How to be your own lawyer in Georgia (and when you shouldn’t)
In his inaugural State of the Judiciary address in March, Georgia Supreme Court Chief Justice Michael Boggs told lawmakers, judges and others assembled for the joint legislative session about challenges the state faces in providing access to justice for Georgians.
The first is an “astounding” backlog of civil and criminal cases, exacerbated by the COVID-19 pandemic, which he said will take some county and state courts years to catch up on. The second is a statewide shortage of lawyers.
What’s Happening
Fulton County alone has 4,000 pending indicted felony cases, and 14,000 unindicted felony cases, Boggs said.
Defendants awaiting trial sit in jail for months, or even years. In Dougherty County, more than 200 people who’ve been charged but not convicted have been in jail for more than two years.
As for judicial access, of 159 counties in Georgia, 67 have 10 or fewer licensed practicing attorneys, and seven — all rural counties — have none at all.
Boggs said the legal workforce shortage significantly impacts civil cases such as divorces, child custody and eviction proceedings. He also noted that there is no right to appointed counsel in civil cases. “The basic right of access is denied to many during their most dire life challenges,” said Boggs.
One imperfect solution to this lack of legal representation is for people to represent themselves.
It’s not a new practice — people have done it for decades, from contract disputes in small claims courts to major felonies in superior courts. In 2021, 1.1 million people led their own cases in criminal and civil courts in Georgia.
But the outcomes aren’t always good. Former Georgia Supreme Court Justice P. Harris Hines said in 2017 that self-represented litigants often lack basic legal knowledge, are more likely to lose their cases, and tend to slow down court proceedings.
Since then, the Access to Justice Committee of the Judicial Council of Georgia has led a statewide effort to create more resources to help people of low and middle incomes to represent themselves better, and to make courts more user-friendly, including an expansion of online legal resources.
Georgians can now access free legal forms based on Georgia code, related how-to videos and detailed instructions for common legal matters in family law, probate law (such as wills, guardianship and estate settlement), landlord-tenant law, advance health directives and name changes.
Most county courts have some online forms, as well as physical law libraries with printed forms and legal research materials available to the public.
Over the past five years, more than a dozen libraries around the state have expanded to become legal self-help centers staffed by paralegals or other trained personnel who can walk people through the maze of forms and explain how to complete and file a legal document properly. Nancy Long is one such legal “navigator,” working at the Southwest Georgia Legal Self-Help Center in Dougherty County in Albany. Southwest Georgia has many counties considered to be legal deserts, including four with no active, licensed lawyers.
Long, a paralegal, said many people come into the center “afraid and intimidated by the legal system, and we help them figure out the forms and the legal terms, explain what things mean, and guide them through the system.”
Recently the center helped a man who wanted to legally acknowledge his child so the child could inherit from him. The staff provided information about the legitimation process, and he successfully represented himself in court.
The Southwest Georgia center also has tech set up for people to attend court hearings remotely via Zoom, which enables many residents without internet to access the courts and legal counsel in other cities.
A Word of Caution
When it becomes clear that someone can’t handle their case themselves, either because of literacy issues or the case is too complex, Long said the staff refers people to a list of attorneys in the area, some of whom are willing to represent clients for free or at a reduced cost. One such pro bono attorney is Vicky Kimbrell, who leads the family law unit for Georgia Legal Services Program, a nonprofit serving low- and moderate-income clients in the 154 counties outside of metro Atlanta. Atlanta Legal Aid Society serves a similar clientele within the five-county metro Atlanta area.
“Pro se” or self-representation is better suited to uncontested divorces, said Kimbrell. “It works best when you have some agreed-upon structure, and when you file the divorce, both parties can agree and sign acknowledgments. People can walk through that pretty simply.”
The website of the Judicial Council provides comprehensive legal packets for divorces with and without children, and includes eight videos that explain how to complete the complex child support calculator worksheets.
“In a disputed custody case, that’s not enough,” said Kimbrell, who also serves on the Judicial Council’s Access to Justice committee and has helped to develop self-help resources for family law cases, including uniform legal forms for divorce that are accepted in courts statewide.
