Catherine Rampell of the Washington Post is worried that Mick Mulvaney will blow up the global economy by destroying the creditworthiness of the United States’ debt. It’s not an unreasonable concern considering that Mulvaney has been nominated to serve as Trump’s director of the Office of Management and Budget (OMB), a position which is responsible for preparing the president’s budget proposal to Congress.
Mulvaney is most famous as a congressman for being a Debt Ceiling truther. That is, he joined irresponsible nutcases like Paul Ryan in arguing that the United States government could fail to make debt payments on time without defaulting on its debt or causing a downgrade in our nation’s credit rating.
Here’s how Ryan, who was then serving as the House Budget Committee chairman, put it in June 2011:
“If a bondholder misses a payment for a day or two or three or four — what is more important is you are putting the government in a materially better position to better pay its bills going forward.”
In early August 2011, Standard & Poor’s downgraded our credit rating simply because we had come so close to defaulting.
Here’s what Mulvaney said in October 2013:
“We’re not going to default; there is no default. There’s an [Office of Management and Budget] directive from the 1980s, the last time we got fairly close to not raising the debt ceiling, that clearly lays out the process by which the Treasury secretary prioritizes interest payments.”
Days later, Fitch Ratings issued a warning that “it could cut the sovereign credit rating of the United States from AAA, citing the political brinkmanship over raising the federal debt ceiling” and “Dagong Global Credit Rating downgraded the United States from A to A-, and maintained a negative outlook on the country’s credit.”
Since entering Congress, Mulvaney has never voted to raise the debt ceiling and has opposed all budget deals crafted to avoid default. He has consistently argued that that we can prioritize interest payments without doing damage to our credit or blowing up the global economy.
As Rampell notes, Mulvaney is out of his mind. And Trump is insane on this issue, too.
…Mulvaney and the president-elect have at least one major thing in common: an alarming openness to defaulting on the federal debt.
“I would borrow knowing that if the economy crashed you could make a deal,” [Trump] said.
When the financial press freaked out, he walked back the language — only to revive it a month later.
Mulvaney has also questioned the need to preserve the country’s sterling reputation as a borrower.
I encourage you to peruse the historical list of directors of the OMB. Pay special attention to the Republicans who have served in the position, because they definitely tend toward the less nutty and more reality-based variety of conservative. You’ll see names like Josh Bolten, who later became President George W. Bush’s chief of staff, Mitch Daniels, who went on to serve two terms as governor of Indiana, and Rob Portman, who currently serves in the U.S. Senate. The most notorious name on the list is David Stockman, the main defender of Ronald Reagan’s delusion trickle-down supply-side theory of budgetary economics. Here’s a reminder of how Stockman worked out in the job.
Stockman was quoted as referring to Reagan’s tax act in these terms: “I mean, Kemp-Roth [Reagan’s 1981 tax cut] was always a Trojan horse to bring down the top rate…. It’s kind of hard to sell ‘trickle down.’ So the supply-side formula was the only way to get a tax policy that was really ‘trickle down.’ Supply-side is ‘trickle-down’ theory.” Of the budget process during his first year on the job, Stockman was quoted as saying, “None of us really understands what’s going on with all these numbers.”
…Stockman became concerned with the projected trend of increasingly large federal deficits and the rapidly expanding national debt. On 1 August 1985, he resigned from OMB and later wrote a memoir of his experience in the Reagan Administration titled The Triumph of Politics: Why the Reagan Revolution Failed in which he specifically criticized the failure of congressional Republicans to endorse a reduction of government spending to offset large tax decreases to avoid the creation of large deficits and an increasing national debt.
As Rampell mentions, while Trump and Mulvaney may both demonstrate an alarming willingness to stiff our creditors, they differ about the advisability of deficit spending. This puts him in Stockman’s role vis-a-vis Reagan, where agreement over tax decreases and the resulting revenue loss is not matched with a commitment to cut spending. Stockman blamed Congress rather than Reagan (or his own ridiculous theory), and Mulvaney would surely do the same. The results, however would be the same: exploding debts and a need to repeatedly raise the debt ceiling.
To refresh your memory there were “18 increases to the debt ceiling between February 1981 and September 1987.”
There’s simply nothing in Mulvaney’s record to indicate that he’d countenance the timely raising of the debt ceiling, let alone having to do it eighteen times in a six and a half year span.
Rampell offers one slim reed of hope:
Our best bet is that the two Goldman Sachs alumni taking White House roles (including Treasury secretary, the post directly responsible for managing the public debt) can explain to Trump why these kinds of actions would blow up the world.
Let’s just hope they’re the ones he listens to when the time comes.
So, we’re hoping the Goldman Sachs guys will save us.
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