The Dangers of Politicizing the Debt Ceiling Vote

In 2006, then Senator Barack Obama voted against raising the debt ceiling. At the time, he said this:

The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies.

Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.

In 2007 and in 2008, when the Senate voted to increase the limit by $850 billion and $800 billion respectively, Senator Obama did not even bother to vote. He now probably wishes he hadn't voted on the issue in 2006. Now, of course, the President is singing a different tune and rightly so.

In an interview to be aired by ABC News, President Obama has admitted that politics drove his thinking in 2006 when he voted against raising the debt limit. 

"That was just an example of a new senator making what is a political vote as opposed to doing what was important for the country," Obama said, "I'm the first one to acknowledge it."

Obama said he now understands why Republicans are concerned about voting to raise the debt limit, characterizing it as a "lousy vote." He continued, "Nobody likes to be tagged as having increased the debt limit for the United States by a trillion dollars."

The President added if Senators could see what he sees as President, they wouldn't vote against raising the limit. "As President, you start realizing...we can't play around with this stuff. This is the full faith [and] credit of the United States."

Actually it is more than the full faith and credit of the United States, it is much of what underpins the whole global economy. Senator Obama was wrong in 2006, the failure of leadership would be not to raise the debt ceiling though I have to note that no other country on Earth has the idiotic policy that the United States has of having a legal limit on the amount of bonds the central government can issue. It is a market driven event, not a political one.

Enter now, our bête noir du siècle, because the sheer stupidity and ignoble ignorance of this man far transcends that fit for a mere day, Senator Jim DeMint of South Carolina.

From The Hill:

Sen. Jim DeMint (R-S.C.) said on the conservative Laura Ingraham Show he is considering filibustering an upcoming vote to raise the nation's $14.3 trillion debt limit if it doesn't contain other fiscal reforms.

That could pose a conundrum for leaders in both political parties, who say it is imperative for Congress to raise the debt ceiling to prevent the government from defaulting on its debt.

DeMint, whom Tea Party activists consider a key ally, urged Republican leaders to draw the line.

"I think Republicans have to decide this is a time to start the fight," he said. "Not passing the debt ceiling is not going to cause us to default on our debt."

Well, actually, it leads to a technical default. The US Treasury would be barred from its legal authority to issue bonds that finance government despite the fact there is a global demand for US securities in the capital markets. The historically low level of real and nominal interest rates on Treasury securities is proof that there is still strong demand for Treasury securities.

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