WSJ Promotes Default Trutherism

A Wall Street Journal article promoted false Republican claims which disputed the devastating effects failure to raise the debt ceiling on October 17 would have on the U.S. economy, despite recent Journal reporting which admitted default could have “cataclysmic” consequences.

In an October 9 article headlined “Obama's Default Scenario Derided,” the Journal noted that according to President Obama, “if Congress doesn't raise the country's debt ceiling soon, an economic crisis with skyrocketing interest rates and a crashing stock market could follow,” as the U.S. would default on its pre-existing debts -- an understanding of the manufactured impending fiscal crisis which is supported by economists and the Treasury Department.

But rather than confirm this factual assertion, the Journal instead provided a platform for Republicans who baselessly “say they don't believe” default will lead to devastating negative effects and have even “questioned what the word 'default' really means.” The Journal hyped Republican claims that the White House could choose to prioritize which payments to make once the deadline hits, and claimed these misleading remarks had credence because the U.S. has never defaulted before, making the potential crisis “unchartered waters.”

In reality, the Treasury Department does not have the legal authority to prioritize payments if the debt ceiling is not raised, and economists agree that congressional failure to raise the debt limit could be catastrophic, setting in motion a financial crisis in the United States and around the globe.

The “debt ceiling” was officially breached on May 17 of this year. Since that date, the Treasury has implemented "extraordinary measures" to avoid defaulting on American sovereign debt obligations by shifting funds from various accounts. The New York Times reported that these measures will be exhausted by October 17:

Economists of all political persuasions have warned that a failure to raise the debt ceiling by the Treasury's deadline of Oct. 17 could be catastrophic. The world economy's faith in the safety of Treasury debt would be shaken for years. Interest rates could shoot up, and stock prices worldwide would most likely plummet.

The Journal itself has previously reported the devastating consequences the prospect of default is already having on the worldwide economy. On October 8, the Journal reported that short-term U.S. debt prices had fallen “amid rising investor concern about the prospect of a government-debt default, sending the yield on one-month U.S. Treasury bills to its highest level since the financial crisis.” The same day, the Journal reported that China had warned the U.S. of default's “global ramifications,” and that banks in the United Kingdom have begun “stockpiling cash” and preparing for “cataclysmic” consequences.

Domestically, money for government employees, the military, Social Security, Medicare, food safety inspections, and more could cease or be delayed, and CNN business correspondent Alison Kosik reported that “if a default happens, there's one analyst who says that the S&P 500 could drop 45 percent.” 

Furthermore, the claim that the administration could choose to prioritize some payments over others in order to avoid default is false. Tony Fratto, a former Treasury Department assistant secretary and senior George W. Bush White House staffer called payment prioritization "fanciful," and Treasury Department Inspector General Eric M. Thorson reported to Congress that the Treasury had no means or capacity to prioritize certain payments over others. Slate economics blogger Matt Yglesias explained that Treasury has “no more legal authority to prioritize payments than they do to borrow extra money.” 

Conservative media have attempted to downplay the urgency of the upcoming deadline, with some actively advocating for default