Many have noted the strange push on the part of some Republicans to pretend that refusing to raise the debt ceiling is some kind of consequence free action, including David Weigel. I noted in an earlier post, Forbes Magazine has a couple of writers encouraging this belief.

Republican House members have said things like this:

“We’ve got more than enough cash flow, more than enough cash flow to pay interest on the public debt when it comes due and the House Republicans have passed a prioritization bill,” said Texas Rep. Joe Barton on CNBC this week. “This talk about default by the U.S. Treasury is nonsense. The president can be smart or the president can be stupid. And I would assume as smart as President Obama is, when push comes to shove, he’ll be smart. So we are not going to default on the public debt. But that doesn’t mean that we have to pay every bill the day it comes in.”

Things similar to this have been said by Rep. Ted Yoho (R-Fla), who actually thinks that a default would bring stability to world markets because they would be reassured that we were serious about curbing our debt (He doesn’t want to increase the debt ceiling ever again.) and two Senators have jumped on the denial train as well. Sen. Tom Coburn tosses this in:

“I would dispel the rumor that is going around that you hear on every newscast that if we don’t raise the debt ceiling we will default on our debt. We won’t.”

And Ted Cruz apparently can’t make up his mind.

Consider these two Ted Cruz statements, alongside one another:

1. “Will the U.S. default on its debt? … The answer is of course not.”

2. “The debt ceiling historically has been among the best leverage that Congress has to rein in the executive.”

The “facts” they use to support these claims are that government cash flow is great enough to cover not only debt payments but everything that they consider important and all we have to do to make it fit is to slash funding for things they don’t like. I have not seen one person or organization pushing these ideas take note of the fact that government income and expenditures both vary throughout the year and not in synch with one another. They also refuse to acknowledge that the kinds of shifting of funds and payments that they say would easily allow payments to be made when they need to be made not only might be illegal but that there are no systems designed to track and enable that kind of juggling in any department of the government.

In addition those who have no fear of a default seem firmly convinced that the political calculus will favor them, constantly repeating the mantra that they represent the people because a majority of Americans don’t like Obamacare and therefore support their strategy. This completely ignores that every poll that specifically asks whether or not the government should be shut down in order to force changes in Obamacare don’t go their way. That’s just the shutdown, mind you, not the debt ceiling increase.

Of course Fox News tells us that a majority of the public supports not increasing the debt limit or at least making large cuts in government spending before doing so. Personally I want to see a poll that has follow up questions to see how many of those people even understand what the debt ceiling means.

But maybe there are a few things that those who buy into the idea that not raising the debt ceiling wouldn’t have any blowback should take into account. According to Gallup just the shutdown appears to have a negative effect on consumer confidence. While some of them have pointed out that the financial markets don’t seem to be raising any alarms about the approaching debt ceiling confrontation, perhaps they didn’t wait long enough. The Wonkblog points out that today was a very bad day in the Treasury bill market.

Normally, the interest rate the government pays on bills is around the same as the short-term interest rates in other money markets (for example, the interest rates banks charge each other for overnight cash, or the interest rate that the Federal Reserve targets). Both of those are near zero right now, which is why on Sept. 30, eight days ago, the interest rate on Treasury bills maturing Oct. 17 was a mere 0.03 percent. Nothing, in other words.
But since then, the possibility that the Treasury might have trouble paying or might not be able to pay its bills over the next few weeks has grown — and the interest rate has skyrocketed. It was at 0.16 percent at Monday’s close. On Tuesday the rate so far has been almost double that, as high as 0.297 percent.
There are reports, including this one from Reuters, indicating that some of the biggest money managers in the world are starting to avoid U.S. government debt that matures in the near future out of fear they will not be repaid promptly. Bond investors seem to be confident that the U.S. government will make good on its obligations in the longer term –securities that mature a year or more from now are actually seeing their rates fall. But they are becoming less confident that these short-term securities will pay on time.

There’s an economic consequence that they’ve denied already rearing its head. As far as political consequences are concerned, the Princeton Election Consortium finds that while it may not hang on until 2014 just the shutdown isn’t doing them any favors, even in the House of Representatives. What would a debt crisis do to them, especially if they’re wrong about the economic consequences? Given that the sad excuse for an economic recovery that we currently have is still all too fragile, a fall back into a deep recession wouldn’t be out of the question and even with the current level of safe house districts I think that in that case they very well could lose the House next year. And they would have no one to blame but themselves but are incapable of understanding that. Maybe they’re just Mad.