“If you’ve got a couple of kids or a house, it gets really complicated. If your husband has a lawyer and you don’t, and you’re standing in court, and whether or not you get custody of your kids depends on how you can maneuver this court process, that’s a scary place to be,” she said, advising people to seek out pro bono or low bono counsel in those cases.
People who are experiencing domestic violence or stalking and who need a temporary protective order (TPO) should call one of the legal aid programs or the domestic violence hotline, said Kimbrell. “It’s pretty dangerous to file your own TPO, and these are the kinds of cases that we prioritize.”
| SELF-REPRESENTED LITIGANTS IN GEORGIA | |
| More than 1 million Georgia residents represent themselves in civil and criminal courts each year. Here’s the breakdown of self-represented litigants in Georgia courts in 2021. | |
| Superior Court State Court Juvenile Court Probate Court Magistrate Court Municipal Court | 68,097 188,101 2,802 99,238 106,723 660,790 |
| Source: Judicial Council of Georgia |
Kimbrell noted that legal aid organizations take on clients with household incomes up to 200% of the federal poverty level, which is $29,160 for an individual and $49,720 for a family of three. Cobb County Magistrate Judge Tabitha Ponder, who also serves as staff attorney for the Georgia Judicial Council’s Access to Justice Committee, advises people to “try using free legal resources first, before making a decision to represent yourself.”
She said self-represented litigants do well in small claims court, where they often face other pro se parties. But she considers them at a disadvantage when trying a case against someone who has a lawyer. That distinction is most notable in dispossessory cases, she said.
“Most landlords are represented by counsel,” she said. “And I would say 90 to 95% of the tenants are not represented. And sometimes, sitting on the bench, I see they have legal arguments they can make, and there are some things they may be entitled to, but as a judge, our hands are tied; we can’t give advice from the bench. And this is important for folks who are facing evictions because our eviction process is really quick.”
In Cobb County, tenants fending for themselves can take advantage of mediators and free legal aid attorneys who are always present in the courtroom during eviction cases.
“We’ve got a person there to speak with both parties and see if they can work out an agreement,” said Ponder. “And the [tenants] can get some sound legal advice. So that’s extremely helpful. What I’ve found with self-represented litigants is that most of the time, these folks don’t require a lawyer to represent them in person. They just need some advice and some resources to help them … it’s usually just one or two issues or questions on a form that they struggle with.”
Lawyers offering “limited scope” or “unbundled” services who are willing to take on just the part of a case that a person can’t handle for themselves can be the key to success or failure for a pro se litigant, she said. “Unbundling really works, and it’s something we need to see more support for statewide.”
Cobb County also offers a free monthly family law workshop via Zoom covering divorce, contempt, paternity and legitimation. The workshop is mandatory for self-represented litigants, who can ask a family law attorney general questions via the chat, and have the option afterward to pay $100 for a 1.5-hour consultation with an attorney.
Other sources of support include:
- The Cobb Second Chance Desk helps individuals with a criminal history who may be eligible to restrict and seal their record.
- The Georgia Justice Project (GJP) helps people with record restrictions and pardons, offering free online workshops on how to clear criminal history. It also regularly runs free on-site legal clinics at law libraries and justice centers around Georgia.
- The Fulton County Probate Information Center helps Fulton residents understand how to manage a deceased family member’s estate with free 30-minute consultations with a probate attorney. The Council of Probate Court Judges is a statewide resource offering dozens of standard forms for common probate issues in Georgia, as well as how-to videos and guidance on guardianship for minors and adults.
In Macon, the Middle Georgia Justice Center serves people in Bibb, Houston, Peach, Crawford, Monroe, Jones, and Twiggs counties. It handles heirs’ property, probate, property, guardianship matters, divorce, legitimation, criminal history relief, as well as ID card and driver’s license issues.
The center helps people whose income is up to 300% of the federal poverty level, which is $43,740 for one person and $74,580 for a family of three. People apply for legal aid online or in person, and then learn if they’ll receive support to use the center’s self-help resources, direct representation by a staff attorney or a referral to a pro bono or low bono lawyer. The center has expanded from three to six full-time employees this year with more than $500,000 in funding from corporate grants, local donors and federal funds.
