Q&A: Americus Mayor Lee Kinnamon on Jimmy Carter: ‘… a giant man, who never lost his connection to this little place’
Lee Kinnamon, the 59-year-old mayor of Americus and a sixth-generation resident of Sumter County, sat down with State Affairs this week to discuss former President Jimmy Carter’s impact on Americus, a small, rural town in southwest-central Georgia with a population just shy of 16,000, Carter’s hometown of Plains, and the former president’s wider contributions to the county and state.
Americus, just 10 miles north of Plains, is the birthplace and headquarters of Habitat for Humanity, the nonprofit that works with volunteers and would-be homeowners to build affordable homes around the world. Jimmy and Rosalynn Carter spent one week a year for almost 40 years swinging hammers for Habitat, building and repairing thousands of homes, and bringing precious publicity to a cause near and dear to their hearts.
The conversation has been edited for brevity and clarity.
What are some of the key ways that President Carter has been able to impact Americus, Plains and Sumter County throughout his life?
Well, since he returned to Sumter County from the White House he has been an unflagging supporter of his hometown’s and the county’s economic development, and a supporter of public education in the county. He’s a strong supporter of Georgia Southwestern [University], where he got to know his wife, Mrs. Rosalynn. And he has supported projects in Americus, such as the Rylander Theater. Of course, his and Rosalynn’s support for Habitat for Humanity, which was founded here by Millard and Linda Fuller, has been enormous. And they were all friends. Not only did they work together on these homebuilding projects around the country and around the world, but they were good friends. And so he was closely tied to what was going on here in the years following his presidency.
Talk about that a little bit more, because most people know that he and Rosalynn volunteered with Habitat for Humanity. And because of their prominence, they brought a lot more attention to it. But how did that involvement begin and evolve?
President Carter grew up here [in Sumter County] on what was a fairly typical farm and, if you've read his book, "An Hour Before Daylight," you get a glimpse into that world where African-Americans who worked [as sharecroppers] on the farm, and he and his father's and mother's siblings, they all were integrated in a way on the farm that allowed them to work with each other. They were segregated, of course, and separated by the conventions and rules of that period. And that informed his development significantly.
So that by the time he became our governor, and gave that famous quotation from the gubernatorial inaugural address in January of 1971, he had traveled a good way along an arc that began in his childhood. [At his inauguration, Carter said, “I say to you quite frankly that the time for racial discrimination is over. … No poor, rural, weak or Black person should ever have to bear the additional burden of being deprived of the opportunity of an education, a job or simple justice.”]
He was talking about an end to segregation and end to discrimination and a call for equality. It's a watershed moment in the state's history. Prior to that, we had not heard a governor say those words. And we had not heard him say those words. And I think that's the moment that history will remember. Because Jimmy Carter had been elected under the assumption that he would be a sort of business-as-usual, conservative white governor, in the vein of Lester Maddox. [Segregationist former Georgia Governor] Marvin Griffin had endorsed him [Carter]. When he made that statement, he shocked some, but confirmed for others what they had long suspected: that he was really a progressive. And people who knew him well knew that he was going to change the state forever. And from that moment forward, he devoted really his entire life to living out those words.
The evolution of his public positions on race is interesting. When he was on the school board in the 1950s, he basically toed the line as far as segregation goes.
Well, you know, I suppose the time was not right for that change to happen. But what allowed him to stand and make those statements at his inauguration were all of the heroic actions of African Americans and whites during the civil rights movement in the prior decades, in the ‘50s and the ‘60s. And it's not as though he had not been evolving, really, from his childhood, and his intimate relationships with African-Americans on the farm. He had the example of Mrs. Lillian, his mother, who had a much more progressive, forward-thinking view on matters of race than certainly most people of her station here in those years.
There was a period in the late-1950s when Carter was pressured to join the White Citizens Council in Plains. And he said he wouldn't, and his peanut warehouse and dry goods store were boycotted.
President Carter is never one to be bullied. We also have to remember even when he was campaigning for governor, on the position of federally enforced busing, he stood against that and said that he did not believe that was the solution. And part of that was the fact that he just was not going to be bullied.
So now in terms of my personal experience with him —I was speaking as a historian, because I was born in 1964, the year of the Civil Rights Act. So you know, I turned seven in 1971. I don’t remember the assassination of Dr. King, right? But turning to what I do know of him [Carter] on a personal level, when he was campaigning for president, and when he ultimately won the election and went into the White House, I was 11, 12, 13 years old. Those are really strong memories for me.
What do you remember?
Just the incredible flood of people into this sleepy place. Plains was transformed. And we would ride over there from Americus, my cousin and my sister and I. We would go over and gawk at all of the goings-on and kind of marvel that [ABC news reporter] Sam Donaldson would be at the depot in Plains, interviewing Mrs. Lillian. And yeah, I remember the pride, too, that we, me and my parents, felt of having a president from this place was overwhelming. I remember my grandmother having campaign buttons, and all the posters and paraphernalia and things for Carter. And she was very interested and very, very proud of that. Now, I'm talking about a woman who was born in 1894. She lived to be 97.
Much later in life, I got to know President Carter and Mrs. Rosalynn in a civic capacity. They were both involved in driving the economic development to ensure the continued good fortune of their hometown, Plains, which they dearly loved.
