Paul Ryan Doesn't Think We'll Default

Reporting on Politics and Policy.
Jan. 4 2013 10:15 AM

Paul Ryan Doesn't Think We'll Default

Paul Ryan doesn't give too many interviews to the MSM anymore. That seems wise: What did all of those interviews with Ezra Klein and other critics do for him, apart from putting him on record for decreasingly specific defenses of his own bills?

But Ryan did talk to conservative radio host Hugh Hewitt this week. If one of Washington's favorite speculative games right now is "what will Ryan do in the next negotiations," we have a new answer. When asked about the debt limit, Ryan insists that hitting the limit won't be as big a problem as people think.

Technically speaking, what happens is Treasury does not have the authority to go out and borrow money to pay our bills, and they can’t redeem bonds. So the problem with “default” is you can’t make good on your bonds. And that means you’ll have a triggering event where your interest rates shoot skyrocketing up. And it will cost us a whole lot more money to borrow money, and it will cost us a whole lot more money as individuals to borrow money. It hurts our economy, and it will cost our government a lot more money to borrow money, and it triggers a debt crisis. That’s the horror scenario that is played for people when you entertain the idea of whether or not we would default on our bonds. I don’t believe that that would happen. I don’t believe we’re going to default on our bonds.

The first debt limit battle was so unprecedented that people made up theories of how it might play out, without really knowing. Republicans -- first Pat Toomey, then Rand Paul -- speculated that the Treasury could keep puttering around and cutting back, avoiding default. We know, thanks to the GAO, that the short period of Treasury bond-shuffling actually increased its borrowing costs by $1.3 billion. And Ryan's talking as if we don't know that.

David Weigel is a Slate political reporter. You can reach him at daveweigel@gmail.com, or tweet at him @daveweigel.