What’s Next?
Ponder said the Access to Justice committee has just completed a new set of uniform landlord-tenant forms and how-to videos that should make it easier for people to represent themselves. They’ll be posted once approved by the Magistrate Court Council later this year. Their next project is legitimation forms that can be accepted in any Georgia court.
And the committee is currently working with Georgia Legal Services Program to create kiosks offering printable legal forms and instructions that will be placed in seven to 10 courthouses and self-help centers “strategically around the state, in legal deserts,” said Ponder.
“I’m a firm believer that when people have the right resources, they can have success with any kind of case,” she said.
SELF-HELP, FREE AND LOW-COST LEGAL RESOURCES IN GEORGIA
JUDICIAL COUNCIL OF GEORGIA - Free forms, instructions and how-to videos on family law and landlord-tenant law and a list of Georgia’s legal self-help centers.
GEORGIA LEGAL AID - Offers dozens of free forms, guides and resources to handle legal issues.
GEORGIA LEGAL SERVICES PROGRAM - Nonprofit that serves low- and moderate-income clients in the 154 counties outside metro Atlanta.
ATLANTA LEGAL AID SOCIETY - Nonprofit that offers free legal aid in civil matters for low- and moderate-income people across metro Atlanta.
STATE BAR OF GEORGIA - Find an attorney. Tip: Use pricing filter to select limited scope, pro bono, fixed price, etc.
COUNCIL OF MAGISTRATE COURT JUDGES - Free forms generator guides you through questions to create free, customized forms to take to the Magistrate Court.
COUNCIL OF PROBATE JUDGES OF GEORGIA - Offers statewide standard forms and how-to videos for common probate issues, including wills, estates, and guardianship for minors and adults.
GEORGIA JUSTICE PROJECT - Free resources and attorneys to help people with clearing criminal records, obtaining pardons and early termination from probation.
GEORGIA COALITION AGAINST DOMESTIC VIOLENCE - Information on finding a shelter, finding a lawyer, how to be safe in court.
24-HOUR DOMESTIC VIOLENCE HOTLINE IN GA - 1-800-334-2836
Calls to the hotline are automatically connected to the caller’s nearest Criminal Justice Coordinating Council-certified shelter.
GEORGIA SUPERIOR COURT CLERKS’ COOPERATIVE AUTHORITY - Free standard statewide forms on family violence, protective orders.
Contact Jill Jordan Sieder on Twitter @JOURNALISTAJILL or at [email protected].
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Header image: The Georgia Supreme Court (Credit: Joy Walstrum)
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Judicial circuits get $15 million more to pare down big case backlogs
Georgia courts are getting a $15 million injection to help combat case backlogs accumulated during the COVID-19 pandemic. The money will be used to update courtrooms with new audio-visual equipment, cameras, recording devices and other technology.
Nearly half of Georgia’s 50 judicial circuits are getting the new round of money, the second and final round of federal American Rescue Act (ARPA) grants slated to be distributed this year. Two of the 24 circuits awarded grants – Flint and Pataula – are first-time recipients. The rest of the money is going to circuits that applied and were approved for more money.
What’s happening
“The bulk of this round of distributions is to modernize courtrooms and things like that,” Bruce Shaw, a spokesman for the Judicial Council of Georgia/Administrative Office of the Courts, told State Affairs.
For example, according to their backlog response plans, 21 circuits plan to use the money to add newer audio-visual equipment. Approved as a new eligible expenditure by the committee starting this award cycle, over $12 million was requested and awarded to update audio-visual equipment.
Requests also included money for temporary personnel such as senior judges, judges to serve by designation, court clerks, prosecutors, security, investigators, victim support staff and court reporters. There were also requests for supplies, personnel education and training as well as money to rent temporary space to hold court.
“We look forward to the support and efficiencies the audio-visual equipment modernization will provide to move cases faster and without technical delays,” said Supreme Court of Georgia Chief Justice Michael Boggs, chairman of the Judicial Committee.
