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May 16, 2011 3:40 PM WWRD (What Would Reagan Do) on the debt limit

By Steve Benen

I’d much prefer a political discourse in which policymakers simply evaluated a measure on the merits and voted accordingly. But since that’s fallen out of fashion in Washington, we’re left to emphasize observations like these.

Several prominent congressional Republicans have dismissed the Obama administration’s claim that the country would face dire consequences if Congress does not vote to raise the federal limit on government borrowing by August.

But an icon of the Republican Party - former president Ronald Reagan - warned Congress during his presidency that a failure to raise the debt limit could also cause a financial catastrophe.

In a November 1983 letter to then-Senate Majority Leader Howard H. Baker Jr. (R-Tenn.), Reagan warned that without a higher debt ceiling, the country could be forced to default for the first time in its history.

Reagan wrote: “The full consequences of a default — or even the serious prospect of default — by the United States are impossible to predict and awesome to contemplate. Denigration of the full faith and credit of the United States would have substantial effects on the domestic financial markets and the value of the dollar.”

This really shouldn’t matter. Republicans should simply realize that raising the debt ceiling is the sane thing to do and act accordingly.

But we’re currently left looking for a way to help GOP officials understand the seriousness of the situation, and given Republicans’ religious reverence for “Ronaldus Magnus,” maybe this will help.

As Pat Garofalo noted this is especially important for GOP lawmakers who have convinced themselves that this issue is fairly trivial, and concepts like “default” and “full faith and credit” are minor inconveniences better left ignored.

If they’re not willing to listen to economists, American business leaders, the financial industry, the Federal Reserve, and the Treasury Department, maybe they’ll listen to Reagan, who decried policymakers who would “bring the government to the edge of default before facing [their] responsibility. This brinksmanship threatens the holders of government bonds and those who rely on Social Security and veterans benefits. Interest rates would skyrocket, instability would occur in financial markets, and the Federal deficit would soar.”

Steve Benen is a contributing writer to the Washington Monthly, joining the publication in August, 2008 as chief blogger for the Washington Monthly blog, Political Animal.

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  • c u n d gulag on May 16, 2011 3:47 PM:

    Steve, that was Reagan THE MAN!

    He's immaterial compared to Reagan THE MYTH!

    Reagan THE MAN is a wholly owned subsidiary by the Liberals and Democrats.

    Reagan, the MYTH, is like Jesus, Zues, Thor and every other mythical diety - perfect in every way.

  • DAY on May 16, 2011 3:51 PM:

    The so-called "quote' is obviously a forgery, done by the same folks who do birth certificates and National Guard records.

    Besides, Everybody Knows reagan never raised taxes.

  • jonas on May 16, 2011 3:53 PM:

    I'm sure McConnell, Boehner and other GOP leaders *know* that this is insanity and that they're playing chicken with the US and global economy by doing this, but they are also scared to death of their insane, know-nothing base that thinks raising the debt limit would just mean more free cash for strapping young bucks to buy T-bones. Remember, St. Ronald warned about them, too.

  • Unhappy Realist on May 16, 2011 3:57 PM:

    Realistically Reagan was probably too liberal to even be part of the Democratic Party today, never mind the GOP.

  • DK on May 16, 2011 3:57 PM:

    Maybe Obama should photocopy this letter and cross out Howard Baker's name and write in Boehner's and then distribute copies of the modified letter to all the MSM.

  • slappy magoo on May 16, 2011 4:08 PM:

    This is an entirely moot point. Reagan was not a Black Democrat. Try again.

  • jcricket on May 16, 2011 4:10 PM:

    concepts like �default� and �full faith and credit� are minor inconveniences better left ignored.

    The conservative crowd are the very same people who overlooked GWB's repeated history of destroying every company he ever controlled, needing someone to come along to either bail him out, or clean up his mess. Of course they are of the mindset that it's okay to steer a ship toward the rocks. Someone else always picks up the pieces after the wreckage. After they have removed every piece of value from the ship, of course.

    The people who have to sacrifice and work their asses off to make it to recovery are never them.

  • kevo on May 16, 2011 4:11 PM:

    Though honesty is a casuality of politics, at least Ronald Reagan wasn't as dishonest as the current crop of Republican "leaders"! -Kevo

  • jcricket on May 16, 2011 4:14 PM:

    [I guess the normal copy / paste doesn't translate anymore, even with HTML tags. Go figure.]

  • Schtick on May 16, 2011 4:21 PM:

    There you go again.
    They just don't care. What is so hard to understand about that?

  • Tom Jonas on May 16, 2011 4:43 PM:

    The Republicans learned from Rahm Emanuel.
    "You never let a serious crisis go to waste. And what I mean by that it's an opportunity to do things you think you could not do before".

    Opportunity is knocking.

