Tags: debt | ceiling | default | shutdown

Washington Post’s Klein: A Deadbeat Uncle Sam Lurks in the Wings

By John Morgan   |   Wednesday, 09 Jan 2013 02:08 PM

A spiral of costly consequences awaits the United States if it fails to resolve the debt ceiling prior to a date with fiscal doom that is estimated to arrive sometime between Feb. 15 and March 1, according to Washington Post columnist Ezra Klein.

That two-week window of time is an estimate by the Bipartisan Policy Center (BPC) of when the nation would begin to default on its obligations, absent a deal between lawmakers.

If the ceiling is breached, the government can still cover interest on the escalating national debt and continue to pay for key entitlements, defense spending, education and a few other programs, Klein wrote.

Editor's Note: Startling Proof of the End of America’s Middle Class. Details in the Video

But that would mean defaulting on just about everything else, according to Klein. A partial list includes a shutdown of the FBI, nuclear weapons monitoring, federal prisons, federal courts and the Federal Aviation Administration. In addition, tax refunds wouldn’t be sent out.

The shutdown would also create a chain-reaction contagion for financial markets. “The damage to the economy would be tremendous, and it would occur at every level, from individuals looking for a loan to buy a house to hedge funders trying to play the markets,” he wrote.

It is actually unclear whether government computer systems can be adjusted to pay some bills and not others.

And the prospect of the government paying bondholders ahead of citizens is an uncomfortable one.

“This could lead to some interesting headlines,” said Steve Bell, director of economic policy at the BPC. “Imagine: ‘America pays Chinese debt instead of Social Security.’”

Klein concluded, “Ironically, for those who want to use the debt ceiling, as leverage to reduce the deficit, busting through the debt ceiling would make our future deficits far worse.”

The federal government has already reached its debt limit, and the Treasury Department is taking "extraordinary measures" to meet debt payments.

Republicans are demanding spending cuts in an amount equal to any new debt limit increase, a position that is opposed by President Barack Obama and Democrats.
Sen. Lindsay Graham, R-S.C., told CNN that without spending cuts attached to the increase, he could not support the debt limit increase, no matter how urgent.

"I believe we need to raise the debt ceiling, but if we don't raise it without a plan to get out of debt, all of us should be fired," Graham said.

Editor's Note: Startling Proof of the End of America’s Middle Class. Details in the Video

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