|Bill Clinton and Newt Gingrich before closing the government in 1995.|
Remember how they played “chicken” back in the 1950s? Two guys in hot-rod cars drove toward a cliff. The first to jump out was Chicken. His friends all laughed. Click here to see how it played out in the classic film Rebel Without a Cause. Notice how the winner got to celebrate by being killed while his friends drank beer.
- First, on March 4, the Continuing Resolution (CR), the law that funds most of the US federal government, expires. This is no accident: Republicans last December insisted on the short fuse. Unless the CR is extended or replaced, the government must shut down that day.
- Second, in late March, the Debt Ceiling, which limits the total amount of money the Federal Treasury can borrow — set last year at $14.3 trillion — is scheduled to be reached. Since Treasury borrowing is needed not just to fund the government but also to replace expiring bonds and pay interest, failure to raise the ceiling could cause the US government to default on its bills.
Government shut downs? Defaults? The last time Washington shut down was in 1995 when then-House Speaker Newt Ginrgich insisted then-President Bill Clinton accept a list of spending cuts, which Clinton refused. For a full week as the polticians jockeyed, offices closed, benefit checks froze, and national parks and monuments went dark. The public cringed at the whole futile exercise. As for defaulting on bonds, the US government has never done this in its entire 213-year history (with a partial exception in 1933 when FDR eliminated the “gold clause” in US obligations, allowing debt paid in paper currency.( Click here to see Alex Pollock’s take on this from the American Spectator. )
US “full faith and credit” — its commitment to pay bills — is enshrined in the Constitution as the basis of our national ability to borrow. It is as close to sacrosanct as anything in finance, and the only thing that separates us from Greece and Ireland in the eyes of lenders.
So why are Congressmen and Senators — particularly Republicans of the Tea Party stripe — threatening once again today to play chicken with America’s global fiscal standing by refusing the raise the debt ceiling or extend the CR? Is it really just simple, self-serving, annoying politics-as-usual?