Wednesday, June 29, 2011

Geithner Letter to DeMint

Reading Treasury Secretary Tim Geithner's letter to Jim DeMint is horrifying. Geithner has to explain basic economics to DeMint as if he was a child. It is painfully obvious that DeMint is incredibly stupid. Demint believes that the country can run without raising the debt ceiling. DeMint proposes only paying the interest back to banks. Geithner explains that the federal government borrows 40 cents for every dollar. There will will future financial obligations, in terms of loans and budget priorities in legislation that has already been passed.

DeMint believes the Treasury Department runs like his credit card. Just stop using it and everything is okay. If DeMint failed to pay his mortgage and auto insurance, he would be homeless and unable to drive. The federal government would not have enough revenue to fund its military operations in Afghanistan, Libya and Iraq. The fedral government would likely shut down. I wonder how DeMint would feel when he doesn't receive a paycheck.

Geithner explaining DeMint's factual errors to him.

In your letter, you suggest that the debt limit should not be raised, and instead that federal debt be "capped" at the current limit. You further propose that after the government's borrowing authority is exhausted in August, the United States should for some indefinate period pay only the interest on its debt, while stopping or delaying payment of a broad swath of other commitments the the country has made under the law.

I have expressed my concerns about this idea before, but I will restate them to be clear: this "prioritization" proposal advocates a radical and deeply irresponsible departure from the commitments by Presidents of both parties, throughout American history, to honor all of the commitments our Nation has made.

The debt limit applies to past decisions of Congress. Increasing the debt limit is necessary to allow the United States to honor obligations previously authorized and appropiated by Congress.

DeMint is advocating ignoring past legislation that has become law. The Treasury Department does not have the power to do that under the Constitution. DeMint thinks the debt ceiling is a "budget enforcement mechanism." DeMint is under the illusion that the debt ceiling was designed to wipe away past fiscal obligations.

Geithner explains that the financial sector would go into a panic if DeMint's "priorization" idea became reality. Fortunately, that is unlikely. Wall Street is going to make Republicans raise the debt ceiling. The debt negotiations has been nothing more than theatre.

DeMint made this statement to The Hill.

"Secretary Geithner's approach to dealing with the looming debt crisis is to take his hands off the wheel and let the car careen over the cliff," he said.

Notice that DeMint doesn't cite what tools Geithner has. Probably because DeMint has no idea what the Treasury Secretary does. Below is Geithner's letter to DeMint.

Geithner Letter to Sen. DeMint

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