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Wednesday, June 11, 2014

Will Congress "Pay the Bills" in 2015?

by Calculated Risk on 6/11/2014 11:19:00 AM

I wrote several posts about the "debt ceiling" debate in 2011 and again in 2013. Unfortunately "debt ceiling" sounds virtuous, but it isn't - it is actually a question of "paying the bills".   And I've always argued that Congress would "pay the bills". So even though the debate in 2011 clearly scared many Americans and impacted the economy, I was confident that Congress would eventually do its job.

These political stunts always happen in off election years with the hope that most voters will forget about the nonsense by the next election.  So there is a risk in 2015 - and right now I'm a little more concerned than in previous years.  Most of the commentary concerning the upset of Congressman Eric Cantor has focused on immigration reform, but his opponent has also argued that the government should not pay the bills (default on payments to the American companies and people).  

This is an economic risk for next year (and a political risk for the GOP).  As Republican Senator Mitch McConnell noted in 2011, if the debt ceiling isn't raised the "Republican brand" would become toxic and synonymous with fiscal irresponsibility.

Back in 2013 I promised to start criticizing Congress earlier in the process since 2011 was ridiculous and reckless (2013 was also dumb). I think there is a general ignorance of how the budget works, and what it means to be fiscally responsible. I'll write more about these topics and start earlier this time! 

Note: There are certain politicians who think it is OK to not pay the bills as long as the U.S. makes interest and principal payments on the debt.  That is crazy talk.  There is a name for people who don't pay their bills: deadbeats.  If politicians don't pay their personal bills, they are deadbeats.  But if they stop the government from paying the bills, we are all deadbeats.  And there will be serious economic consequences for not paying the bills on time.  The consequences will build over time, but after several months, not "paying the bills" in 2015 would ripple through the entire economy.