WASHINGTON — A growing number of economists and politicians say President Obama is just factually wrong when he claims the United States is risking default by not raising the debt celing.
They also say Obama is mistaken in claiming that failure to raise the debt ceiling would be a disaster, or as he put it, “insane, catastrophic, chaos.”
One famous economist even goes so far as to portray the president’s dire warnings as outright dangerous and irresponsible. CNBC’s Lawrence Kudlow accused the president of threatening “to pull the whole system down for (his) own gain.”
Obama has repeatedly insisted that not raising the debt ceiling would mean the United States could not pay the bills it has already accumulated – the payments Congress has already authorized – and would result in a default.
Not true, wrote Jeffrey Dorfman in Forbes.
The University of Georgia economics professor explained, “Reaching the debt ceiling does not mean that the government will default on the outstanding government debt. In fact, the U.S. Constitution forbids defaulting on the debt (14th Amendment, Section 4), so the government is not allowed to default even if it wanted to.”
Dorfman described how, instead of defaulting, if the debt ceiling is not raised in the next two weeks, the government will actually have to prioritize its expenses and keep its spending under the revenue the government collects.
“In simple terms, the government would have to spend an amount less than or equal to what it earns. Just like ordinary Americans have to do in their everyday lives.”
Would increase debt
In addition to threatening an “economic catastrophe” worldwide if Congress does not raise the debt ceiling, Obama has repeatedly insisted raising it “does not add a dime to our debt.”
Also “not true,” wrote Dorfman.
“An increase in the debt ceiling allows the government to continue to run a budget deficit, which by simple accounting means that the national debt will increase. Not raising the debt ceiling does not mean defaulting on the current debt, but rather that no new debt can be incurred.
“Raising the debt ceiling is like having the credit limit increased on your credit card,” he explained.
But that hasn’t stopped the administration from issuing dire threats and predicting impending doom.
“A default would be unprecedented and has the potential to be catastrophic,” a Treasury report said. “Credit markets could freeze, the value of the dollar could plummet, U.S. interest rates could skyrocket, the negative spillovers could reverberate around the world.”
“This is not a deadbeat nation. We don’t run out on our tab,” said Obama, vowing he would not negotiate over the “full faith and credit of the United States.”
President plays politics
Why would the president keep issuing such cataclysmic warnings that the sky will fall if the debt ceiling isn’t raised?
“I have a strong suspicion that Obama and his troops are trying to provoke a massive sell-off in stocks and bonds to further their political position.”
Worse yet, he fears the president could be turning his doomsday scenario into a reality, saying, “a massive sell-off like that could conceivably become a self-fulfilling prophecy, driving the (global) economy into recession.”
Kudlow has harsh words for what he suspects is the president’s purely political motivation for using scare tactics. “This kind of political tactic is beneath the presidency. No president — not Nixon, Carter, Reagan, the Bushes or Clinton — has ever menaced and assaulted the financial world to achieve short-term political gains the way Obama has. This has never happened before.”
He even suggests the president is acting against the interests of the United States, because “of the extraordinary importance of our financial system, especially after the crisis of 2008, Obama’s selfish tactics border on the unpatriotic. Presidents don’t act that way … And they don’t try to pull down the whole system for their own gain.”
Against it before he was for it
Kudlow isn’t the only one to question a president’s patriotism over the national debt.
When Obama was a candidate for president in 2008 he called President Bush “unpatriotic” for increasing the national debt by $4 trillion.
Since then, Obama has increased the national debt by $6 trillion, hitting a total of $16.7 trillion this week.
Obama was also against increasing the debt ceiling before he was for it.
He, and all his Senate colleagues, voted in 2006 against Bush’s raising of the debt ceiling to $8.9 trillion.
Other side of the story
The establishment media have begun to pay attention to those who say there is another side to the president’s current story, as more and more lawmakers come forward to dispute the administration’s claims that it is necessary to raise the debt ceiling to avoid a disasterous default.
The New York Times has discovered “a surprisingly broad section of the Republican Party is convinced that a threat once taken as economic fact may not exist — or at least may not be so serious.”
The Times noted, “Some question the Treasury’s drop-dead deadline of Oct. 17.” and cited Sen. Richard Burr, R-N.C., whom the paper refers to as “no one’s idea of a bomb thrower,” as not “buying the apocalyptic warnings that a default on United States government debt would lead to a global economic cataclysm.”
The paper found Republicans who believe “there is no deadline at all — that daily tax receipts would be more than enough to pay off Treasury bonds as they come due.”
Sen. Rand Paul, R-Ky., said, “It really is irresponsible of the president to try to scare the markets.
“If you don’t raise your debt ceiling, all you’re saying is, ‘We’re going to be balancing our budget.’ So if you put it in those terms, all these scary terms of, ‘Oh my goodness, the world’s going to end’ — if we balance the budget, the world’s going to end? Why don’t we spend what comes in?”