So in the late-‘90s, Mrs. Rosalynn and Mr. Jimmy, in order to accomplish this, one thing that they thought would help would be to take the railroad line that runs into their town and create a passenger excursion train for tourists. And they became involved in that, and I was named to the board of the Southwest Georgia Railroad Excursion Authority, which was created by the Georgia General Assembly. President Carter had his hand in, kind of pushing that forward to get it funded and to get it created. …President Carter worked very closely with [local legislators] to make sure it happened. And then I began to get to know President Carter and have interactions with him. … I was made chair and I've served ever since, for about 20 years, as the chairman of the railroad authority.
And what does that railroad do for not just Plains, but for the whole area?
Millions of dollars in economic uplift every year for this relatively poor area. At least $2 million in direct economic impact from the train, and then of course a big multiplier effect from all the related tourism.
The train begins near Cordele, where we're headquartered, and then it takes passengers from there across the heart of Sumter County, crossing Lake Blackshear and the Flint River. Then it terminates at Archery, which is [Carter’s] boyhood farm. And we bring thousands of people annually. Several hundred on each trip come into Plains every Saturday. And we’ve all benefited. Because when it lays over here in Americus, we have people staying in our hotels and our restaurants. … And our business owners know the excursion train is deeply tied to their fortunes.
And I have to give President Carter and Mrs. Rosalynn their due for this. They were just absolutely determined to get that train off the ground. It took a lot of people, but without the clout offered by the Carters, we probably wouldn’t be here today talking about it.
And the Carters have stuck with it. We lost all state funding for the train during the great recession. And we were cut completely out of the state budget. And just in the last several years, President Carter has helped to advocate for restoring funding to the train, helping us to navigate politics and the budget process and all of that with people he knows, and it has been bipartisan. [Representative] Butch Parrish, a Republican, really helped with that. It has not been, you know, ‘Well, that train was for President Carter and his Democrat cronies.’ It's a train that helps a poor part of the state just get a little bit better. It helps a lot of folks, it provides employment, it's an economic engine.
What is the budget for the train?
It's just shy of $700,000. And you know, sometimes [Carter] would ask me hard questions about what we're doing and what the numbers are looking like. Because when I would meet with him, he’s the chief executive, in every sense of the word, and he would ask all the difficult questions.
… And not all people who leave that [presidential] office are as connected and invested and rooted in their home place as President Carter is. He has just done so much to improve conditions here.
Carter devoted a lot of acreage from a former peanut and soybean tract on his farm to create a giant solar energy field that now powers 50% of Plains. And now we have all of these green energy industries, including solar energy companies, coming to Georgia.
Well, he was the alternative energy president. He was the one who pioneered that, making the White House energy efficient and so forth. He was way ahead of his time on that, though, and he was criticized for it at the time. The Austerity President, right? And there was a big economic development announcement in the governor’s office recently about a solar panel company coming to Americus. NanoPV is the name of the company… We hope that materializes. If it does it could be an enormous economic uplift.
We understand that over these last couple of years, the Carters are still working on a fair housing initiative through the Carter Plains Foundation to delve into some heirs property issues with a number of low-income, predominantly African American folks in Plains who don't have clear titles to their homes, which are falling into disrepair. And they’re helping to repair the homes and work out the legal issues.
Yes, those properties are all wrapped up in inheritance issues, with lack of wills and deeds and so forth. So yes, it’s heirs properties, we call it. That's exactly right.
…They are amazing. It has been a privilege for me to get to know them. My wife Karen and I have had dinner [at a mutual friend’s home] with the Carters and other people on many occasions. This is kind of a closing of an era for us. We used to go over there fairly frequently and talk with him. About personal things, not just train business. I mean, he likes to hunt and fish and do things that I like to do. He’s a big outdoorsman. He's a fly fisherman. He was a deer hunter. He loves turkey hunting. So he's, you know, just like a lot of other folks around here, I guess. … But he also happens to be a former president.
President Carter has said what drew him back to Plains is the kind of peace and equilibrium he gets from being there, still connected to his people, and to be in the natural environment, the woods and the streams.
For President Carter, place matters. I know that place doesn't matter to people so much anymore. In our transient society, people rarely stay in one place long enough to develop connections and roots and all that, but for him, he grew up as did I, and here place matters to us. His people, my family, we're both from families that go back generations here. My boys, our children, are seventh-generation residents of Sumter County, which is unusual today.
… He's just a real person who has a very broad understanding of history and politics, and religion, and is conversant on so many topics. But he's also a down-to-earth human being. So one minute we can be talking about, you know, the political history of the New Deal, or something like that, and the next minute you're able to talk with him about his pond and fishing and a fly that he used, and that sort of thing. So you can do both with President Carter, he's never lost. Connection and rootedness with this place and its people matter to him. And I think the things that he grew up doing as a child, you know, fishing, for example, was something he loved to do when he was little. And he carried that with him.
I dare say if he were able to, he would probably want to go fishing this week because the weather's about to warm up. We're about to hit 84 degrees on Thursday. And he's probably thinking that turkey season is about to start in March. He so loves turkey hunting. So in other words, a giant man of the world, who has never lost connection to this little place.
Do you have memories of former President Jimmy Carter or his family? We would love to hear from you. Reach out on social media at:
Read more on President Carter:
Jimmy Carter: From Plains to prominence
COMMENTARY: He is 'Mr. Jimmy' to me
COMMENTARY: What Jimmy Carter taught me about being a public servant and reading a compass
Chick-fil-A board chairman Dan Cathy reflects on Jimmy Carter’s ‘profound’ legacy
Jimmy Carter: A look at his Georgia
Header image: Mayor Lee Kinnamon
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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.
“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.
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].
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].
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].
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].