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Republicans Seek to Force Default on US Debt

Let’s face what we all know by now: the Republicans have fallen off the deep end. In the Republican-controlled House of Representatives, an idea once confined to the conservative ‘wingnut’ fringe of the Republican party has morphed into the party’s mainstream — the belief that intentionally allowing a Federal default on paying the National debt might be an acceptable price to pay to make a political point by forcing the Obama administration to assume ownership of a fiscal mess created by the previous Republican president. Just to be clear that I am not simply being partisan or shifting blame here, the national debt DOUBLED under George W. Bush from $5Tn when he took office to $10Trn when he left. That means it took George Bush just five years to spend, what it took all previous presidents 200 years to do.  See for yourself, here, and here.

And increasingly Republicans – some say for cynical partisan reasons – are rejecting President Obama’s  $4.4 Trn Debt Reduction Plan and its dire predictions of economic “catastrophe” if the debt limit is not increased. They argue a period of technical default can be managed without plunging markets into chaos. But judging by the dire economic catastrophe in states that are controlled by Republicans such as Wisconsin, Ohio, Arizona and Texas — Rick Perry’s ‘Texas Miracle,’ really wasn’t — Americans should think carefully about the consequences to our way of living, and what happens when Republicans implement their draconian economic schemes — something George H.W. Bush(41) called ‘voodoo economics’ — that give unecessary tax cuts to the wealthy, billion-dollar bailouts to Wall Street and Big Oil, and tax loopholes to corporations that ship good-paying American jobs overseas, while ordinary working and middle-class Americans suffer. See more on Republican economics here.

WSJ: Moody’s Warns on US Debt

Establishment Republicans including Tim Pawlenty, the former Minnesota governor who announced his presidential candidacy last month, are backing a short-term default if it leads to deep, immediate spending cuts. Jeff Sessions and Paul Ryan, the top Republicans on the Senate and House Budget Committees, have also said failure to raise the debt limit would not trigger immediate catastrophe. Republican Senator Pat Toomey has even introduced legislation directing the Treasury to prioritize debt service over other payments if the debt limit is not raised. It has 22 Republican co-sponsors in the Senate and 98 in the House of Representatives, although no members of the Republican leadership have backed it.  David Frum, a former speechwriter for President George W. Bush and a Republican advocate for raising the debt limit, said he holds regular question-and-answer sessions with Republican congressman over a beer.

“I have yet to meet one Republican who actually says a failure to raise the debt limit scares them,” Frum said. “It is deeply, deeply troubling the number of Republicans I now talk to — and I include the mainstream — who think a technical default is manageable. Many on Wall Street disagree – myself included. And so does Donald Trump, See the video below…





Source: Reuters, WSJ                           Cartoon: Newsday/UPS by Wes Handelsman

 

Author

Elison Elliott
Elison Elliott

Elison Elliott , a native of Belize, is a professional investment advisor for the Global Wealth and Invesment Management division of a major worldwide financial services firm. His experience in the global financial markets span over 18 years in both the public and private sectors. Elison is a graduate, cum laude, of the City College of New York (CUNY), and completed his Masters-level course requirements in the International Finance & Banking (IFB) program at Columbia University (SIPA). Elison lives in the northern suburbs of New York City. He is an avid student of sovereign risk, global economics and market trends, and enjoys writing, aviation, outdoor adventure, International travel, cultural exploration and world affairs.

Areas of Focus:
Market Trends; International Finance; Global Trade; Economics

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