Threat of Government Shutdown is Just a Ploy to Raise the Federal Debt Ceiling and Cut Social Spending

Specter of Government Shutdown Still Looms

Rather than cutting federal departments and budgets, the federal workforce, and wages and benefits to federal workers and retirees, the only cuts the bureaucrats want to make is to social services for the people and Social Security, which is self-funded by a separate payroll tax (FICA).

January 3, 2011

Government Executive - A top Senate Republican signaled on Sunday that GOP lawmakers are ready to engage in brinkmanship over the federal government's debt ceiling, threatening to let the Treasury default on its obligations if Democrats don't agree to drastic cuts in spending.

"This is an opportunity to make sure that the government is changing its spending ways," said Sen. Lindsey Graham, R-S.C., in an interview on NBC's Meet the Press. "I will not the vote for the debt ceiling increase until I see a plan in place that will deal with our long term obligations, starting with Social Security [see next story]."

Graham, who often positions himself as a bridge-builder between Republicans and Democrats, laid out demands on Sunday that were much closer to the tea party wing of the new Congress. He said he would insist on raising the retirement age for Social Security, limiting old-age benefits for people with higher incomes and slashing non-security discretionary spending to 2008 levels -- a cut that Republicans estimated would equal about $100 billion a year.

The federal government's current debt ceiling, the maximum amount it is legally allowed to borrow, is $14.3 trillion. The government's debt is now about $13.9 trillion, and it is expected to bump up against the ceiling sometime this spring.

If Congress refuses to approve a higher ceiling, the Treasury would almost immediately start defaulting on its obligations -- an event that most analysts say would have calamitous effects for the United States and for global financial markets that view Treasury securities as the ultimate safe haven for investors. The move would likely force a government shutdown, or force it to immediately slash spending across the board on everything from defense to Social Security. Beyond that, the move would almost certainly set off a panic among global investors that would send markets crashing and interest rates soaring.

Austan Goolsbee, chairman of the president's Council of Economic Advisers, warned on ABC's This Week that failing the raise the debt ceiling this year would be "catastrophic."

"I don't see why anybody's playing chicken with the debt ceiling," Goolsbee said. "If we get to the point where we damage the full faith and credit of the United States, that would be the first default in history caused purely by insanity."

Theatrical showdowns over the debt ceiling have become a regular event over the past decade, and Democrats frequently used such occasions when they were in the minority in Congress to embarrass Republicans and the Bush administration. But in the end, lawmakers always approved increases and financial markets have always assumed that the alternatives were too apocalyptic to be politically plausible.

But that may not be the case this year. Many Republicans associated with the tea party movement, including Sen. Jim DeMint of South Carolina and Rep. Michele Bachmann of Minnesota, have argued for months that Congress should not increase the debt ceiling without immediate and steep spending cuts.

Shortly after the midterm elections last November, Bachman wrote on her blog that the debt ceiling would be "one of the most significant challenges to the start of the 112th Congress'' and that Congress simply cannot continue to operate under the pretense of "gangster government," raising the limit upon our whim."

On Sunday, Bachman made it clear she wanted to use the debt ceiling as a bargaining tool against Democrats.

"At this point, I am not in favor of raising the debt ceiling,'' she said on CBS's Face The Nation. "The Congress has had a big party the last two years. They couldn't spend enough money. And now they're standing back, folding their arms, saying, oh -- taunting us, 'How are you going to go ahead and solve this big spending crisis?' "

Rep. Michael Kelly, a tea party-supported freshman Republican from Pennsylvania, was more fervent.

"Raising the debt ceiling to me is absolutely irresponsible. We've been spending money for so long that we don't have and keep saying, well, it's OK; we'll just raise taxes; we'll find it somewhere."