Why It Matters
Between March 2020 and June 2021, Georgia’s judiciary system operated under a statewide Judicial Emergency Order that placed limits on court operations to protect the health and safety of people working or coming into court during the pandemic. That led to a backlog of criminal and civil cases, especially those requiring jury trials to resolve.
In October 2021, Gov. Brian Kemp allocated $110 million in ARPA money to the state’s judicial branch to deal with the backlog, especially serious violent felonies.
The Judicial Council is administering $96 million of that money to eligible courts, prosecutors and related agencies. The remaining $14 million in ARPA money went to the Georgia Public Defender Council for grants to public defenders.
With this latest round of awards, 45 of Georgia’s 50 judicial circuits will have received grants since the program began on Jan. 1 , 2022.
Challenges still persist. In addition to the backlog of cases, Boggs said there’s a shortage of attorneys during his inaugural State of the Judiciary address in March. And some courts are in need of court reporters.
In addition to dealing with serious felony cases, COVID and court backlogs tied up many civil cases. For example, Atlantans Antonio Fleetwood’s and Lakiela Edwards’ wedding plans were on hold for nearly two years. The couple finally tied the knot in a special Valentine’s Day ceremony at the Fulton County Probate Court.
How successful has the ARPA program been in helping reduce the backlog in Georgia’s 50 judicial circuits? That’s hard to say. There is no statewide clearinghouse, Shaw said, that would give a clear picture of the progress. Or lack of it.
“It’s going to be different in each circuit,” he said. “So a statewide average would be difficult to come by right now.”
State Affairs checked in with Georgia’s 10th Judicial District, which handles civil and domestic cases for 21 counties in northeast Georgia. It has seven circuits and is the third-largest district in the state.
In the first few months of this year, the Augusta Judicial Circuit, the 10th District’s largest circuit, has seen its pending serious violent felonies drop by 37%, District Administrator Tracy J. BeMent told State Affairs.
Alcovy, another circuit in his district, “has done extremely well in prioritizing serious, violent felony trials this past year and has worked down their [cases] quite a bit,” BeMent said.
As of last August, the latest data available, “Alcovy had cleared out 54 serious felonies and was on track to complete almost 49 trial weeks for 2022 amongst their five judges,” Bement added.
In the Toombs circuit, clearance rates are low but they’re prioritizing backlog cases, BeMent said. The Western circuit in Athens continues to have a backlog “as they have a number of cases that have yet to be indicted,” he said.
What’s Next?
More work remains to be done.
“The challenge continues to be making sure we have appropriate staff and that we’re fully staffed and that that staff is trained and ready to go,” BeMent said.
The ARPA money has helped add more personnel but it takes time for them to get up to speed, he noted.
So far, the district has received about $8 million in ARPA money, BeMent said, with another $3 million coming from this latest round of ARPA distributions.
Meanwhile, former President Jimmy Carter recognized The Judicial Council/AOC’s 50th anniversary this year in a Jan. 25 letter. The council was formed while Carter was Georgia governor. The ailing 39th president entered hospice on Feb. 17.
“Now the challenge is considering what is needed from all of you for the next 50 years,” Carter, 98, said in the letter. “What do future generations of judges, lawyers and citizenry need from their judicial branch? What does improving justice look like in the next decade? These are no small questions, but ones I know you will meet with the same spirit that has guided you through the past half-century.”
Have questions, comments or tips? Contact Tammy Joyner on Twitter @lvjoyner or at [email protected].
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Top image: Inside the Nathan Deal Judicial Center in Atlanta (Credit: Judge Stephen Dillard)
$69.4 billion farm-to-table pipeline: ‘If you’re not at the table, you’re on the menu’
Tammy Joyner and photographer Brandon Franklin hit the road with the Georgia Legislative Black Caucus (GLBC) for the Black farms tour. There were so many great pictures, we decided to share the tour with you. Enjoy!
And check out our Q&A with Chairman Carl Gilliard and an agriculture perspective on Gov. Brian Kemp’s budget vetoes.
