The Embarrassed Republican: You lose

Today with the roll-out of the healthcare exchanges there are some considerable issues.  It seems that millions of Americans who, according to Fox news and about 50 Congressmen, don’t want “Obamacare” are clogging the lines on the signup websites.  The sites are inundated with applicants.  It’s a lot like trying to get the latest update for the iPhone.  However, if we give it some time we’ll all get a chance.

Meanwhile, we can all try and guess what a government shutdown will really mean.  Were we planning a trip to the statue of liberty, or a state park?  That will have to wait.  For most of us, what’s really affected by the shutdown is pretty foggy.  Social security checks will still go out, troops will be paid as well as Congressmen and Senators.  However, processing new social security claims will stop, those workers have been “Furloughed.”  The NSA will keep listening but NASA is shutting off the lights. Oh, and the National Institute of Health and the Center for Disease control are furloughed as well so flu shots are now in question.

I heard one government employee call the Shutdown a “lockout.”  Surprisingly, a lot of government workers can come in to work if they choose.  There’s no guarantee of getting paid for that time though, ever.  Congress would have to approve back pay and I, for one, would be pretty doubtful of that right now.  That’s because the big fight is yet to come.  It’s one thing to yell about the unconstitutionality of a law that has passed the supreme court test.  To use a government shutdown to bargain against a law you don’t like.  It’s quite another to play with the full faith and credit of the country.  The Debt Limit battle arrives in the next two weeks.

To be clear the debt limit isn’t about spending, it’s about bills.  This is about payments for money we’ve already spent.  Using it to make a point about further spending risks the national credit score and the rate we can borrow at.  As soon as we stop paying what we already owe, it hurts everyone.  We all lose.  Businesses have to pay more for loans, consumers have to pay more for loans and the many other countries in the world that use our bonds as a financial reserve are suddenly in question.

Some of us apparently do not understand that America’s leadership in the world provides a great deal of financial stability for the entire planet.  We earned that position and the confidence that put us there by always paying our bills, on time.  Who would take that position if we defaulted?  It’s hard to say but after a pretty awful recession, world wide (or possibly depression), it’s likely that the Chinese would step up.  If our debts are suddenly no good, then they would get sold at some discount and someone would have to buy them.  A lot of countries have invested in the US and they face ruin if they can’t get at least some money back.  Debts don’t just go away, even for countries.

So if Congress can’t get the debt limit raised what could we do?  Unfortunately our government isn’t designed to ignore one whole branch.  Especially the one holding the purse strings, no matter how irresponsibly they act.  It has been suggested that the 4th paragraph of the 14th amendment would cover the situation.

“The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. (There’s more)....”

It’s a Civil war amendment, meant to make sure all the loans we took out and promises we made during the war got paid.  (It goes on to say that we’re not paying any damages to the Confederacy or compensating them for loss of slaves.)  However, the first section does seem to indicate that there is no question of a “debt limit.”  We have to pay our lawful bills.  If Congress authorizes an expense the U.S. pays, end of story.

Although it’s pretty clear the White House is adamantly opposed to using this paragraph to raise the debt limit themselves.  That would turn a potential financial crisis into a Constitutional one.  Which would be a lot less serious situation, but then the President would be taking full responsibility for a Congressional problem.  Not a good precedent to set.

So we’re back where we started, it’s all up to Congress and the 40 or 50 congressmen who are holding us all up for ransom.  However, a government shutdown is a side show compared to a default, so we can expect some defections from the ranks of the Republican’s current “No prisoners” strategy.  In fact, although the markets will get shakier and shakier as we close on the date I’m predicting (and really hoping for) a rise of the moderate Republicans.  Together with Congressional Democrats they could easily sideline the representatives who’ve lost touch with reality.  The Tea Party might like that, alone, defending their ideals against all odds (and sense).  It would also keep them out of trouble, and be far less risky for the rest of us.

It probably isn’t clear to these Republicans that campaign contributions are going to start drying up if they play games with the debt limit.  Nothing personal or even unpatriotic, it’s just business.  Make life more expensive for your backers and away they go.  It’s going to be a very interesting mid-term election.  Maybe pitch forks and torches interesting.

Even at that, our savings went to cash and bonds yesterday.  There’s just no telling what will happen next.  My family would like to get through all this with at least some of our retirement left.