Appearing yesterday on CBS' Face the Nation (transcript, here), Michele Bachmann made one accurate statement. She was asked by host Bob Schieffer"if you can't get an agreement with the Democrats to cut spending, would you really vote against raising the debt ceiling and allow the government or force the government to begin defaulting on its debts?" Bachmann responded
Well, first of all it isn't true that the government would default because very simply the Treasury Secretary can pay the interest on the debt first and then and from there we just have to prioritize our spending.
As American Action Forum President and former McCain economic adviser Douglas Holtz-Eakin explains in the 58 second video below, presumably the federal government would, with its $2.25 trillion in reserves, pay the $300 billion interest on the debt. It then would have $1.95 trillion remaining with which to satisfy mandatory spending (including farm programs, but overwhelmingly entitlements), approximately $2.10 trillion. The money available would be insufficient to make all these payments while $1.375 trillion dollars in discretionary spending would go unpaid.
At the very least, then, failure to lift the debt ceiling would probably mean some mandatory spending obligations for Social Security/Medicare/Medicaid would go unmet and there would be no additional money for highways, education, or soldiers.
The Executive Branch owns the task of determining where the limited funds go, authority both programatically and politically advantageous. President Obama, clearly determined to avoid default (and failure to agree on a deal to lift the debt ceiling) could cite the needs which would be shortchanged by GOP failure to raise the debt limit. That would include, most likely, Medicare and Social Security, two wildly popular programs. Obama could accuse the GOP- credibly, ethically, and effectively- of endangering the safety of American fighting men and women. The man who got bin Laden vs. those who would make it impossible. Or as Susie Madrak pointed out six months ago, Treasury Secretary Geithner simply could
stop paying the salaries of members of Congress and their staffs. It probably wouldn't take long, in that event, for Congress to vote Obama the debt-ceiling raise he needs.
The debt ceiling, as Holtz-Eakin and Nate Silver persuasively argue, will be raised. It will be done with or without trillions of dollars in cuts that would undermine the social-safety net and jeopardize the economic recovery. As Silver notes, "in practice, most of the measures that might be employed"- aside from increasing taxes on the wealthy, supported by most Democrats- in a budget deal "are popular only "in theory." With reductions in Medicare, Social Security, or support for "the troops" highly unpopular and the bully pulpit well within reach, it's up to President Obama to get done a deal consistent with Democratic values.