Pat Toomey’s Plan for a Slow Motion Default

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Not paying your creditors is defaulting. Full stop. Choosing which obligations to default on first is still defaulting.

I see Chris Potter over there saying that paying some creditors and not others would “avoid default” but he’s dead fucking wrong! Paying some creditors and not others is a default. So far I haven’t seen any other reporters mess up the details of Pat Toomey’s plan for a slow motion default yet, unlike in 2011. Let’s keep on describing this accurately.

Dave Weigel explains for those who are still tempted to describe this inaccurately to avoid alienating Republican politicians:

In two years, all that’s changed is the “paying our military” part of the play. Toomey wants to avoid the optics of summer 2011, when Democrats said (correctly, if a little too pat) that being unable to issue new debt meant that the government couldn’t pay its bills to popular people, like veterans. But wasn’t the nadir of the debt fight worse than all that? After a point, when you’re saying the rest of the government can do without payment for a while, aren’t you shutting down FDA inspections? While doing this, aren’t you panicking the markets and lowering consumer confidence?

Why, yes. So, let’s try it again!

And here is what would happen if we hit the default ceiling, via Wonkblog:

Imagine we hit the debt ceiling Feb. 15. The BPC’s analysis suggests that federal spending over the next month will be about $450 billion. Federal revenues will be nearer to $277 billion. That means that the government will have to default on about 40 percent of its obligations.

The choices it will face quickly become stark. It can cover interest on the debt, Social Security, Medicare, Medicaid, defense spending, education, food stamps and other low-income transfers, and a handful of other programs, but doing all that will mean defaulting on everything — really, everything — else. The FBI will shut down. The people responsible for tracking down loose nukes will lose their jobs. The prisons won’t operate. The biomedical researchers won’t be funded. The court system will close its doors. The tax refunds won’t go out. The Federal Aviation Administration will go offline. The parks will close. Food safety inspections will cease.

This is the difference between a debt-ceiling shutdown and a government shutdown. As Shai Akabas, a research at the Bipartisan Policy Center, puts it, “in a government shutdown, the government is shutting down future obligations. With the debt ceiling, They’ve already obligated the money. They owe these people the payments now, and they can’t make them.”

This entry was posted in Budget, Economy.

3 Responses to Pat Toomey’s Plan for a Slow Motion Default

  1. Chris Potter says:

    I was actually characterizing Toomey’s position. Not mine.

    • Jon says:

      Here’s the paragraph:

      Asked by Ingraham about concerns that a debt default would destroy the US government’s creditworthiness — and maybe bring down the entire economy — Toomey returned to a 2011 plan to prioritize debt repayments and spending on active-duty military. That would avoid default — which Toomey called “not a risk” — while forcing shutdowns of other government operations. Toomey allowed that such an outcome would be “very disruptive” and “not optimal” but added “I think we have to be willing to go there.”

      This section is describing Toomey’s position, but you wrote “That would avoid a default..while forcing shutdowns of other government operations”. I think that’s a confusing way to put it. In your own voice you’re saying that this would avoid a default. To avoid confusion, it should’ve gone something like “Toomey claims this would avoid a default.”

      Sorry for the cranky tone, I just have some traumatic memories of Colby Itkowitz constantly screwing this up last year.

  2. Chris Potter says:

    Yeah, I was just clarifying more than anything. I should have put in a “Toomey says” there. Just forgot because I was working on the fly and because it was bookended by Toomey quotes, and the blog post included later material to rebut his “no prob” stance.