From the National Journal:
A top Senate Republican signaled on Sunday that GOP lawmakers are ready to engage in brinkmanship over the federal government’s debt ceiling, threatening to let the Treasury default on its obligations if Democrats don’t agree to drastic cuts in spending.
[Sen. Lindsey Graham, R-S.C.], who often positions himself as a bridge builder between Republicans and Democrats, laid out demands on Sunday that were much closer to the tea party wing of the new Congress.
The federal government’s current debt ceiling, the maximum amount it is legally allowed to borrow, is $14.3 trillion. The government’s debt is now about $13.9 trillion, and it is expected to bump up against the ceiling sometime this spring.
If Congress refuses to approve a higher ceiling, the Treasury would almost immediately start defaulting on its obligations — an event that most analysts say would have calamitous effects for the United States and for global financial markets that view Treasury securities as the ultimate safe haven for investors. The move would likely force a government shutdown, or force it to immediately slash spending across the board on everything from defense to Social Security. Beyond that, the move would almost certainly set off a panic among global investors that would send markets crashing and interest rates soaring.
Theatrical showdowns over the debt ceiling have become a regular event over the past decade, and Democrats frequently used such occasions when they were in the minority in Congress to embarrass Republicans and the Bush administration. But in the end, lawmakers always approved increases and financial markets have always assumed that the alternatives were too apocalyptic to be politically plausible.
But that may not be the case this year. Many Republicans associated with the tea party movement, including Sen. Jim DeMint of South Carolina and Rep. Michele Bachmann of Minnesota, have argued for months that Congress should not increase the debt ceiling without immediate and steep spending cuts.
On Sunday, Bachmann made it clear that she wanted to use the debt ceiling as a bargaining tool against Democrats.
“At this point, I am not in favor of raising the debt ceiling,” she said on CBS’s Face The Nation. “The Congress has had a big party the last two years. They couldn’t spend enough money. And now they’re standing back, folding their arms, saying, oh — taunting us, ‘How are you going to go ahead and solve this big spending crisis?’”