“Make the farm work and serve the community.” — Addis Bugg, Sr., Addis Farm
Joyner and Franklin traveled with the GLBC to several Black-owned farms, including Roberts Vineyard, Addis Bugg Farms, Paul Copeland Farms and Living Waters Farms. They concluded the tour with the “At the Table Roundtable” discussion event with Georgia farmers at Fort Valley State University.
Can you spot the bull?
Have questions, comments or tips? Contact Tammy Joyner on Twitter @lvjoyner or at [email protected].
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Header image: John Deere combine at the state-of-the-art agricultural research facilities at Fort Valley State University. (Credit: Brandon Franklin)
All images and video by Brandon Franklin.
Read more on the ag industry by Tammy Joyner.
Q&A: Even the Energizer Bunny is no match for Carl Gilliard
State Rep. Carl Gilliard has been running at a fast clip for nearly four decades, juggling a ministry, making music and movies, writing books, feeding the hungry, hosting talk shows and performing community activism.
As a teenager, Gilliard founded a local rap group in Savannah to fight gun violence. By the time he was a student at Morris Brown College, the late civil rights activist the Rev. Hosea Williams was his mentor. His activism also put him in the sphere of other influential civil rights icons: the Revs. Joseph Lowery and Ralph Abernathy, and Coretta Scott King.
Gilliard later went on to become a minister himself as well as an author, radio show host and head of a multimedia group that produces documentaries on history. Gov. Brian Kemp appointed the state representative from Garden City to the Georgia Film Commission in 2019.
Gilliard sits on eight legislative committees, including appropriations, creative arts and entertainment, and transportation.
In January, Gilliard ascended to a critical leadership post in the Georgia General Assembly: chairman of the Georgia Legislative Black Caucus (GLBC), the largest caucus of Black lawmakers in the nation.
In that role, Gilliard is determined to get Black farmers solidly entrenched in Georgia’s $69.4 billion farm-to-table pipeline. “If you’re not at the table, you’re on the menu,” the 59-year-old is fond of saying.
Caucus member Sen. Gail Davenport, D-District 44, marveled at Gilliard’s energy. “I don’t know how he gets it all done. He’s busy,” she said. “He has led the caucus very well. He knows South Georgia very well and certainly here in the General Assembly, he has been an effective leader. He works to make sure the Senate understands the position of the House and the House understands the position of the Senate as far as the Democrats are concerned.”
As caucus chairman, Gilliard has made Black farmers and other Black businesses, access to credit, affordable housing and medicine top priorities.
But Black farmers are close to his heart. He recalled years ago when Georgia lawmakers gave millions of dollars to pecan farmers after tornado-ravaged storms damaged their pecan trees.
“We did a bill to give them money. Then we called a special session just to appropriate more money,” said Gilliard, who served on the Appropriations Committee at the time. “Unfortunately, Black farmers were not a part of [getting] that [money].”
State Affairs spoke to Gilliard about his role as chairman, what he intends to do to help Black farmers, and his other top priorities.
How do you see your role as chairman?
As chairman, I’m blessed to be able to walk in the leadership of 74 great senators and representatives from across the state. We represent the melting pot of Georgia.
What has been the biggest takeaway in your first five months as chairman?
Being able to hear from the members and their diverse communities. When we look at the big picture, we have more in common than not in common. That is the reason we did the GLBC rollout in reference to legislation because those are some of the things you hear in communities across the state.
You head the nation’s largest caucus of Black legislators. What are the economic and social issues impacting Black Georgians and how is the caucus poised to address those issues?
The needs of Black Georgians are just like what we went through when the recession hit. Everybody on Wall Street got bailed out while the people on Main Street got left out.
We are constantly playing catch-up. We’ve got to do more: continue education, start more businesses, be able to get a fair share of [state] contracts and be able to deliver services so that we can have generational wealth for future generations.
Black Georgians also have to be included in the top levels of [Georgia’s] $4.4 billion film industry. So the focus is to look at legislation that gives inclusion to levels of opportunity in film.
We must also try to get more Blacks into the business side of film, in reference to the creative opportunities of making and producing films and soundtracks.
Some people feel now that we’re in a post-racial era, there’s no need for a separate caucus for Black legislators. Thoughts?
