Republicans are demanding huge spending cuts including cuts to Medicare and other entitlement programs in exchange for agreeing to raise the debt ceiling. The Tea Party wing of the Republican Party seems in no mood to negotiate. Either the Democrats and Obama agree to their terms or the debt ceiling will not be raised. Period.
So how much does it really matter? What would likely happen if the debt ceiling isn’t raised by August 2nd, the day the U.S. official goes broke?
Robert Reich, former U.S. secretary of labor and professor of public policy at UC Berkeley, spells out the probable scenario in an article today appearing on SFGate, the website of the San Francisco Chronicle.
Reich notes that Treasury Secretary Tim Geithner will have to do everything he can to continue paying interest on U.S. debt and avoid a default that would be truly disastrous for the country and the economy. Reich writes:
The government will have to cut spending by about 35 percent, about $3.8 billion a day. Seniors expecting Social Security and Medicare checks will be in for a rude surprise, as will military personnel and other government workers expecting to be fully paid.
Meanwhile, America’s creditors are likely to become spooked about the risk of not being repaid in the future. As a result, credit markets could go into free fall. Interest rates would skyrocket. The dollar would plummet.
Why would the Republican Party allow such a thing to happen? Won’t the Wall Street fat cat Republicans step in to stop such an economic disaster? As Reich points out, the Tea Party wing of the party is in control. Wall Street may control the money but the Tea Party controls the ground troops, particularly the troops that will get out the vote in Republican primaries. Any Republican up for re-election or who is seeking the Republican nomination for President is terrified of the Tea Party.
If things don’t change, come August 2nd we may be holding memorial services for the American economy and a whole lot of seniors are going to be struggling to figure out how to pay their bills and get medical care.
In an earlier post, “New research reveals what drives the Tea Party,” I wrote that various polls show only about 20% to 25% of Americans identify with the Tea Party and only about 5% could be considered active supporters. Think about that. It is possible that 5% of Americas with very extreme views may exercise enough control over the Republican Party to create a true disaster for the country, one from which we may not recovery for decades.
It is time for the leadership of the Republican Party to finally say “NO” to its extreme elements and work with Obama and the Democrats to do what is right for the country. It is time for all of us to demand that they do. Nothing less than the wellbeing of the country is at stake.
Read Reich’s full article here:
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