The new head of the Republican Study Committee — a caucus of ultra-conservative House Republicans — said yesterday that he might favor the United States defaulting on its obligations, rather than raise the debt ceiling. Rep. Steve Scalise (R-LA) posited that, as long as the United States continues to pay interest on its debt, all would be well:
RSC Chairman Steve Scalise (R-La.) said Obama should pledge to avoid defaulting on Treasury bond payments once the Treasury Department no longer has the means to avoid exceeding the $16.4 trillion debt ceiling.
“The fact that we continue hitting the debt ceiling is a symptom of Washington’s spending problem, and hitting the debt ceiling does not immediately trigger a default,” Scalise said. “The Treasury Secretary has an obligation to preserve the credit rating of the United States and should pledge to continue making necessary interest payments to avoid default.”
This is a popular line of thinking on the right, but prioritizing payments doesn’t avoid a default. It simply means that the government will pay off holders of U.S. debt while stiffing any other number of people to whom payments are owed, including veterans or Social Security recipients. As the Bipartisan Policy Center has shown, the executive branch would have some very tough choices should it need to prioritize payments in the way Scalise proposes, and some obligations will have to fall by the wayside.
As Slate’s Matt Yglesias put it, breaching the debt ceiling results in “a deadbeat federal government. Some people won’t get money they’re legally entitled to.” And that will cause untold consequences across the world economy. Scores of government functions would need to be shut down, immediately, and interest rates will spike, affecting financial products (like credit cards and mortgages) around the globe.
Several prominent Republicans have admitted as much, with Speaker John Boehner (R-OH) saying it would be “a financial disaster, not only for us, but for the worldwide economy.” Yet Scalise is treating it like no big deal, in a bid to use the debt ceiling to wring policy concessions from Democrats. The U.S. will exhaust its borrowing ability on or around February 15th, according to the latest estimates.