There will always be a need for a Black caucus in Georgia. There’s always been a need since 1868 with “The Original 33” senators and state representatives who were [initially] not allowed to take office. Fourteen of them were lynched and killed. They had to go through unscrupulous challenges. We still face those challenges when we are in the minority, and we’re trying to get legislation passed for the people who are still facing obstacles. Across the nation, there will always be a need for Black caucuses because of the consensus of the people we represent. We represent over 3 million [Black] people in Georgia.
Who are Georgia’s Black farmers?
When people think about farmers, 99% of the time they just think about those who grow. But you have farmers who have land. You have farmers who have cattle. We even have farmers today [whose business ranges from] cattle to produce to hemp. They just don’t get an opportunity to [publicly] share all that they produce.
Having the resources to upgrade and getting the materials and equipment they need — that’s the biggest need.
They don’t have the workers to help with these farms. And they don’t have the money to hire. They’re just trying to survive. So there has to be a connection to workforce development to help them. The state has workforce development programs that may be able to help some of these farmers. Here again, it’s about us being innovative enough to use what we have to help them.
Have you talked to Agriculture Commissioner Tyler Harper about your concerns?
Well, we’re going to be talking with the new agriculture commissioner. We’ll give him a chance to get in the door [of his new job] first. We’re giving him the benefit of the doubt to say, ‘Let’s meet.’ This will better Georgia because agriculture is the No. 1 entity in Georgia.
What’s the caucus’ next step as it relates to Black farmers?
We’ll push for a bill that would create the Georgia Racial Equity in Agriculture Act. It would establish an Office of Equity in Agriculture, provide training for farmers of color and other historically-underserved farmers and ensure equal distribution of federal aid from the Inflation Reduction Act and Promoting Precision Agriculture Act. And we are gathering information to establish a Georgia Black farmers directory to list all of the farmers who are currently in the state to get them support from consumers as well.
Aside from Black farmers, what are the caucus’ other priorities?
Health care for all Georgians. Looking at the criminal justice system and people who are unfairly on probation for long periods of time when they have a misdemeanor. Some people are still on probation after 20 years. We’ve got to look at different elements of the criminal justice system to see what is fair and what needs to be updated.
We need to make sure we have a fair shake in the minority participation of state contracts. If we’re 30% of the population, then those contracts need to look like the representation of the 30% of minorities in Georgia.
What are some of the events the caucus has planned?
On June 7, we have the Young Leaders Conference at the Capitol for high school and college students. The caucus’ annual conference will be in Savannah July 21 to 23 and we have several for-the-people rallies coming up in Athens, Augusta, Macon and Valdosta. Lastly, we have a Black university tour the first week of September at several Black universities in Georgia.
The Carl Wayne Gilliard File
- Title: Chairman of the Georgia Legislative Black Caucus; Democratic state representative, District 162 (Savannah)
- Age: 59
- Hometown: Savannah
- Residence: Garden City
- Occupation: Pastor of Family Life Center in Garden City which operates the Empowerment Center, a program that “gets people on their feet and helps them with everything from housing to credit.” He also has a nonprofit, Feed the Hungry, that has distributed about 1.5 million servings of food in 10 cities in Georgia and four in South Carolina.
- Education: Graduate of Morris Brown College; Doctrine of Divinity from the New Generation School of Seminary.
- Career: While in college, worked as the national youth coordinator for then-presidential candidate the Rev. Jesse Jackson. Became a minister in 1995. Sworn in to the Georgia House of Representatives on May 5, 2016.
- Accomplishments: In the mid-1980s, he founded the Savannah-based rap group Candy Love to combat gun violence. Creator of four national gospel plays. Host of a radio talk show in Savannah as well as gospel TV shows. Founder of Feed the Hungry Inc. in 2009. In 2012, he launched a multimedia communication company called Urban Media and the Gilliard Foundation, which produce documentaries and television specials on history. Author of an upcoming book “Power of the Pen.”
- Family: Married father of four daughters
- What do you do to relax: Watch sports. I am a writer and a filmmaker who does documentaries.
