Republicans Next Attack on the Middle Class: Pay Wall Street First If Debt Ceiling Not Raised

Screwing the middle class has become a Republican badge of honor. Republicans are tripping over themselves trying to find more creative ways to do it. The low-hanging fruit of suppressing their wages, shipping their jobs overseas, destroying their net worth, cheerleading them into crippling debt, and busting their private sector unions is done. The attack on public sector workers is in process.

Enter, stage far right, Koch-lobbyist and former derivatives maven Senator Pat Toomey (R-PA).

In a recent hearing Toomey (pronounced, perhaps not coincidentally, “to me”) suggested to Federal Reserve Chairman Ben Bernanke that there would be no financial crisis if the debt ceiling were not raised because they would direct the Treasury Secretary to “pay off bondholders first” from money coming into the government.

Soldiers fighting in Afghanistan, Social Security recipients, Medicare/Medicaid providers and recipients, veterans, children’s health care, food stamps…all would have to line up behind Wall Street to get their money.

Bernanke became visibly uncomfortable and tried as gently as possibly to warn Toomey that it might not work out so simply. Toomey then became visibly angry and cut off the answer stating, “I was a bond trader, and I know they would not consider the possibility of default real”.

One wonders how many examples the electorate needs before they realize who these Republicans are, and whom they serve with complete obedience. Yes, many Democrats take money from these vested interests and support their positions, but the difference in support levels on the one hand, and obeisance on the other, is hardly subtle.

Moreover, Toomey is more than just a little crazy. Not raising the debt ceiling means the government cannot pay all its obligations. Any fiduciary, any holder of an IOU from the government, any vendor, would be negligent if they did not demand immediate full payment. It only takes one, and the others would be foolish not to follow.

What would be the value of holding US government obligations with loons like Toomey playing Russian roulette with the US and world economy?

The Social Security Trust Fund, for example, holds “Special Issue” Securities from the US Treasury, redeemable at any time for face value. Usually, the Trust Fund just redeems what it needs (“just-in-time-redemption”, sounds like a revival!) and leaves the other money collecting interest. If the debt ceiling were not extended, a responsible fiduciary would demand payment of principal on some of the Special Issue Securities beyond the just-in-time-redemption requirements.

Toomey’s proposal is thus not only mean-spirited, it is also unworkable. It will spook the markets at any time, and especially at a time of world-turmoil and high economic fragility.

Joe Sestak, Toomey’s Democratic opponent in the 2010 election, was an Admiral who had spent his life in service to his country. Instead, Pennsylvania chose someone who spent his career in service to himself…and his corporate paymasters.

Any surprise then that he would not only shut down the government, risk YOUR economic future by playing games with the debt ceiling, but also insist that Wall Street get paid ahead of soldiers, veterans, the elderly, the ill, children, disaster victims…?

Is this what Pennsylvania really wanted?