The debt limit debate has certainly been a fertile ground for silly commentary, and now Andrew Ross Sorkin, who contributes to the New York Times Business Deal Book, offers his own contribution.
Sorkin notes that the stock markets and bond traders have not yet panicked, even though the debt limit negotiations have broken down. So he runs out to quote those who say all the scaremongering was both wrong and a strategic mistake, and those who issued warnings have lost all credibility.
The thrust of Sorkin’s article, however, is not merely about political credibility or negotiating strategy. It is about whose interests are at risk.
Without acknowledging it, Mr. Sorkin is simply giving credence to a favorite Tea-GOP talking point, that Tim Geithner has more than enough revenues coming in to pay the interest and principal on bonds and other sovereign credit obligations. So there is no risk of “default” and it’s irresponsible scaremongering to tell granny she might not see her Social Security checks or get Medicare. The market can do the math, and that’s why investors have not panicked yet.
Of course, the non-wealthy can also do the math, and they can figure out that if these preferred creditors are fully protected, but the government is funding close to 40 percent of it’s spending via deficits, a lot of other people will not be funded. It’s just math, and that is essentially the point Geithner has been making. This thought doesn’t appear in Sorkin’s article.
With more obligations than revenues, someone must lose. Tim Geithner, probably not everyone’s choice for protecting main street America over banks, Wall Street and foreign creditors, will make the calls on what gets paid and what doesn’t, no doubt with with help from Bill Daley, Dan Pfeiffer, and Barack Obama. Feel better?
And isn’t that the Tea-GOP game plan? If they can’t force the government to slash the New Deal in a Boehner/Obama grand screwing, or the current Harry Reid or Boehner versions of that, they’ll force the contraction another way. And what will that contraction do to the economy, Ross?
Sorkin can’t be bothered to mention, let alone discuss, what a major cut in government spending on everything else would do to the economy. Those who have looked at one scenario suggest that a 10 percent hit on GDP could essentially crash the economy again, never mind what that means to millions of real people who could be devastated and to essential government health and safety services.
But not to worry. There are enough life boats for the rich, so those of you who do not have first class tickets, please don’t cluster around the boats. It just complicates the rescue plan.