- What’s your ultimate dream? Having a farm.
Have questions, comments or tips? Contact Tammy Joyner on Twitter @lvjoyner or at [email protected].
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Header image: State Rep. Carl Gilliard touring Bugg Farm in Pine Mountain, GA. (Credit: Brandon Franklin)
A default on the country’s debt could cause ‘real and lasting’ damage
The nation’s politicians are considering a voluntary default on the country’s debt. Yes, “voluntary.” The nation’s elected leaders in Congress and the White House could end this today if they wanted. Unfortunately, they are choosing to engage in political brinkmanship in negotiations over the debt ceiling, potentially defaulting on the nation’s debt.
In a straightforward sense, the debt ceiling is created by enacting legislation in which Congress temporarily limits the degree to which federal government expenditures can exceed tax revenue. The shortfall is covered by issuing treasury bills, notes and bonds. On an annual basis, the difference is referred to as the deficit, while the accumulation of the yearly deficit is referred to as the national debt, which is now $31.5 trillion. It fundamentally means that the government needs to take in more tax revenue to pay its bills. The first debt ceiling was created by Congress in 1917, so this is a familiar thing.
The general timing of when the debt ceiling is hit can be forecasted with relatively high accuracy, so this problem is unsurprising. Congress had months and months to address this but instead chose to act like children pretending that some inevitable outcome and day of reckoning for irresponsible behavior is now somehow a surprise. The Treasury Department began using “extraordinary measures” back in January when the usual and customary flow of tax revenue was insufficient to pay the bills. The Treasury Department has some ability to create months of budgetary wiggle room through fiscal creativeness that mostly boils down to suspending the reinvestment of revenue generated in some federal government pension or caretaker accounts.
That wiggle room is now gone. The so-called X-date, when even the extraordinary measures fail to cover the bills coming due, is now estimated to be June 1. This date has been moved forward several months because tax revenue is running about 10% below that of the previous fiscal year. The reason is mainly attributable to the slowdown in capital gains tax revenue from realized gains in the stock and housing markets.
Should our elected representatives choose to voluntarily default on the nation’s debt because of their unwillingness to compromise on political dogma in the negotiations over the debt ceiling, well, let’s say bad things will happen. Extraordinarily bad things. Global financial markets will be shaken to their core. The interest rate on the 90-day Treasury bill is referred to as the risk-free rate of return because, under normal circumstances, the government will not go out of business in the next three months. A vast array of domestic and global interest rates is benchmarked to the risk-free rate of return established by the interest rate on short-term U.S. government debt. When that rate is no longer risk-free, everyone will pay higher interest rates on all borrowings, including credit cards, auto loans, mortgage rates, and multi-billion dollar capital investments like those in Georgia’s budding electric vehicle industry.
At a minimum, the federal government would need to decide which bills coming due would be paid, thereby creating a class of winners and losers regarding who gets paid and when. Fundamentally, the tradeoff is between trying to calm financial markets by paying the interest due on debt versus mitigating the severity of the default-induced recession. The optics are not good if Treasury makes winners out of bondholders, and 25% of that debt is held overseas, and makes losers out of older people relying on their Social Security payment.
In the long run, when a government defaults on its debt, it faces much higher interest rates in the future when borrowing again in global capital markets. Greece in 2012 and 2015 is a case in point. When Greece effectively defaulted, investors demanded higher interest rates to compensate for the increased risk on Greek bonds. The 10-year rate on Greek bonds skyrocketed to 35% from about 4% and remained elevated for eight to nine years.
Hopefully, our elected representatives in Washington, D.C., will acknowledge the real and lasting damage a default of the world’s largest debtor nation would cause now and in the future. We’ll be back at this in a few years when the next debt ceiling cap is again under siege.
Michael Toma, Ph.D., is the Fuller E. Callaway professor of economics in the Parker College of Business at Georgia Southern University in Savannah. He specializes in macroeconomics and regional economics and holds a Ph.D. in Economics from George Mason University in Fairfax, Virginia. He joined Armstrong State University in Savannah in 1997 and continues with Georgia Southern University today. He can be reached at [email protected].