Should Congress decide not to raise the debt ceiling by the Aug. 2 deadline set by Treasury Secretary Tim Geithner, the government could continue to operate for days or even weeks, Wisconsin Republican Sen. Ron Johnson said today on a conference call with bloggers.
“Next year, if we don’t increase the debt ceiling, I don’t think anybody is looking at living under a debt ceiling budget for an entire year,” the senator said. “But as opposed to caving, to not getting the fiscal controls we need, if we had to live under a debt ceiling budget for a couple days or a couple weeks, it wouldn’t be the end of the world, if you plan on it.”
That’s because $2.6 trillion would still flow into the Federal Treasury next fiscal year, Johnson explained.
“That is more than enough to make all debt payments,” he said. “It covers 100 percent of Social Security — and still leaves about $1.6 trillion to cover about $2.6 trillion worth of spending. If this administration misses one payment to a Social Security recipient, if they miss one payment to a soldier, if they miss one debt payment, that is a choice they are making. It doesn’t have to be this way if they plan for it.”
Johnson compared the situation to a business reorganization after a bankruptcy.
“I’ve been on the unsecured creditor side of a customer going bankrupt,” he said. “If you come to me as an unsecured creditor in a bankruptcy situation where the customer is going through a reorganization and you say, ‘Secured creditors are getting dollar for dollar — that’s interest on the debt, that’s Social Security. The rest of you guys, until we get this figured out, will basically get 60 cents on the dollar. Once we go through the reorganization, once we get this figured out, you’ll probably get 98 cents on the dollar.’ I’d be going, ‘That’s a sweet deal.’ I’d do that in an instant.”
Johnson also had harsh words for the secrecy that has characterized negotiations of a debt limit deal.
“It was very irresponsible to assume they were going to get an increase in the debt ceiling because nobody knows what the deal is going to be,” he said. “We’re supposed to take a look at this — some deal that’s been struck behind closed doors by a couple individuals that’s going to decide the financial fate of America — and we’ll get two days to take a look at that? Again, let me use the word — it’s disgusting. It’s disgusting the way this process is playing out.”