Republicans are engaged in a dangerous game of brinksmanship over raising the debt ceiling. It's a game that could end in disaster.
The US is a debtor nation, and as such, we are desperately dependent upon good credit. So far, we have been able borrow and borrow at favorable rates because "the full faith and credit of the US government" stands behind every bond, every borrowed dollar.
But that could change if Republicans continue their cynical game of economic chicken.
What Republicans risk, even if they eventually capitulate and raise the debt ceiling, is the loss of this faith, and the unprecedented catastrophe that loss would bring on.
If the international community even suspects the US will routinely consider not honoring its debts, the cost of money for US industry, consumers and government would skyrocket almost overnight, bringing on the mother of all depressions, possibly with simultaneous inflation.
Republicans claim they're doing this because they're genuinely alarmed by the deficit, and that it poses a clear and present danger to us.
Let's be clear. Republicans don't give a damn about the deficit. Here's the proof.
Fact: The Ryan budget - which Republicans voted for and support with an almost religious fervor - doesn't achieve a balanced budget until 2063.
Why does it take so long? Because balancing the budget isn't really the point. In fact, Ryan's budget adds at least $62 trillion to the debt between now and 2063 - so much for their faux emergency.
In reality, the Ryan budget is a stealth vehicle designed to pass a nightmarish wish list of very unpopular Republican giveaways to the rich and powerful, while repealing popular social programs.
For example, it cuts taxes on the highest wage earners from the current 35% down to 25%, it lowers corporate taxes by the same amount, it dismantles Medicare, guts Medicaid, eliminates regulations on Wall Street and the financial community, eviscerates Pell grants, establishes a process for "reforming" the Social Security program, and all but eliminates environmental protections - on an on it goes. By now, you know the drill - give trillions to Wall Street and the uber-wealthy, kill regulations that create a level playing field, and pay for it out of the hides of the middle class.
Fact: Republicans created most of the deficit.
Our current deficit is about $13.5 trillion dollars. Reagan, Bush I, and Bush II are responsible for nearly 70% of that debt - an amount more than twice as much as all previous presidents combined. And conservative attempts to blame a Democratic Congress don't hold water -- for the most part, Congress passed budgets slightly lower than those requested by Bush and Reagan. During the time this massive debt was being run up, did Republicans express even an iota of concern? Nope. In fact, Dick Cheney famously said, "Reagan proved deficits don't matter."
Fact: The People's Budget proposed by the Congressional Progressive Caucus creates a budget surplus by 2021, and for the most part, the proposals it uses to do it are supported by the majority of Americans.
If the deficit were a dire emergency worth risking the US's financial credibility and a catastrophic economic meltdown, then surely eliminating the deficit by 2021 is better than eliminating it by 2063 and amassing an additional $62 trillion in debt in the meantime? Not if you're a Republican. Nor, apparently, if you're in the Obama Administration.
The bottom line is, Republicans created the economic crisis and the debt they are now brandishing as a weapon in a political war, precisely so they could mount a stealth attack on the New Deal programs Americans love, and they are risking America's future prosperity to do it.
Right now, the media and the Democratic Party are feeble enablers of this reckless and dangerous strategy. Indeed, the Obama administration's penchant for compromising with Republican lunacy is now so finely honed, one has to believe that if Republicans announced that we needed to sacrifice 100 virgins to fix the economy, Obama would stick out his chin and say, "No. We only need 50 - and I won't sacrifice even one more than that."
As Robert Reich pointed out in his June 1st blog, the US economy suffers from a demand deficit, not a budget deficit. And with industry sitting on more than $2 trillion in profits instead of investing it, that demand can come from only one place - government. This means revenue must be a part of any deficit reduction, if we are to achieve prosperity.
But with Obama arguing about the number of virgins we should sacrifice, instead of using to the Bully pulpit to back a serious budget proposal capable of creating prosperity, don't count on it.
And as yesterday's Congressional vote on raising the deficit ceiling shows, Democrats are petrified of being labeled soft on the deficit, so don't look for leadership there, either.
Meanwhile, the media is lionizing Paul Ryan's ludicrously self-contradictory budget, while ignoring a serious proposal that actually accomplishes what Republicans say we must accomplish.
Here's the irony - Puff the Mighty Deficit Dragon was created to serve the interests of the rich and powerful, the ones who call the tune in Washington. The ones who set the politicians dancing and the media elite singing. But right now, the Mighty Deficit Dragon has gotten away from them, and is threatening to bring down the whole house of cards.