It was hardly a bold prediction in my post on April 13th that although the government shutdown crisis had been averted, the hard work to put the economy in line had just begun. Well, here we are ahead of the August 2nd deadline to raise the federal debt ceiling and still no deal. An agreement would allow the federal government to resume borrowing somewhere north of $100 billion a month to meet its obligations.
According to Wikipedia: “The modern debt limit, in which an aggregate limit was applied to nearly all federal debt, was established in 1939. The Treasury has been authorized by Congress to issue such debt as was needed to fund government operations as long as the total debt (excepting some small special classes) does not exceed a stated ceiling.”
While perhaps a good idea in theory, what’s the point of a ceiling if it constantly gets raised? Since March 1962, the debt ceiling has been raised 74 times, according to the Congressional Research Service. It’s been raised ten times since 2001 alone.
Voting against raising the limit seems to have become a platform for making a political protest vote against an administration’s budget plan. In fact, President Obama voted against raising the debt ceiling in 2006; a vote he now calls “a mistake.” Currently, we have the Republican controlled House of Representatives refusing to raise the ceiling without significant spending cuts.
I believe the Republicans are trying to make a very important point here. For the last several years, the national debt reached a level where it significantly threatens the economy and our future. As of today, each American’s share of the debt is $46,144.14. Making payments on just the interest alone is becoming a major economic burden for our country and our future. We must, collectively, take real steps to start walking back this debt monster. And we must do it NOW, with a significant deal that makes our country start to live within its means.
However, the current stalemate in Washington DC is a political abomination. The fact we’re in even in this situation right now is an embarrassment and glaring sign of government dysfunction. The house minority leader, Mitch McConnell, recently said on the Laura Ingram show said “I refuse to help Barack Obama get reelected by marching Republicans into a position where we have co-ownership of a bad economy.” If the Republicans would go so far as to send our country into default by refusing to let Obama appear to have a victory is absurd.
In any negotiation of government budgets, money out (spending) and money in (taxes) are the two areas of negotiation. It appears to me that Democrats are willing to take some pain and make some painful (and long overdue) cuts to programs popular with their base. But Republicans are refusing to negotiate a tax increase, even highly targeted increases to the wealthy individual and corporate interests based on blind ideology.
It’s a stubborn refusal that is sending our country to the edge of an abyss. It’s unknown full the consequences of a default, but at minimum, interest rates would spike (increasing the debt dramatically), our credit rating reduced, our weak recovery hobbled, and our economic standing with the world forever tarnished.
In times of such raging domestic disagreement, it can help to get some perspective from outside our borders. The new head of the IMF, Christine Lagarde, recently said the following:
“I would hope that there is enough bipartisan intelligence and understanding of the challenge that is ahead of the United States, but also of the rest of the world.”