Tuesday, May 17, 2011

Conservative Madness On Debt Ceiling

Tea Party Nation leader and conspiracy theorist Judson Phillips wants House Speaker John Boehner replaced. Phillips reason is that Boehner will not let America default and raise the debt ceiling.

Almost three months ago, Tea Party Nation called on conservatives to primary John Boehner when he is up for reelection next year. If there is any doubt of the need to primary John “I want to surrender early and often” Boehner, he has just removed it.

At a private meeting on April 25th with Tea Party activists, Boehner was asked if the GOP would raise the debt ceiling, he said yes.

The federal government has never defaulted. It is hard to say what would happen. Wall Street does not want to find out. Any major financial institution that has lent money to the Treasury Department could lose its AAA rating. These banks could also lose their money.

Treasury Sec. Tim Geithner could keep funding the government by using Treasury bonds. It is unclear how long that will last. Geithner is already dipping into federal pension funds.

Foreign banks own over 40 percent of United States debt. What their reaction would be is not clear. Obviously, these banks want their money and the interest returned. Geithner wrote a letter to Congress outlining what will happen if the debt ceiling isn't raised.

* The Treasury would be forced to default on legal obligations of the United States, causing catastrophic damage to the economy, potentially much more harmful than the effects of the financial crisis of 2008 and 2009.

* A default would impose a substantial tax on all Americans. Because Treasuries represent the benchmark borrowing rate for all other sectors, default would raise all borrowing costs. Interest rates for state and local government, corporate and consumer borrowing, including home mortgage interest, would all rise sharply. Equity prices and home values would decline, reducing retirement savings and hurting the economic security of all Americans, leading to reductions in spending and investment, which would cause job losses and business failures on a significant scale.

* Default would have prolonged and far-reaching negative consequences on the safe-haven status of Treasuries and the dollar’s dominant role in the international financial system, causing further increases in interest rates and reducing the willingness of investors here and around the world to invest in the United States.

* Payments on a broad range of benefits and other U.S. obligations would be discontinued, limited, or adversely affected, including:

o U.S. military salaries and retirement benefits;
o Social Security and Medicare benefits;
o veterans’ benefits;
o federal civil service salaries and retirement benefits;
o individual and corporate tax refunds;
o unemployment benefits to states;
o defense vendor payments;
o interest and principal payments on Treasury bonds and other securities;
o student loan payments;
o Medicaid payments to states; and
o payments necessary to keep government facilities open.

Phillips and Republicans that are against raising the debt ceiling aren't fiscal conservatives. They are anarchists.

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