“I think the important thing to do would be to make it clear to markets that the government is not going to default on its debt,” said Senator Patrick Toomey, Republican of Pennsylvania, whose bill assigns priority to interest payments. “It would be easy, I think, to make it clear to the markets that they don’t have to worry about this.”
Toomey's plan to pay interest payments but not other government obligations -- such as wages -- seems as dumb politically as economically. After all, much of the debt is held by foreigners, so Toomey would pay off the Chinese before American citizens who toil for the public. I guess this fits with the basic Republican idea that interest recipients are more important than average Americans, but it is certainly playing with fire to do so. This would convert the government into a debt junkie who chooses each month whether to pay utilities or the rent and which creditors to hide from. Does Toomey really believe financial markets will still trust US debt under such behavior?