Photo: Gage Skidmore/Flickr
GOLAN HEIGHTS — 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 travelling 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 prioritise 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.”
As Paul points out, this would automatically force the federal budget into balance, a position he argues would give Republicans leverage to push through a comparatively gradual balanced budget amendment, similar to the “Cut, Cap and Balance” amendment that House Republicans passed in 2011.
“We have tax receipts to pay for about 70 per cent of the government and we’re running deficits of about 30 per cent, so what I would say is pay for the 70 per cent we would all keep going and stop paying the other 30 per cent until we come to an agreement,” Paul said. “That agreement would include an amendment to gradually balance the budget over five years. The only thing the debt ceiling would do is force us immediately to have a balanced budget.”
Though far-fetched, Paul’s plan is a creative way for the GOP to leverage the debt ceiling fight to cut spending; without similar legislation, it is not clear that the Treasury would have the legal authority to prioritise its payments, making default a possibility.
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.
Even Paul concedes this roadblock:
“Everybody is for spending cuts in the abstract, but then when you start naming specifics, people are like, ‘No I won’t vote for that because it’s in my district or my state,'” he said. “It’s a game — we defer the pain, and we defer having the real guts.”
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