions is to take on more debt. The collective body of public employees across the nation–city, county, state and federal is draining the coffers dry and pushing us further into debt. It is imperative to radically reform the compensation and benefit packages as well as pensions of public employees. Call your own city or county and inquire about vacation accrual and payout, % of employee contributions to health insurance and pensions vs taxpayer contributions. Less than half the population even pays taxes and we’re paying for ourselves as well as everyone else, when we figure in the % of taxpayers who are public employees and the fact the taxes they pay are paid with borrowed money it’s a no-brainer that the system can’t be sustained. I wonder how much of the public pensions were invested in AIG?

  • Ron

    Debbie writes: “Less than half the population even pays taxes …”

    Not true. Perhaps you are talking about ONE form of taxes – the federal income tax – where about half the population does not even make enough money to pay, but there are several forms of taxation:

    – payroll taxes (FICA, medicare), which we all pay if we have a job (except on earning above about $106k for FICA)

    – property taxes – own property, pay taxes

    – sales taxes – buy stuff, pay taxes

    – capital gains taxes – sell non-retirement investments with a profit, pay taxes

    Just to name the most common. Does not include corporate income taxes, which are likely paid by consumers as a pass-through (at least that is what CEOs claim any time there is a discussion about raising corporate income taxes).

    Individual income taxes aren’t even half of the federal government’s revenue stream, at least according to the Tax Policy Center (45% for fiscal year 2008).

  • We need to work together as Americans and stop this Bullying Politics. GOP and DFL both are not looking the best of the people, but power and fight among themself. I hope to see another political party

    Thank you

  • We need to work together as Americans and stop this Bullying Politics. GOP and DFL both are not looking the best of the people, but power and fight among themself. I hope to see another political party

    Thank you

  • steve

    it is a spending problem not political and consumers have enough money to spend!

  • Lawrence

    If people could separate POLITICS from this discussion, the answer is a real simple, boldly declared OF COURSE NOT, for this one reason, and one reason alone – defautling on any loan is financially crippling to a person, a private business, and definitely a country. In fact, if the federal government was a business, the Republicans wouldn’t even mention taking the company into default status. The business would fire them so fast their heads would swim, and they’d have a very good reason for doing so. But, people don’t separate politics from issues like this very well. And so, you’re going to have some people siding with the Republicans on this matter even though the Republicans basically said we will bring this country to financial ruin if we don’t get what we want.

  • James

    John,

    What percentage of the US population will survive the first 6 months of GD 2.0?

    I would give it a 60% decrease.

    In GD 1.0 many lived on or near farms / country, today the population is 3X and the majority live in cities.

    Without a JIT food / power / fuel supply who will be able to cope?

    I just hope the rest of the world is as bad off. I would hate to have to defend my home from commies:-)

    Beans, bullets, and Band-aids

    Pretty hard to eat Gold and Silver.

    DTOM

  • Jeff

    The question “Is threatening a default a good way to exert political leverage?” is making an assumption that isn’t true. The question should be “Is threatening to not increase the debt limit a good way to exert political leverage?”; 95% of economists will tell you that not raising the debt limit will not lead to default…that little assumption shows MPR’s bias. Remember we have more than enough tax revenue for the federal government to cover every single penny owed to debt holders; the treasury will exaust every other option before defaulting on the debt. That includes not paying federal workers and stopping SS/Medicare payments. To answer the question, yes, it’s a very good political tactic to tie fiscal responsibility to increasing the total amount of debt that the government can accumulate. Think of it from the perspective of a parent interacting with their child, would you blindly give your child another advance on their allowance (after they’ve already had 3 this week) without a discussion about responsibility? Wouldn’t you at least discuss what the money is being spent on and create some sort of priority list so that things that are not a high priority do not have money spent on them? Let’s grow up and be realistic, there absoutely should be spending cuts associated with raising the debt limit.

  • Steve the Cynic

    Raul, like it or not, wealth is being redistributed all the time. Left to itself, the free market will gradually redistribute wealth from the poor to the rich, until a few elites effectively rule the world. I assume you don’t want to see that outcome. Marxists make the mistake of thinking that the solution is for no one to own anything, which is ridiculous. Socialists, a little less radical, think the solution is for the government to own all the means of production. The Soviet Union proved that doesn’t work either. The optimal economy would seem to be a mixed one, consisting of mostly free market capitalism, with an effective social safety net funded by progressive taxes. That’s not socialism (contrary to the ideological bullshit you keep parroting). It’s common sense.

  • Steve the Cynic

    Jeff, if I understand you correctly, you would rephrase the question thus: “Is threatening to lay off all federal workers and quit paying promised social security benefits a good way to exert political leverage?” You seem to be saying that it is, and I would respectfully {ahem} disagree.

  • Jeff

    Steve the Cynic – [Jeff, if I understand you correctly, you would rephrase the question thus: “Is threatening to lay off all federal workers and quit paying promised social security benefits a good way to exert political leverage?” You seem to be saying that it is, and I would respectfully {ahem} disagree.] *** No, it would not involve laying off all federal workers…..most likely we’d set up a system of priority jobs that have to get done and the non-priority jobs would go away……I have no problem with that if that’s what it takes to get some cuts to government. Once again those are last resort type items, so you’d probably see an increase in benefit age before you’d ever see SS payments not going out; and yes I would be in favor of that as well. The Republicans have all the bargaining chips, if they do nothing they get major cuts that the US treasury has to do; if they get their way they get to pick and choose smaller cuts to government. It’s a win-win situation for them since the whole point is to create fiscal responsibility before allowing the government to borrow more money, that’s something the American people can understand.

  • Bob B

    Considering that the United States defaulting on its debt would destroy the nation’s financial credibility as well as threaten the economic stability of the entire international community I would have to believe that anyone threatening a national default would be either totally irresponsible or totally ignorant or both.

  • Steve the Cynic

    Okay, Jeff, maybe not “all,” but it would be quite severe. You’re still saying the Guild Of Patricians should play chicken with the economy. That’s what I object to.

  • Sue de Nim

    Raul, consider that the conservative talking heads have been castigating Newt Gingrich for not being conservative enough. If that’s not “radical” and “extreme,” I don’t know what is.

  • Steve

    Is this a trick question?

    The Republicans shut down the government under Pres. Clinton. There are documented and published reports by Senator Dole stating that was one of worst things the Republican party did.

    So…. who can’t learn from history?

    It seems that people voted for people that can’t learn from history!! Now we pay for it…..

    Let the government shut down again, please and show us the current majority in the US Congress can’t read and learn history.

    Cheers,

    Steve

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