Senator Rand Paul has a new plan to prioritize government spending in order to stave off defaults and bring the country back towards solvency:
In a renewed attempt to force President Barack Obama’s hand on the debt limit, Kentucky Republican Sen. Rand Paul is pushing legislation that would ban federal spending on anything but interest payments on the national debt, Social Security checks, and military salaries.
Paul, who is traveling through Israel this week, told Business Insider here Thursday that he believes the GOP should take a more pro-active approach to the coming fight over raising the debt ceiling. Rather than march the country toward a government shutdown — and spook markets with possible default — Paul argued that Republicans should pass a bill that would force the government to prioritize payments to bondholders.
“The only real way to have leverage with the debt ceiling is to convince people that we are not going to default on our debt,” Paul said. “We could actually direct the President to pay our interest, make Social Security payments, pay soldier salaries, the basic functions that could keep government going. That way we take default off the table. They always scare us into raising the debt ceiling by saying that the stock markets will tank, everyone will go crazy if we default. I don’t think we should default — but I don’t think we should raise the debt ceiling either.”
This is actually a good idea; by focusing on what the government should be doing (in the case of Social Security, fulfilling promises it made to people) it would allow the government to avoid a debt ceiling fight this year that nobody wants, and hopefully should make it easier to cut back on spending.
The only tweak I would have here is that military salaries should be renamed “government salaries.” Unless Paul wants to fire every civilian working for the government, you do have to pay them for their labor. However meager it is.
The author of this article, Grace Wyler, says there are two problems with this:
Still, there are two big problems with Paul’s idea.
First, he assumes that potential default — not Draconian spending cuts — would be the only explanation for a market scare.
Second, there is little political will to actually balance the budget. As Business Insider’s Joe Weisenthal argues today, as soon as the austerity measures went into effect, support for the spending cuts would evaporate and Congress would vote to raise the debt ceiling.
The first one I don’t see as true. If, perhaps, we cut spending by 60-70% in one day, maybe, but less drastic—though still signficant cuts—should free up the economy. Think of the government spending millions of dollars to buy milk ingredients from farmers or spend on regulations preventing entrepreneurs from starting new businesses. Instead, that money would remain in the private sector, and there would be a far greater incentive to actually use it to create new opportunities and grow the economy. I don’t think that would scare the market. The only ones who would be scared would be the big banksters on Wall St., who are basically in cahoots with the government now for the past decade, and even they would find a way to benefit from it. Quite easily.
The second criticism is far more solid. It’s just an observation of Washington culture. No one wants to really change anything. Even with Republicans, there is only lip service to true government cuts.
Still, this is a good idea. Now all we need are more folks in Washington to fight for it.