Saturday, October 19, 2013

Is the Tea Party Fit to Govern?

In order to lead in a democracy, representatives must comprehend the consequences of their actions, respect democratic processes and not recklessly or intentionally disable the government from functioning in accordance with the wishes of the people. The US Government is the United States of America and its operation is a direct reflection of the democratic wishes of its people as expressed (albeit imperfectly) in our elected leaders. When one speaks of loving America and patriotism, those ideals cannot be divorced from the government. True patriots are willing to make supreme sacrifices on behalf of their fellow citizens and in support of their government.

The best analysis of the fiscal position of the US government immediately prior to October 17, 2013 (when the government would have hit the debt ceiling without the intervention of responsible leadership on both sides of the aisle) shows that the US government would not be able to pay its legal obligations as early as October 22, 2013. After that the US would pile up more and more unpaid legal obligations. Failure to pay legal obligations is a default--whether it is the mortgage payment or the credit cards. It is no different for the government. The default on one legal obligation calls all other legal obligations into question. That is why major holders of US debt assumed such a aggressive position in asserting that the US must pay its lawful obligations and not pick and choose which creditors to pay. US obligations used to be a zero risk instrument; now we must pay more because partisan politics impedes the ability of the government to make payments on its lawful obligations. If the US misses payments the value of all its obligations decline--that is basic finance and an iron rule of market discipline. Call it Economic Logic 101.

But even if that problem could be overcome (and it cannot), it appears that the US Treasury is literally not wired for a selective default: "The Treasury Department maintains that it has no ability to pick and choose which bills to pay if it's short of cash. According to the agency's inspector general, its computer systems are designed to 'make each payment in the order it comes due.'" Thus, there was never any real possibility of selective default, logically or administratively.

Further, there is no legal basis for prioritizing same payments over others.  The law treats all obligations as legally binding. So, even if the Treasury could prioritize payments, because Congress has issued no legal direction on how to allocate funds, President Obama would be forced to break some laws, or ignore the debt ceiling limit to comply with more laws, a Constitutionally impossible position. Further, he would apparently enjoy unbridled discretion and power over the allocation of revenues among lawful obligations. Either way the utter lawlessness of this approach and the massive power transfer to the President apparently never dawned on the Tea Party leaders who led us into this (now imaginary) nightmare. After October 17, our constitutional democracy was doomed, as was our economy.

Yet, 18 GOP Senators and 144 GOP Representatives voted against raising the debt ceiling late on October 16. Did they intend to force Obama into unconstitutional acts so that they could impeach him? Did they want a constitutional crisis? Did it occur to them that our creditors would lose confidence in our obligations and that we no longer would be able to issue zero risk securities? Did they understand the costly consequences of continuing down the road to default?

The sad truth is that the Tea Party leadership was clueless at best. Here are some examples:

"You’re seeing the tremor before the tsunami here. I’m not going to raise the debt ceiling. I think we need to have that moment where we realize [we’re] going broke. I think, personally, it would bring stability to the world markets."  Ted Yoho, Tea Party Rep. from Fla.

"We have 10 times as much tax revenue as we've got annual interest on the debt obligations. So if the president does not want us to default on our credit or obligations, we won't." Mo Brooks, Tea Party Rep. from Alabama.

"I'm not as concerned as the president is on the debt ceiling, because the only people buying our bonds right now is the Federal Reserve. So it's like scaring ourselves." Richard Burr, Tea Party Senator from NC.

"If you don't raise your debt ceiling, all you're saying is, 'We're going to be balancing our budget.' So if you put it in those terms, all these scary terms of, 'Oh my goodness, the world's going to end' — if we balance the budget, the world's going to end? Why don't we spend what comes in?"  Rand Paul, Tea Party Senator from Ky.

"CNN’s Erin Burnett: You would be willing to make cuts, I want to make it clear, to entitlements, things like Medicare, that’s what you’re asking for [in order to raise the debt ceiling and avoid default]?
GOP/Tea Party’s Tim Huelskamp: We have had those votes, we’ve had those votes on numerous things, yes I will." Tea Party Rep. from Kan. (Interview with Erin Burnett).

These quotes demonstrate a complete lack of appreciation for democratic lawmaking under our constitution as well as basic principles of finance and economics. For example, the Federal Reserve simply is not the exclusive investor in Treasury debt and in no way would a default enhance stability in global financial markets. Similarly, imposing a balanced budget mandate in the face of a default would disable our nation in lasting ways that would be against the overwhelming majority of voters. Thinking otherwise is akin to believing in the tooth fairy or the Easter bunny.

Further, entitlement reform is necessary for long term budget sustainability. But, insisting upon either entitlement reform or default is contrary to all notions of democratic governance and completely contrary to the Constitution. If all politicians behaved this way democratic rule making would cease, our government would cease to function, and we would be in constant economic depressions. Defaults would become endemic to the system to maintain credibility behind the constant threat of default. Extreme conservatives should consider the patent irresponsibility if the Democrats insisted on default in exchange for the passage of Cap and Trade for carbon emissions.

Plainly, we cannot allow our system of government to devolve into political and economic terrorism. Otherwise, we all end up less prosperous, more impoverished and consigned to constant state of economic pain and misery. This is not the American tradition and this is not what made our nation great. Our common commitment to each other and democratic lawmaking necessarily imposes limits on the extreme measures we can permit for partisan advantage.

For these reasons, many of the leaders of the Tea Party (certainly those quoted above) simply have no right to continue in Congress. They are not fit to govern. Responsible elements of our political system must work for the defeat of those who share ideas like those expressed above and those who would otherwise resort to default as a tool of political advantage.

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