I was shooting yesterday with two friends and one friend's 16 year old son. At lunch afterward, the talk turned to 'downside preparedness' in case it all turns south in the debt ceiling debate. The chart above was nicked from zerohedge, and I wish I had it with me at the time.
I made the point that if we believe that the federal government is paying lots of money to people who really don't deserve it, then we don't have that much to worry about in terms of civil unrest. Illegal aliens will not be rioting to demand more free services that they aren't actually entitled to in the first place. And all those people with jobs which are created only to fulfill the Democrat political agenda probably won't either.
I have to believe that in their heart of hearts, all those 'green jobs' sustainability consultants and race baiting 'diversity' executives all know that they aren't really accomplishing anything in the real economy. They are only the beneficiaries of a political scam. They know that they're job isn't producing any actual GDP, only the 'good feelings' that come from achieving a political goal. And if the money runs out at the federal government they end up on the unemployment line, it won't hurt the 'actual' economy at all.
But my friend made the point that when the money runs out it won't be the least deserving that lose funding but the least politically connected. The worst of them will be the ones who survive best. So we'll still have plenty of diversity managers, and sustainability consultants at 200K a year each, but there will be lots of people who no longer get food stamps or other services that (for some people at least) are really vital.
Then it occurred to both of us, (more or less at the same time) that so long as the Democrats still run things in Washington, the people who will really be least likely to lose their funding are those who will be most likely to bring about a violent response if it's cut. Senior citizens don't generally riot no matter how much you slash their entitlements, but reduce the flow of free money for college kids from 95% of their expenses to 92% and it's Molotov cocktail time. As you can clearly see by the difference between the way Liberals treat Christians vs how they treat Muslims, if the Democrats are you opposition, then violence very much does pay.
This is exactly what we're seeing in Greece. It's not the people who deserve the most but the people BELIEVE they deserve the most who are the worst actors, and are therefore being treated to the smallest percentage of austerity. And in our political landscape, it's much easier for me to imagine Van Jones and the Marxist rabble out there throwing grenades and storming the federal position than my deeply patriotic father in law with his walker and two artificial hips.
Anyway, the chart above gives an idea of total numbers for the federal government, but I personally don't think that's where the action will be. If we get any substantial increase in interest rates then a whole host of deep blue states will be forced into bankruptcy - California and Illinois first of all. That will mean massive job cuts at the state and local levels, way before we see much from the Feds. We will absolutely get a rise in interest rates when we get downgraded, unless the Fed picks up the difference itself.
And if the Fed will step in as buyer of last resort for Treasuries, they'll be converting as Treasury issue into an issue for the currency instead. This will lower the purchasing power of the people still employed, effectively slashing their pay. But so long as the police and the soldiers still get paid, then even in a worst case scenario I don't think we have anything more than local problems. Nothing wholesale or wide spread. So don't go throwing up your sandbags just yet.
Of course - all this assumes a level of economic rationality from Obama that to be frank, he has yet to adequately demonstrate. He may very well think that windmills, solar panels and Ethanol subsidies need to be paid before the interest on the debt. Who knows what his real priorities are.
But since this issue is pretty much at his sole discretion, then I'm afraid that we're all likely to find out.
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