  • Dave J. on May 16, 2011 4:50 PM:

    "The full consequences of a default...are...awesome." --Ronald Reagan

    See!!??!? He said it would be awesome! Sheesh, you libs.
    --GOP

  • doubtful on May 16, 2011 4:53 PM:

    St. Ronnie was nothing but a Goldman Sachs puppet, as is every single person who has followed him in that position.

    The bankers were just more timid at the time than they are now. If they knew then what they could do without reprisal we wouldn't be remembering Regan as we do, but as the myth he's evolved into in the right wing looney world.

    But it was during Regan that the plutocracy took hold and they've never looked back.

  • INTJ on May 16, 2011 5:17 PM:

    According to this theory, giving the alcoholic more vodka is the sane thing to do. Really?

    The facts: The government expects to take in $2.2 trillion this year, and of that, we will spend between $207 billion and $357 billion on interest payments. That's all we need not to default, and maintain "full faith and credit." That means we will take in nearly $ trillion more than we need to avoid default.

    Now, there is merit in having a discussion over how disruptive diverting significant operational spending would be, but it isn't the same conversation. The U.S. won't default on its obligations unless the administration wants it to.

  • Mark on May 16, 2011 5:17 PM:

    As Tom Jonas alludes, of course the issue is not that Republicans think raising the debt ceiling or the potential necessity of defaulting are not serious concepts; they're well aware of the probable damage to American credibility and financial standing if that were to happen.

    They're simply prepared to let it happen, with all the attendant problems it would cause, if it would weaken Obama and reduce his chances of re-election. That's the only thing that matters, and all other considerations are subordinate to that goal. If something that would be an American "first" and would be overwhelmingly negative can be made to happen on Obama's watch, it's worth whatever it costs. So be it, right, John?

  • chi res on May 16, 2011 5:37 PM:

    The government expects to take in $2.2 trillion this year, and of that, we will spend between $207 billion and $357 billion on interest payments. That's all we need not to default, and maintain "full faith and credit."

    So, I don't have to pay my bills, just interest, and I can maintain "full faith and credit"?!? Sign me up!

  • Neo on May 16, 2011 6:16 PM:

    Here are Obamas thoughts on the debt limit in 2006, when he voted against increasing the ceiling:

    The fact that we are here today to debate raising Americas debt limit is a sign of leadership failure. It is a sign that the U.S. Government cant pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Governments reckless fiscal policies. Increasing Americas 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.

  • Doug on May 16, 2011 8:28 PM:

    "...GOP lawmakers who have convinced themselves that this issue is fairly trivial..." Steve Benen

    What can one expect after three decades of comparing the Federal budget to the family budget? Individual bankruptcy is no longer the cause of undying shame and/or the "honorable way out"; ie, suicide. I really believe that too many of today's Republican/Teabaggers simply don't comprehend the difference between THEIR budget and the Federal budget. Or between personal bankruptcy and a Federal "default".
    An individual can declare bankruptcy and have their debts erased. Then, by paying their bills on time, and by not incurring any further debt, after three or four years, their PERSONAL credit is back to normal, or near it.
    Of course for the US, it doesn't work that way. A "default" by the Federal government DOESN'T erase any of the outstanding debt, it only means that any FUTURE debt will cost much, much more to finance. Not only will we STILL owe $14 trillion, but the interest charges on that amount will double, triple or worse!

    Oh, and Neo? I believe what Sen. Obama was objecting to was the refusal to increase taxes and thus DECREASE the amount of borrowing needed to fund the Federal government. The context hasn't changed, taxes need to, at the very least, return to the levels in place BEFORE GWB decided it was more important to cut taxes than PAY OUR DEBTS!

    ommear for? "om, me ar for" what?

  • knightphoenix2 on May 16, 2011 9:45 PM:

    Doug,

    In addition what you said, the vote to raise the debt limit in 2006 ALREADY had enough votes to pass; so Senator Obama's "No" vote wouldn't caused a financial crash. And, of course, he was *dead right* about the need to raise revenue to pay for those extra expenses that the Bush Administration was hiding "off the books."

  • Texas Aggie on May 17, 2011 12:46 AM:

    Interest rates would skyrocket, instability would occur in financial markets, and the Federal deficit would soar.

    But it's a crisis that the republicans can take advantage of? They can feast on the corpse of the country after it's all over. What part of "Don't give a sucker an even break" don't you understand?

  • Zorro on May 17, 2011 1:25 PM:

    As Pat Garofalo noted this is especially important for GOP lawmakers who have convinced themselves that this issue is fairly trivial, and concepts like default and full faith and credit are minor inconveniences better left ignored.

    Since most GOoPers seem incapable of handling more than a single idea at a time, how about this one for them: since the US is no longer on the Gold Standard, or even bimetallism, the only source of value of the US dollar is the "full faith and credit" of the US government. Should the US be forced to default on a single debt, even once, this sole source of value to the US dollar would evaporate, leaving US dollars virtually worthless.

    Does that get your attention yet, Teabaggers? Or are you too busy playing dress-up to mind the country you've decided you want to rule?

    -Z

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