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If the debt ceiling is not raised before the federal government uses up its current borrowing authority, then sometime in February the U.S. government will no longer be able to issue more debt -- at which point all hell will break loose.
If the government can't issue new debt, first it must stop paying for things, resulting in furloughs and a tightening or suspension of federal services.
What happens if the debt ceiling is not raised?
"There's always some wiggle room. There's various accounts that the Treasury can play with and able to draw on money so they could almost certainly extend the time past where you would literally run out of funds," said Dean Baker, economist at the Center for Economic and Policy Research.
At some point though, the Treasury will be unable to issue more debt. When that happens, things decay dramatically.
"My guess is you'd probably see some real panic in financial markets. You'd probably see interest rates on U.S. debt go through the roof. Sort of like what happened with Greece earlier in the year when there was concern that Greece would default on the debt," Baker says.
It's a hostage situation.....
It's a classic hostage situation. And the key question is whether Republicans are willing to hold ranks and exert their leverage longer than Democrats are willing to call their bluff. If neither side blinks, and Congress, led by Republicans, tells the world, "we're not going to pay off our debts," the economic fallout would be dramatic. If Republican demands are unreasonable and Democrats refuse to cave, then Republicans will be forced to decide whether to let the country -- and particularly their wealthy base, and donors on Wall Street -- take a huge hit, or let down the Tea Party, which is practically itching for a shutdown.
"It's a classic hostage situation."
Torn between two lovers.....could also be an apt description of the new Republican majority in the House come January. How can Republicans in an age of TeaBag insanity reward their authentic constituents...the filthy rich....and still hold on to their newfound love interest.....the TeaBaggers?
Blackmail. Extortion. Shakedown. Hold the nation hostage for ransom. And, naturally, lie about it while they're doing it.
In other words, the new House Speaker, John Boehner, will be, metaphorically, placing a gun to the head of Uncle Sam, and demanding of the Democrats that unless they do exactly as Republicans say.....the old, bedraggled guy gets it in the frontal lobe.
Just how the modern GOP rolls. Super patriots...they are.
Right on cue....the wings atop the nuts begin to spin....
"I think it will not be without some strings attached if it happens, because they're going to have to seriously address spending and debt," Senate Minority Leader Mitch McConnell told Fox News last week.
Sen. Tom Coburn (R-OK) suggested he'd like to see over $300 billion in spending cuts before he'd end a filibuster on the debt ceiling.
On NBC this weekend, Tea Party leader Jim DeMint (R-SC) joined in on the fun: "No, I won't. Not-- not unless this debt ceiling is combined with some path to balancing our budget: Returning to 2008 spending levels. Repealing Obamacare," DeMint said. "We have got to demonstrate that we have the resolve to cut spending."
Translation: Sure, we're going to hold a gun to Uncle Sam's forehead and demand from the Democrats a ransom for our very rich constituents....and yeah, world markets could get shaky and begin melting down under our hostage threat....placing the future of America in serious doubt. But goshdarn it....we've been waiting forever to slash and burn those communist entitlement programs. If now's not the time to place a gun to America's head to get what our rich owners desire......slashing and/or privatizing Social Security, Medicare, Medicaid....repealing health care and extending deep Bushian tax rates....when would it ever be time?
And besides....we have to put on a good
There is little doubt that the blatantly whorish and dishonest new Republican Party majority in the House are planning on f*cking up the country in a big way. It is many of these same Republicans who repeatedly raised the debt ceiling over the 8 years of the Bush-Cheney Reign of Terror.......a period in which the national debt doubled. These reincarnated deficit and debt hawks never thought twice about "demonstrating a resolve to cut spending", then. They never put a gun to Uncle Sam's head, then.
It is only now, with a Democratic president in charge, that government belts must be tightened, entitlements ripped and stripped, tax cuts for zillionaires made permanent....or the old Uncle gets it.
Bill Clinton was cornered and coerced into balancing the budget by charlatan GOP fiscal hawks in the 90's, a hostage-taking group of GOP nuts high on Gingrich crack. All of which enabled a new GOP
That's exactly what the new hostage takers have in mind.
I cannot see how any of this will work out well.