WASHINGTON – Sen. Richard M. Burr, R-N.C., a reliable friend of business on Capitol Hill and no one’s idea of a bomb thrower, isn’t buying the apocalyptic warnings that a default on U.S. government debt would lead to a global economic cataclysm.
“We always have enough money to pay our debt service,” said Burr, who pointed to a stream of tax revenue flowing into the Treasury as he shrugged off fears of a cascading financial crisis. “You’ve had the federal government out of work for close to two weeks; that’s about $24 billion a month. Every month, you have enough saved in salaries alone that you’re covering three-fifths, four-fifths of the total debt service, about $35 billion a month. That’s manageable for some time.”
As President Obama steps up his declarations about the dire consequences of not raising the debt limit, increasing numbers of congressional Republicans are disputing that forecast, as well as the timing of when the Treasury might run out of money, further complicating the negotiating situation for both Obama and Speaker John A. Boehner, R-Ohio, who must find a way out of the impasse.
Both men were counting on the prospect of a global economic meltdown to help pull restive Republicans into line. On Wall Street, among business leaders and in a vast majority of university economics departments, the threat of significant instability resulting from a debt default is not in question. The problem is that a lot of Republicans simply do not believe it.
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. Some question the Treasury’s drop-dead deadline of Oct. 17. Some government services might have to be curtailed, they concede.
“But I think the real date, candidly, the date that’s highly problematic for our nation, is Nov. 1,” said Sen. Bob Corker, R-Tenn.
Others say there is no deadline at all – that daily tax receipts would be more than enough to pay off Treasury bonds as they come due.
“It really is irresponsible of the president to try to scare the markets,” said Sen. Rand Paul, R-Ky. “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?”
“If you propose it that way,” he said of not raising the debt limit, “the American public will say that sounds like a pretty reasonable idea.”
In a news conference, Obama said repeatedly that those who doubted the repercussions of a default were making a huge mistake.
“When I hear people trying to downplay the consequences of that, I think that’s really irresponsible, and I’m happy to talk to any of them individually and walk them through exactly why it’s irresponsible,” he said. “And it’s particularly funny coming from Republicans who claim to be champions of business. There’s no business person out here who thinks this wouldn’t be a big deal, not one.”
The turmoil created by the partial shutdown of the federal government has already sent investors fleeing from stocks to the safe harbor of Treasury bonds, long considered the safest investment on earth because the full faith and credit of the U.S. government has never been questioned. If that safe harbor is undermined, most economists have said loudly and repeatedly, the impact could be catastrophic.
The U.S. Chamber of Commerce and the National Association of Manufacturers, both bastions of Republican support, sent letters to Congress on Tuesday urging action on the debt ceiling.
“Our nation has never defaulted in the past, and failing to raise the debt limit in a timely fashion will seriously disrupt our fragile economy and have a ripple effect throughout the world,” wrote Jay Timmons, the president of the manufacturers’ group.
Some Republicans trust such warnings. “Unlike some of my colleagues, I’ve been told by too many people in the financial business that there will be reactions in the market,” said Sen. John McCain, R-Ariz. “Of course, I’m worried.”
But the voices of denial are loud and persistent, with some Republicans saying that the fallout from the continuing shutdown and the automatic, across-the-board budget cuts known as sequestration has been less severe than predicted.
Paul acknowledged that some economists disagreed with him but said that others agreed.
To Rep. Paul C. Broun Jr., R-Ga., and a candidate for the Senate, it is a question of ranking the evils.
“There are a lot of things that are going to affect our economy,” he said. “The greatest threat right now 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.”