Grinding on

The government shutdown is just an ongoing nightmare.  It's had minimal direct effects on me, so far (unavailability of the Smithsonian and various parks in the area (one of which I hadn't previously realized was a federal park) is about it), but I've seen its effects on a lot of other people that I know, and with whom I work.

This whole thing is getting more surreal by the day.  First, it was over an extraconstitutional way to repeal a law.  Yes, a law, not a bill, as Republicans kept insisting.  Not only that, but a law that the Supreme Court had already weighed in on.  Even more ironic (and stupid), it was a law that had its origins with the Heritage Foundation and Congressional Republicans.

But no, we had to get rid of it, or it would be the end of Civilization as we know it (yes, their rhetoric really did reach that level of absurdity).

Then we had to do keep the government shut down so that one of a number of concessions could be wrung out of the Administration.

Then it had to be kept shut down until Republicans got something out of the shutdown, even if they weren't sure about what.

Now, we're hearing that even a default wouldn't be a big deal, because tax revenue is more than enough to keep up with debt service payments.  Revenue being more than debt service is probably true, but everything else in that statement is false or misleading.

1) The market doesn't look at it, and say, "Well, I'm being paid, so even if a number of other people aren't, that's ok."  No, they look and say, "That entity isn't paying all its bills, so I could easily be next to be skipped or cut off".  That's how you start the sovereign equivalent of a bank run.

2) Counting revenue to be more than debt service would require stealing (and this is outright stealing, no longer having it under the table) from Medicare, Medicaid, and Social Security.

3) It would also mean canceling all tax writeoffs.

4) If a default isn't a big deal, then there really is no leverage over the Administration.

5) A more pernicious side effect is that, right now, CDS contracts on the government defaulting are going up a lot.  If the government fails to pay its bills, those will cash.  Those cashing will probably bankrupt the banks that issued the contracts (the biggest problem with so-called banking reform is that it failed to require banks issuing CDOs to keep sufficient cash to cover a reasonable percentage of issued CDOs.  So they don't have the money to pay out any significant percentage of failures).  With the government defaulting, there will be nobody left to save the banks.  No, not even the 'too big to fail' banks (and believe me, that's an even bigger problem today than it was five years ago; the other major flaw of so-called banking reform).  So you can probably kiss the entire banking system goodbye.  And if the banks go down, nobody will be able to get their money (probably not even people with money overseas).

Do any of points 1, 2, 3, and 5 sound like no big deal?

This is a big deal, and it will poleaxe the entire global economy.

The fact that this has been allowed to go as far as it has just blows my mind.  The GOP needs to stop this colossal game of chicken, because it will hurt everyone.  Badly.

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