While House Republicans have resisted passing a budget that would fund the government, that’s actually only half the battle raging on Capitol Hill these days: They are also considering taking the United States’ credit line hostage unless President Obama and the Democrats meet their demands (which are, seemingly, to repeal Obamacare in its entirety and potentially cut spending).
If you think that shutting down the government is a huge blow to the economy, you should know that’s nothing compared to the catastrophic damage that could result from hitting the debt ceiling on October 17.
But Rep. Steve King (R-IA) indicated to CNN’s Chris Cuomo on Thursday that he doesn’t think any harm could come from surpassing the nation’s debt limit. There’s an easy way to avoid defaulting, he said, even if we fail to raise the ceiling:
CUOMO: Will you carry this momentum about Obamacare right into the debt ceiling and through the deadline? Are you willing to collapse the credit of the united states in order to make your point?
KING: I don’t think the credit of the United states is going to be collapsed. I think that all this talk about a default has been a lot of demagoguery, false demagoguery. We have plenty of money coming in to service the debt. When we stop servicing the debt that would be default, we’re a long, long ways from that. We need to have cool heads and get to a solution.
King is hinting here at the idea that, even if the nation hits its debt limit, it could prioritize payments — taking money away from a certain group or program to direct it at making payments on the debt. Analysts called this plan “essentially impossible” when House Republicans suggested it during the last debt ceiling fight, after Republicans started crafting legislation to prioritize debt unless the president caved to deep spending cuts. A debt-prioritization scheme doesn’t stop the United States from defaulting on its obligations.
There’s no telling what exactly will happen if the U.S. defaults on October 17; never, in the history of the country, have we failed to meet our debt obligations. But all indications are that it would be an utter calamity. The Treasury makes 100 million payments a month, and failing to meet those would at best throw us into utter economic austerity. At worst, it would cause investors to withdraw from the country, raising interest rates and lowering quality of life permanently in the United States.