On Sunday, former Minnesota governor and potential 2012 presidential candidate Tim Pawlenty (R) — touting his own state’s 2005 government shutdown — said that Republicans in Congress should flat-out refuse to raise the nation’s debt ceiling when the country’s legal borrowing limit is reached in the coming months. “I’m glad we had that showdown in Minnesota. As to the federal government, they should not raise the debt ceiling,” Pawlenty said.
Pawlenty appeared on MSNBC today to expound on his views, as well as flesh out a proposal he has that would strictly sequence government spending in order to avoid the U.S. defaulting on its debt (which is what ultimately occurs if the debt ceiling is not raised). He told MSNBC’s Chuck Todd that failure to raise the debt ceiling is good for the U.S. economy, and said that the GOP should hold the debt ceiling hostage to cuts in entitlement spending:
TODD: Do you really think [refusing to increase the debt ceiling] is good for the American economy? Forget the politics of it a moment — it may be good politics — but is this good for the economy?
PAWLENTY: Well, I think it is, Chuck. […] Say to the Congress, we’ll sequence the spending, pay those debt obligations with the interest as they’re due, make sure the military gets paid and taken care of, then let’s have the debate on entitlement reform that everybody always gets on your show and shows like this and say, ‘Savannah, Chuck, it’s time to make the tough decisions’ and they never do. The only way the politicians are going to make the tough decisions is to put their backs against the wall.
Conservative David Frum called Pawlenty’s sequencing proposal “more a piece of campaign positioning than a serious idea,” and noted serious problems with it, including that it would leave Medicare and Medicaid patients out in the cold and make the U.S. unable to replace military equipment in Afghanistan. And while Pawlenty is correct that the U.S. hitting its debt ceiling doesn’t immediately mean default, there is only so much Treasury can do before real problems would begin to occur in already shaky global financial markets.
Ultimately, as David Min wrote, failing to raise the debt ceiling in a timely manner may make paying off the debt — and therefore grappling with the country’s long-term structural deficit — far more expensive:
Taken together, these factors would almost certainly result in a significant increase in the interest rates we currently pay on our national debt, currently just above 2.5 percent for a 10-year Treasury note. If in the near term these rates moved even to 5.9 percent, the long-term rate predicted by the Congressional Budget Office, then our interest payments would increase by more than double, to nearly $600 billion a year. These rates could climb even higher, if investors began to price in a “default risk” into Treasurys — something that reckless actions by Congress could potentially spark — thus greatly exacerbating our budget problems.
That Pawlenty thinks this would be a good outcome — and is advocating Congress flirt with it unless President Obama accede to gutting entitlements — shows how irresponsible mainstream Republicans are when it comes to the nation’s finances.