Paul told the Times, if you propose not raising the debt ceiling in those terms, “the American public will say that sounds like a pretty reasonable idea.”
Rep. Justin Amash, R-Mich., said: “There’s no way to default on Oct. 17. We will have enough money to make interest payments. The issue is, how do we restructure our government so we don’t have to keep hitting the debt ceiling?”
Sen. Pat Toomey, R-Pa., told a disbelieving MSNBC anchor there is “zero chance the U.S. government is going to default on its debt.”
When a CNN anchor accused Republicans of jeopardizing the credit markets “just to gain political advantage,” Sen. Tom Coburn, R-Okla., replied, the real problem was the president’s refusal to curtail overspending, and that was leading the country toward a real catastrophe.
Rep. Ted Yoho, R-Fla., used the example of his large-animal veterinary practice to illustrate how a clear explanation of the situation can help avoid calamity.
“Everybody talks about how destabilizing doing this will be on the markets,” he told the Times. “And you’ll see that initially, but heck, I’ve seen that in my business. When you go through that, and you address the problem and you address your creditors and say, ‘Listen, we’re going to pay you. We’re just not going to pay you today, but we’re going to pay you with interest, and we will pay everybody that’s due money’ — if you did that, the world would say America is finally addressing their problem.”
Rep. Paul Broun, R-Ga., said the biggest threat to the economy is “Obamacare. It’s already destroyed jobs, it’s already destroyed our economy, and if it stays in place as it is now, it’s going to destroy America.”
GOP’s next strategy?
Republicans in the House showed remarkable unity in voting to defund Obamacare, even when Democrats retaliated with a government shutdown.
(House Republicans passed bills to keep all of the government running except the health care law, but Senate Democrats rejected those bills, forcing the government to shutdown.)
And now that the shutdown has proven less than catastrophic in the public’s perception, the GOP may be emboldened to resist the president’s demands to raise the debt ceiling indefinitely, unless they can obtain concessions.
The question now appears to be: What do the Republicans want? Behind closed doors, they are said to be debating whether to pursue purely economic concessions or to continue to push to derail Obamacare.
Rep. Paul Ryan, R-Wisc., wrote an editorial in the Wall Street Journal calling on the president to consider negotiations on spending cuts, reducing the national debt, measures to jump start the economy, reforming entitlement programs and simplifying the tax code.
The article contained no mention of Obamacare. There was no call for delaying the individual mandate, no less defunding the health-care law. The conservative base of the GOP noticed.
Tea Party Patriots national coordinator Jenny Beth Martin said, “Not once did Mr. Ryan mention the program that is hurting hard-working Americans” and demanded “Congress stop spending our tax money on this unaffordable, unworkable” health-care law.
Martin used Ryan’s own words to illustrate why Obamacare is so damaging to the economy.
She quoted his 2011 response to the president’s State of the Union address in which he said, “Costs are going up, premiums are rising, and millions of people will lose the coverage they currently have. Job creation is being stifled by all of its taxes, penalties, mandates and fees.”
Ryan’s op-ed also addressed what he sees as the root cause of the current stalemate: the president’s refusal to negotiate with Republicans.
As WND has reported, Obama has been willing to negotiate with the dictators of Iran and Syria, and even the Taliban, but not with the GOP.
Obama claims Republicans are resorting to “extortion” by threatening to default on the national debt.
House Speaker John Boehner, R-Ohio, said it was the president who was being coercive, because he was refusing to negotiate unless he first got everything he wants.
“The president’s position that … we’re not going to sit down and talk to you until you surrender is just not sustainable,” said Boehner.
Obama has claimed that negotiations over the debt ceiling would be unprecedented.
Ryan pointed out, not only was this is not true, but Obama himself was one of the presidents who had previously negotiated a deal over the debt ceiling.
“In 1985, Ronald Reagan signed a debt-ceiling deal with congressional Democrats that set deficit caps. In 1997, Bill Clinton hammered out an agreement with congressional Republicans to raise the debt ceiling, reform Medicare and cut capital-gains taxes. Two years ago, Mr. Obama signed the Budget Control Act, which swapped spending cuts for a debt-ceiling hike.”
So, why is the president refusing to negotiate this time?
Kudlow points out the president could easily avoid even the appearance of default by agreeing to three separate GOP bills that would “protect the payment, principal, and interest on U.S. Treasury securities, including those held by Social Security funds, even in the event that the federal debt reaches the statutory limit.”
But Democrats have always opposed those measures, causing Kudlow to wonder, “[H]ow bizarre is it that Obama opposes the one piece of legislation that would make it impossible for him or anybody else to make Treasury-default accusations?
Why do Democrats oppose legislation to avoid the very default they claim would be a catastrophe?
Kudlow has a suspicion that it has more to do with politics than what is best for the country.
He cites a senior Obama official who told the Wall Street Journal story the administration is stonewalling because, “We are winning … it doesn’t really matter to us how long the shutdown lasts, because what matters is the end result.”
Follow Garth Kant on Twitter @DCgarth
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